AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 2, 2002.
REGISTRATION NO. 333-97699
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
WASTE MANAGEMENT, INC.
(Exact name of registrant as specified in its charter*)
DELAWARE 4953 73-1309529
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
1001 FANNIN STREET, SUITE 4000
HOUSTON, TEXAS 77002
(713) 512-6200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
DAVID P. STEINER
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
1001 FANNIN STREET, SUITE 4000
HOUSTON, TEXAS 77002
(713) 512-6200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
---------------------
* See inside facing page for information on the additional registrant
guarantor.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
================================================================================
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
PRIMARY
STATE OR OTHER STANDARD IRS ADDRESS INCLUDING ZIP
EXACT NAME AS JURISDICTION OF INDUSTRIAL EMPLOYER CODE AND TELEPHONE
SPECIFIED IN ITS INCORPORATION OF CLASSIFICATION IDENTIFICATION NUMBER OF PRINCIPAL
CHARTER ORGANIZATION CODE NUMBER NUMBER EXECUTIVE OFFICE
---------------- ---------------- -------------- -------------- ---------------------
Waste Management Holdings,
Inc.......................... Delaware 4953 36-2660763 1001 Fannin Street
Suite 4000
Houston, Texas 77002
(713) 512-6200
SUBJECT TO COMPLETION, DATED OCTOBER 2, 2002
WASTE MANAGEMENT, INC.
OFFERS TO EXCHANGE
REGISTERED
$500,000,000 7 3/4% SENIOR NOTES DUE 2032
FOR
OUTSTANDING
$500,000,000 7 3/4% SENIOR NOTES DUE 2032
---------------------
THE EXCHANGE OFFER:
- We will exchange all outstanding notes that are validly tendered and not
validly withdrawn for an equal principal amount of exchange notes.
- You may withdraw tenders of outstanding notes at any time prior to the
expiration of the exchange offer.
- The exchange offer expires at 5:00 p.m., New York City time, on
, 2002, unless extended. We do not currently intend to extend
the expiration date.
THE EXCHANGE NOTES:
- The terms of the exchange notes will be substantially identical to the
outstanding notes except for transfer restrictions and registration
rights relating to the outstanding notes will not apply to the exchange
notes.
- The exchange notes, like the outstanding notes, will be unsecured
obligations of Waste Management and will be unconditionally guaranteed by
our wholly-owned subsidiary, Waste Management Holdings, Inc. The exchange
notes will rank equally in contractual right of payment with all of our
other unsecured and unsubordinated senior indebtedness and the unsecured
and unsubordinated senior indebtedness of Waste Management Holdings.
However, the exchange notes and the guarantees will be structurally
subordinated to the indebtedness of our non-guarantor subsidiaries, which
amounted to approximately $1.6 billion as of June 30, 2002.
RESALES OF EXCHANGE NOTES:
- The exchange notes may be sold in the over-the-counter market, in
negotiated transactions or through a combination of such methods.
---------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 10 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY STATE SECURITIES
COMMISSION, HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 2002
TABLE OF CONTENTS
PAGE
----
Where to Find More Information.............................. ii
Incorporation by Reference.................................. ii
Prospectus Summary.......................................... 1
Historical and Selected Financial Information............... 8
Risk Factors................................................ 10
Forward-Looking Statements.................................. 15
Use of Proceeds............................................. 16
Ratio of Earnings to Fixed Charges.......................... 16
Description of the Exchange Notes........................... 17
The Exchange Offer.......................................... 35
United States Federal Income Tax Consequences to Non-U.S.
Holders................................................... 43
Plan of Distribution........................................ 46
Legal Matters............................................... 46
Experts..................................................... 46
IN THIS PROSPECTUS, THE TERMS "OUR," "WE," "US," "WASTE MANAGEMENT," AND
SIMILAR TERMS REFER TO WASTE MANAGEMENT, INC. AND INCLUDE ALL OF OUR
CONSOLIDATED SUBSIDIARIES UNLESS THE CONTEXT REQUIRES OTHERWISE. WHEN WE USE
"WASTE MANAGEMENT HOLDINGS" OR "GUARANTOR," WE ARE REFERRING TO OUR WHOLLY-
OWNED SUBSIDIARY AND THE GUARANTOR OF THE OUTSTANDING NOTES AND THE EXCHANGE
NOTES, WASTE MANAGEMENT HOLDINGS, INC. FINALLY, THE TERM "YOU" REFERS TO A
HOLDER OF THE OUTSTANDING NOTES OR THE EXCHANGE NOTES.
i
WHERE TO FIND MORE INFORMATION
We are subject to the information requirements of the Securities Exchange
Act of 1934, and in accordance therewith file reports, proxy and information
statements and other information with the Securities and Exchange Commission.
You can inspect and copy these reports, proxy and information statements and
other information at:
- the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington DC 20549, and
- the regional offices of the Commission located at:
- 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and
- 233 Broadway, New York, New York 10279.
You also can obtain copies of these materials from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, DC 20549 at
prescribed rates. You may obtain information regarding the operation of the
public reference facilities by calling the Commission at 1-800-SEC-0330. You can
obtain electronic filings made through the Electronic Data Gathering, Analysis
and Retrieval System at the Commission's web site, http://www.sec.gov.
In addition, you can inspect material filed by us at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005, on which shares
of our common stock are listed.
INCORPORATION BY REFERENCE
We are incorporating by reference in this Prospectus some information we
file with the Commission, which means that we are disclosing important
information to you by referring you to those documents. Specifically, we
incorporate by reference the documents set forth below that we have previously
filed with the Commission:
COMMISSION FILINGS (FILE NO. 1-12154) PERIOD/DATE
------------------------------------- -----------
Annual Report on Form 10-K Year ended December 31, 2001
Quarterly Report on Form 10-Q Quarter ended March 31, 2002
Quarterly Report on Form 10-Q Quarter ended June 30, 2002
Current Reports on Form 8-K March 22, 2002 and August 13, 2002
The documents we have filed with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
before the termination of the offering made by this Prospectus are also
incorporated by reference into this Prospectus.
This Prospectus, which is a part of the exchange offer registration
statement, does not contain all of the information found in the exchange offer
registration statement. You should refer to the registration statement,
including its exhibits and schedules, for further information.
You may request a copy of this information, the exchange offer registration
statement and the Commission filings at no cost, by writing or telephoning us at
the following address:
Waste Management, Inc.
1001 Fannin Street, Suite 4000
Houston, Texas 77002
(713) 512-6200
Attn: Corporate Secretary
TO INSURE TIMELY DELIVERY, YOU SHOULD REQUEST THE DOCUMENTS AND INFORMATION
NO LATER THAN .
ii
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this Prospectus.
You should read the entire Prospectus, including the financial data and related
notes and the information incorporated by reference into this Prospectus, before
making an investment decision.
THE COMPANY
Waste Management is its industry's leading provider of integrated waste
services in North America. Through our subsidiaries, we provide collection,
transfer, recycling and resource recovery, and disposal services. We are also a
leading developer, operator and owner of waste-to-energy facilities in the
United States. Our customers include commercial, industrial, municipal and
residential customers, other waste management companies, governmental entities
and independent power market participants.
Our collection services involve picking up and transporting waste from
where it was generated to a disposal site. We also operate transfer stations,
which are facilities located near residential and commercial collection routes
where collection trucks take the solid waste that has been collected. The solid
waste is then transferred via transfer trucks or rail to disposal sites. These
disposal sites include landfills, which are the main depository for solid waste
in North America, as well as waste-to-energy facilities. As of December 31,
2001, we owned or operated 297 solid waste landfills, five hazardous waste
landfills and 16 waste-to-energy facilities. The solid waste landfills are where
non-hazardous waste is deposited. We use state-of-the-art liners, leachate
connection, ground water monitoring and gas control systems at our landfills to
ensure a pristine environment. All of our landfills are designed and operated
under highly regulated and prescribed procedures. Our hazardous waste landfills
are secure sites that have been permitted by the federal government. Generally,
only hazardous waste in a stable, solid form can be deposited into our
landfills. However, hazardous waste can sometimes be treated before disposal. We
operate a hazardous waste facility at which it isolates treated hazardous wastes
in liquid form by injection into deep wells that have been drilled into rock
formation far below the base of fresh water to a point that is separated by
other geological confining layers. Our waste-to-energy facilities are where
solid waste is burned to produce steam that is used to generate electricity. In
addition to disposing of waste, we offer recycling services, which involve the
removal of reusable materials from the waste stream for processing or resale.
We also operate methane gas recovery projects at some of our landfills,
where we collect the methane gas that is generated at the landfill by
decomposing waste and process it for sale to be used primarily to fuel power
electricity generators. We also rent and service portable toilet facilities,
provide street sweeping services, and provide full service waste services at
customers' industrial plants, known as "in-plant services." Finally, we own and
operate independent power production plants that cogenerate electricity for sale
to customers.
Our total revenues were $13.1 billion, $12.5 billion and $11.3 billion for
the years ended December 31, 1999, 2000 and 2001, respectively. Our net (loss)
income for the years ended December 31, 1999, 2000 and 2001 was $(398) million,
$(97) million and $503 million, respectively. Our revenues and net income for
the six months ended June 30, 2002 were $5.4 billion and $355 million,
respectively.
In the past, our primary growth strategy was to purchase revenue through
acquisitions. However, we are now working on becoming a company of operational
excellence by focusing on our new business strategy. This strategy is designed
to emphasize internal growth and enable us to meet our continuing objective of
operational excellence. The key points to our strategy include:
Local Market Business Integration. We are creating integrated local
business strategies for all of our lines of operations, including collection,
disposal (including waste-to-energy plants), transfer and recycling, with the
goal of improving the utilization of our asset base;
Service Excellence. We are designing and implementing new procedures to
better meet our customers' requirements;
1
Procurement. We are implementing a procurement and sourcing process that
will leverage our size and total purchasing ability to realize savings and
discounts through consolidation and reduction of the number of suppliers we use;
Information Technology. We are continuing to improve system processes and
capabilities needed to transition our entire company to our business model of
operational excellence;
People Performance Management. We are aligning our incentive compensation
with our strategies and guiding changes in our corporate culture;
Safety, Ethics and Compliance. We are committed to providing a safe
workplace for all employees and are creating a compliance culture in which
abidance with laws and regulations and focus on integrity are the key factors;
Price/Revenue Management. We are improving our pricing analysis
capabilities and developing and implementing new revenue management systems;
Sales Force Effectiveness. We are providing tools, leadership and
incentives throughout our company that are designed to enable our sales force to
improve its effectiveness and increase revenue; and
Financing. We are utilizing a significant portion of our free cash flow to
repurchase common stock as a means of enhancing stockholder value.
In March 2002, we announced our plan to adopt a new organizational
structure to support our business strategy. The new structure is designed to
make us more market-based and customer driven, thereby aligning our
organizational structure with our strategy. The new structure aligns the
decision-making, staff support and operations of the field with metropolitan
statistical areas that closely parallel the generation, transport and movement
of solid waste in the United States. We believe that our new structure will
improve our business by optimizing our resources, assets and people to lower our
cost structure. In March 2002, we recorded a $37 million pre-tax charge for
costs associated with this new structure, including $34 million for employee
severance and benefit costs and $3 million related to abandoned operating lease
agreements. As of June 30, 2002, payments of $22 million had been recorded
against the liability. We expect an additional $5 million of restructuring
expenditures in the second half of 2002 as the restructuring is completed.
SUMMARY OF THE EXCHANGE OFFER
On May 24, 2002, we completed the private offering of the outstanding
notes, consisting of $500 million principal amount of 7 3/4% Senior Notes due
2032.
We and the guarantor executed a registration rights agreement with the
initial purchasers in the private offering of the outstanding notes in which we
and the guarantor agreed to deliver to you this Prospectus and agreed to:
- file an exchange offer registration statement with the Commission within
90 days after May 24, 2002;
- have the exchange offer registration statement declared effective by the
Commission within 180 days after May 24, 2002; and
- consummate the exchange offer within 230 days after May 24, 2002.
You are entitled to exchange in the exchange offer your outstanding notes
for exchange notes which are identical in all material respects to the
outstanding notes except that:
- the exchange notes have been registered under the Securities Act and are
freely tradeable if the conditions in "Resales of Exchange Notes," below,
have been met; and
2
- certain contingent interest rate provisions that require us to pay
increased interest rates if we don't meet our obligations under the
registration rights agreement that are described above will no longer
applicable.
We summarize the terms of the exchange offer below. You should read the
discussion under the heading "The Exchange Offer" for further information
regarding the exchange offer and the exchange notes.
The Exchange Offer............ We are offering to exchange the aggregate
principal amount of exchange notes for the
identical aggregate principal amount of
outstanding notes. The outstanding notes may be
exchanged only in amounts which are equal to
whole multiples of $1,000.
Resales of Exchange Notes..... Based on Commission no-action letters, we
believe that after the exchange offer you may
offer and sell the exchange notes without
registration under the Securities Act so long
as:
- You acquire the exchange notes in the
ordinary course of business.
- When the exchange offer begins you do not
have an arrangement with another person to
participate in a distribution of the exchange
notes.
- You are not engaged in a distribution of, nor
do you intend to distribute, the exchange
notes.
When you tender the outstanding notes, we will
ask you to represent to us, among other things,
that:
- You are not an affiliate of Waste Management.
"Affiliate" in this instance has the meaning
set forth in Rule 405 of the Securities Act.
- You will acquire the exchange notes in the
ordinary course of business.
- When the exchange offer begins you are not
engaged in, nor do you have plans with
another person to be engaged in, a
distribution of the exchange notes.
If you are unable to make these
representations, you will be required to comply
with the registration and Prospectus delivery
requirements under the Securities Act in
connection with any resale transaction.
If you are a broker-dealer and receive exchange
notes for your own account, you must represent
that those outstanding notes were acquired as a
result of market-making or other trading
activities and you must acknowledge that you
will deliver a Prospectus if you resell the
exchange notes. By acknowledging your intent
and delivering a Prospectus you will not be
deemed to admit that you are an "underwriter"
as defined under the Securities Act. You may
use this Prospectus as it is amended from time
to time when you resell exchange notes which
were acquired from market-making or trading
activities. For a year after the expiration
date we will make this Prospectus available to
any broker-dealer in connection with such a
resale. See "Plan of Distribution."
3
Consequences of Failure to
Exchange Notes................ If you do not exchange your outstanding notes
during the exchange offer you will no longer be
entitled to registration rights. You will not
be able to offer or sell the outstanding notes
unless they are later registered, sold pursuant
to an exemption from registration or sold in a
transaction not subject to the Securities Act
or state securities laws. Other than in
connection with the exchange offer, we are not
obligated to, nor do we currently anticipate
that we will register the outstanding notes
under the Securities Act. See "The Exchange
Offer -- Consequences of Failure to Exchange."
Expiration Date............... Unless terminated sooner, the exchange offer
will expire at 5:00 p.m., New York City time,
on , 2002, or such later date
and time to which we extend it, referred to as
the "expiration date."
Conditions to the Exchange
Offer......................... We will not be required to accept outstanding
notes for exchange if the exchange offer would
violate applicable law or if any legal action
has been instituted or threatened that would
impair our ability to proceed with the exchange
offer. No minimum principal amount of
outstanding notes must be tendered to complete
the exchange offer. However, the exchange offer
is subject to certain customary conditions
which we may waive. See "The Exchange
Offer -- Conditions."
Procedures for Tendering
Outstanding Notes............. If you wish to participate in the exchange
offer, you must complete, sign and date the
accompanying letter of transmittal or a
facsimile copy and mail or deliver it to the
exchange agent along with any other necessary
documentation. Instructions and the address of
the exchange agent are on the letter of
transmittal and in this Prospectus. In the
alternative, if your outstanding notes are held
through The Depository Trust Company (the
"DTC") and you wish to participate in the
exchange offer, you may do so through the
automated tender offer program of DTC. If you
tender under this program you will agree to be
bound by the letter of transmittal that we are
providing with this Prospectus as though you
had signed the letter of transmittal. By
signing or agreeing to be bound by the letter
of transmittal, you will represent to us, among
other things, the applicable matters described
above in "-- Resales of Exchange Notes." See
"The Exchange Offer -- Procedures for
Tendering" and "-- Exchange Agent."
Guaranteed Delivery
Procedures.................... If you cannot tender the outstanding notes,
complete the letter of transmittal or provide
the necessary documentation prior to the
termination of the exchange offer, you may
tender your outstanding notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures."
Special Procedures for
Beneficial Owners............. If you are a beneficial owner of outstanding
notes which are registered in the name of a
broker, dealer, commercial bank,
4
trust company or other nominee, and you wish to
tender outstanding notes in the exchange offer,
you should contact the registered holder
promptly and instruct the registered holder to
tender on your behalf. If you wish to tender on
your own behalf, you must, prior to completing
and executing the letter of transmittal and
delivering your outstanding notes, either make
appropriate arrangements to register ownership
of the outstanding notes in your name or obtain
a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time and may
not be able to be completed prior to the
expiration date.
Withdrawal Rights............. You may withdraw outstanding notes that have
been tendered at any time prior to the
expiration date by sending a written or
facsimile withdrawal notice to the Exchange
Agent.
Acceptance of Outstanding
Notes and Delivery of Exchange
Notes......................... All outstanding notes properly tendered to the
Exchange Agent and not withdrawn by the
expiration date will be accepted for exchange.
The exchange notes will be delivered promptly
after the expiration date. See "The Exchange
Offer -- Acceptance of Notes for Exchange;
Delivery of Exchange Notes."
U.S. Federal Income Tax
Consequences.................. The exchange of outstanding notes for exchange
notes will not be a taxable event for U.S.
federal income tax purposes. See "United States
Federal Income Tax Consequences for Non-U.S.
Holders."
5
SUMMARY OF TERMS OF THE EXCHANGE NOTES
Issuer........................ Waste Management, Inc.
Notes Offered................. $500 million principal amount of 7 3/4% Senior
Notes due 2032.
Maturity...................... May 15, 2032.
Interest Payment Dates........ Interest on all exchange notes will be paid
semi-annually in cash in arrears on May 15 and
November 15 of each year, commencing November
15, 2002.
Optional Redemption........... The exchange notes will be redeemable at our
option. The exchange notes may be redeemed in
whole or in part, at any time or from time to
time, on not less than 30 days' notice, at the
make-whole price as defined under "Description
of the Exchange Notes -- Optional Redemption."
Ranking....................... The outstanding notes are, and the exchange
notes will be, our general unsecured senior
obligations and will rank equal in right of
payment to all of our other existing and future
senior and unsecured indebtedness, including
debt under our credit facilities. However, the
exchange notes will be structurally
subordinated to the indebtedness of all of our
subsidiaries other than Waste Management
Holdings. The amount of that debt as of June
30, 2002 was approximately $1.6 billion. The
indenture does not limit the amount of senior
debt we can issue, nor does it limit the amount
of debt that can be issued by our subsidiaries.
See "Description of Exchange Notes -- Ranking."
Subsidiary Guarantee.......... The outstanding notes are, and the exchange
notes will be, guaranteed by our wholly-owned
subsidiary, Waste Management Holdings, on a
full and unconditional basis. The subsidiary
guarantee will be unsecured senior indebtedness
of Waste Management Holdings, will be equal in
right of payment to all senior and unsecured
indebtedness of Waste Management Holdings and
will also be structurally subordinated to our
non-guarantor subsidiaries' indebtedness. See
"Description of Exchange Notes -- Subsidiary
Guarantee."
Covenants..................... We issued the outstanding notes, and will issue
the exchange notes, under an indenture with
JPMorgan Chase Bank, the trustee. The
indenture, among other things, restricts our
ability and the ability of our subsidiaries to:
- create liens securing indebtedness; and
- engage in sale and leaseback transactions.
However, the indenture does not limit the
amount of indebtedness that we or our
subsidiaries can incur. For more details, see
"Description of Exchange Notes -- Certain
Covenants."
Use of Proceeds............... We will not receive any cash proceeds from the
issuance of the exchange notes.
The exchange notes will be registered securities but will also be new
securities for which there will not initially be a market. Accordingly, we
cannot assure you whether a market for the exchange notes will develop or as to
the liquidity of any such market. We do not intend to apply for a listing of the
exchange
6
notes on any securities exchange or automated dealer quotation system. The
initial purchasers in the private offering of the outstanding notes have advised
us that they intend to make a market in the exchange notes. However, they are
not required to do so, and any market-making activities with respect to the
exchange notes may be discontinued without notice.
THE EXCHANGE AGENT
We have appointed JPMorgan Chase Bank as Exchange Agent for the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this Prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent addressed
as follows:
For delivery by mail, overnight delivery or hand delivery:
JP Morgan Chase Bank
600 Travis Street, Suite 1150
Houston, Texas 77002
Attention: Rebecca A. Newman
Telephone (713) 216-4931
By facsimile transmission (for eligible institutions only):
(713) 577-5200
Attention: Rebecca A. Newman
To confirm receipt:
(713) 216-4931
7
HISTORICAL AND SELECTED FINANCIAL INFORMATION
The following selected consolidated financial information as of December
31, 1997, 1998, 1999, 2000 and 2001, and for each of the years in the five year
period ended December 31, 2001, has been derived from Waste Management's audited
consolidated financial statements incorporated by reference herein. This
information should be read in conjunction with such consolidated financial
statements and related notes thereto. The following selected historical
financial information as of and for the six months ended June 30, 2001 and 2002
has been derived from Waste Management's unaudited historical financial
statements and reflects all adjustments management considers necessary for a
fair presentation of the financial position and results of operations for these
periods. The results of operations for the six months ended June 30, 2002 are
not necessarily indicative of the results that may be expected for the full
year.
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Operating revenues.................. $11,972 $12,626 $13,127 $12,492 $11,322 $ 5,634 $ 5,434
------- ------- ------- ------- ------- ------- -------
Costs and expenses:
Operating (exclusive of
depreciation and amortization
shown below).................... 7,482 7,283 8,269 7,538 6,666 3,378 3,254
Selling, general and
administrative.................. 1,438 1,333 1,920 1,738 1,622 787 746
Depreciation and amortization..... 1,392 1,499 1,614 1,429 1,371 676 607
Merger, acquisition and
restructuring related costs..... 113 1,807 45 -- -- -- 37
Asset impairments and unusual
items........................... 1,771 864 739 749 380 8 (6)
Loss from continuing operations held
for sale, net of minority
interest.......................... 10 -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
12,206 12,786 12,587 11,454 10,039 4,849 4,638
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations....... (234) (160) 540 1,038 1,283 785 796
------- ------- ------- ------- ------- ------- -------
Other income (expense):
Interest expense.................. (556) (682) (770) (748) (541) (301) (232)
Interest income................... 45 27 38 31 37 27 9
Minority interest................. (45) (24) (24) (23) (5) (3) (3)
Other income, net................. 127 139 53 23 13 8 3
------- ------- ------- ------- ------- ------- -------
(429) (540) (703) (717) (496) (269) (223)
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations before income taxes.... (663) (700) (163) 321 787 516 573
Provision for income taxes.......... 363 67 232 418 284 202 219
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations........................ (1,026) (767) (395) (97) 503 314 354
Income from discontinued
operations........................ 96 -- -- -- -- -- --
Extraordinary item.................. (7) (4) (3) -- (2) (1) (1)
Accounting change................... (2) -- -- -- 2 2 2
------- ------- ------- ------- ------- ------- -------
Net income (loss)................... $ (939) $ (771) $ (398) $ (97) $ 503 $ 315 $ 355
======= ======= ======= ======= ======= ======= =======
8
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Basic earnings (loss) per common
share:
Continuing operations............. $ (1.84) $ (1.31) $ (0.64) $ (0.16) $ 0.80 $ 0.50 $ 0.57
Discontinued operations........... 0.17 -- -- -- -- -- --
Extraordinary item................ (0.01) (0.01) (0.01) -- -- -- --
Accounting change................. -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss)................. $ (1.68) $ (1.32) $ (0.65) $ (0.16) $ 0.80 $ 0.50 $ 0.57
======= ======= ======= ======= ======= ======= =======
Diluted earnings (loss) per common
share:
Continuing operations............. $ (1.84) $ (1.31) $ (0.64) $ (0.16) $ 0.80 $ 0.50 $ 0.57
Discontinued operations........... 0.17 -- -- -- -- -- --
Extraordinary item................ (0.01) (0.01) (0.01) -- -- -- --
Accounting change................. -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss)................. $ (1.68) $ (1.32) $ (0.65) $ (0.16) $ 0.80 $ 0.50 $ 0.57
======= ======= ======= ======= ======= ======= =======
Cash dividends per common share..... $ 0.56 $ 0.16 $ 0.01 $ 0.01 $ 0.01 $ -- $ --
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (deficit)........... $(1,967) $ (412) $(1,269) $ (582) $ (597) $ (587) $ (381)
Intangible assets, net.............. 4,848 6,250 5,356 5,193 5,121 5,150 5,146
Total assets........................ 20,156 22,882 22,681 18,565 19,490 18,709 19,828
Long-term debt, including current
portion........................... 9,480 11,732 11,498 8,485 8,224 8,361 8,619
Stockholders' equity................ 3,855 4,372 4,402 4,801 5,392 5,191 5,290
9
RISK FACTORS
In addition to the information set forth in this Prospectus, you should
carefully consider the risks described below before deciding whether to
participate in the exchange offer. The following risks include all of the risks
which we believe to be material at the current time. Additional risks not
presently known to us or that we currently deem immaterial may also impair our
business operations.
RISKS RELATING TO THE EXCHANGE OFFER AND HOLDING THE EXCHANGE NOTES
THE NOTES ARE SUBORDINATED TO THE DEBT OF OUR SUBSIDIARIES
As a holding company, we conduct our operations through our subsidiaries,
and our only significant assets are the capital stock of our subsidiaries.
Accordingly, our ability to meet our cash obligations depends in part upon the
ability of our subsidiaries to make cash distributions to us, and any of our
subsidiaries' declaration of bankruptcy, liquidation or reorganization could
adversely affect that ability. The ability of our subsidiaries to make
distributions to us is also, and will continue to be, restricted by, among other
limitations, applicable provisions of the laws of national or state governments
and contractual provisions.
The exchange notes will be guaranteed by our subsidiary, Waste Management
Holdings, but will not be guaranteed by any of our operating subsidiaries. Our
obligations under our credit facilities and our other senior indebtedness are
also currently guaranteed by Waste Management Holdings. Similarly, we have
guaranteed the outstanding senior indebtedness of Waste Management Holdings.
Thus, the exchange notes will rank equally in right of payment with the senior
indebtedness of Waste Management Holdings, the debt under our credit facilities
and our other senior indebtedness. Because of our holding company structure and
the impact of the Waste Management Holdings' guarantee, the exchange notes will
be structurally subordinated to the claims of creditors of our operating
subsidiaries, including claims by the holders of debt of our subsidiaries. As of
June 30, 2002, the amount of this subsidiary indebtedness was approximately $1.6
billion out of our total consolidated long-term debt of approximately $8.6
billion.
The guarantee agreements under which we and Waste Management Holdings have
guaranteed each others' senior indebtedness (including Waste Management's
guarantee of the exchange notes) provided that upon any release by the lenders
of Waste Management Holdings' guarantee under our credit facilities (or any
replacement facility), we and Waste Management Holdings will each be deemed
automatically and unconditionally released and discharged from our respective
obligations under the guarantees of the other's senior indebtedness. In such
event, the claims of creditors of Waste Management Holdings will effectively
have priority with respect to the assets and earnings of Waste Management
Holdings over the claims of our creditors, including the holders of the exchange
notes.
FRAUDULENT TRANSFER STATUTES MAY LIMIT YOUR RIGHTS UNDER THE GUARANTEE OF THE
NOTES
Waste Management Holdings' guarantee of the exchange notes may be subject
to review under various laws for the protection of creditors. It is possible
that the creditors of Waste Management Holdings may challenge the guarantee as a
fraudulent transfer under relevant federal and state laws. Under certain
circumstances, including a finding that Waste Management Holdings was insolvent
at the time it issued the guarantee, a court could hold that the obligations of
Waste Management Holdings under the guarantee may be voided or are subordinate
to other obligations of Waste Management Holdings. It could also find that the
amount for which Waste Management Holdings is liable under its guarantee of the
exchange notes is limited. If a court determined that Waste Management Holdings
was insolvent on the date the guarantee was issued or that the guarantee
constituted a fraudulent transfer on another ground, the claims of creditors of
Waste Management Holdings would effectively have priority with respect to Waste
Management Holdings' assets and earnings over the claims of our creditors,
including the holders of the exchange notes.
10
YOU MAY NOT BE ABLE TO SELL YOUR EXCHANGE NOTES
The exchange notes are a new issue of securities for which there is
currently no trading market. We do not intend to apply for listing of the
exchange notes on any securities exchange or automated dealer quotation system.
If an active market for the exchange notes fails to develop or be sustained, the
trading price of the exchange notes could fall. Even if an active trading market
were to develop, the exchange notes could trade at lower than their initial
offering price. Whether or not the exchange notes trade at lower prices depends
on many factors, including:
- prevailing interest rates;
- the markets for similar securities;
- general economic conditions; and
- our financial condition, historical financial performance and future
prospects.
RISKS RELATING TO OUR BUSINESS
WE COULD BE LIABLE FOR ENVIRONMENTAL DAMAGES RESULTING FROM OUR OPERATIONS
We could be liable if our operations cause environmental damage to our
properties or to nearby landowners, particularly as a result of the
contamination of drinking water sources or soil. Under current law, we could
even be held liable for damage caused by conditions that existed before we
acquired the assets or operations involved. Also, we could be liable if we
arrange for the transportation, disposal or treatment of hazardous substances
that cause environmental contamination, or if a predecessor owner made such
arrangements and under applicable law we are treated as a successor to the prior
owner. Any substantial liability for environmental damage could have a material
adverse effect on our financial condition, results of operations and cash flows.
In the ordinary course of our business, we have in the past, and may in the
future, become involved in a variety of legal and administrative proceedings
relating to land use and environmental laws and regulations. These include
proceedings in which:
- agencies of federal, state, local or foreign governments seek to impose
liability on us under applicable statutes, sometimes involving civil or
criminal penalties for violations, or to revoke or deny renewal of a
permit we need; and
- citizen groups, adjacent landowners or governmental agencies oppose the
issuance of a permit or approval we need, allege violations of the
permits under which we operate or laws or regulations to which we are
subject, or seek to impose liability on us for environmental damage.
The adverse outcome of one or more of these proceedings could result in,
among other things, material increases in our liabilities.
From time to time, we have received citations or notices from governmental
authorities that our operations are not in compliance with our permits or
certain applicable environmental or land use laws and regulations. In the future
we may receive additional citations or notices. We generally seek to work with
the authorities to resolve the issues raised by such citations or notices. If we
are not successful in such resolutions, we may incur fines, penalties or other
sanctions that could result in material unanticipated costs or liabilities.
Our insurance for environmental liability meets or exceeds statutory
requirements. However, because we believe that the cost for such insurance is
high relative to the coverage it would provide, our coverages are generally
maintained at statutorily required levels. We face the risk of incurring
liabilities for environmental damage if our insurance coverage is ultimately
inadequate to cover those damages.
In addition, to fulfill our financial assurance obligations with respect to
environmental closure and post-closure liabilities, we generally obtain letters
of credit or surety bonds, or rely on insurance, including
11
captive insurance. We currently have in place all necessary financial assurance
instruments, and we do not anticipate any difficulties obtaining financial
assurance instruments in the future. However, in the event we are unable to
obtain sufficient surety bonding, letters of credit or third-party insurance
coverage at reasonable cost, or one or more states cease to view captive
insurance as adequate coverage, we would need to rely on other forms of
financial assurance. These types of financial assurance could be more expensive
to obtain, which could negatively impact our liquidity and capital resources and
our ability to meet our obligations under the notes.
GOVERNMENTAL REGULATIONS MAY RESTRICT OUR OPERATIONS OR INCREASE OUR COSTS OF
OPERATIONS
Stringent government regulations at the federal, state and local level in
the United States and Canada have a substantial impact on our business. A large
number of complex laws, rules, orders and interpretations govern environmental
protection, health, safety, land use, zoning, transportation and related
matters. Among other things, they may restrict our operations and adversely
affect our financial condition, results of operations and cash flows by imposing
conditions such as:
- limitations on the siting and construction of new waste disposal,
transfer or processing facilities or the expansion of existing
facilities;
- limitations and regulations on collection and disposal prices, rates and
volumes;
- limitations or bans on disposal or transportation of out-of-state waste
or certain categories of waste; or
- mandates regarding the disposal of solid waste.
Regulations also affect the siting, design and closure of landfills and
could require us to undertake investigatory or remedial activities, curtail
operations or close a landfill temporarily or permanently. Future changes in
these regulations may require us to modify, supplement or replace equipment or
facilities. The costs of complying with these regulations could be substantial.
In order to develop, expand or operate a landfill or other waste management
facility, we must have various facility permits and other governmental
approvals, including those relating to zoning, environmental protection and land
use.
OUR ACCOUNTING POLICIES CONCERNING UNAMORTIZED CAPITALIZED EXPENDITURES COULD
RESULT IN A MATERIAL CHARGE AGAINST OUR EARNINGS
In accordance with generally accepted accounting principles, we capitalize
certain expenditures and advances relating to acquisitions, pending
acquisitions, and disposal site development and expansion projects. We expense
indirect acquisition costs, such as executive salaries, general corporate
overhead, public affairs and other corporate services, as incurred. Our policy
is to charge against earnings any unamortized capitalized expenditures and
advances relating to any facility or operation that is permanently shut down and
determined to be impaired, any pending acquisition that is not consummated and
any disposal site development or expansion project that is not completed and
determined to be impaired. The charge against earnings is reduced by any portion
of the capitalized expenditure and advances that we estimate will be
recoverable, through sale or otherwise. In future periods, we may be required to
incur charges against earnings in accordance with our policy. Depending on the
magnitude, any such charges could have a material adverse effect on our results
of operations and possibly our financial covenants, which could negatively
affect our liquidity.
THE DEVELOPMENT AND ACCEPTANCE OF ALTERNATIVES TO LANDFILL DISPOSAL AND
WASTE-TO-ENERGY FACILITIES COULD REDUCE OUR ABILITY TO OPERATE AT FULL CAPACITY
Our customers are increasingly using alternatives to landfill disposal,
such as recycling and composting. In addition, state and local governments
mandate recycling and waste reduction at the source and prohibit the disposal of
certain types of wastes, such as yard wastes, at landfills or waste-to-energy
12
facilities. Although such mandates can be a useful tool to protect our
environment, these developments could reduce the volume of waste going to
landfills and waste-to-energy facilities in certain areas, which may affect our
ability to operate our landfills and waste-to-energy facilities at full
capacity, as well as the prices that we can charge for landfill disposal and
waste-to-energy services.
OUR BUSINESS IS SEASONAL IN NATURE AND OUR REVENUES AND RESULTS VARY FROM
QUARTER TO QUARTER
Our operating revenues are usually lower in the winter months, primarily
because the volume of waste relating to construction and demolition activities
usually increases in the spring and summer months, and the volume of industrial
and residential waste in certain regions where we operate usually decreases
during the winter months. Our first and fourth quarter results of operations
typically reflect this seasonality. In addition, particularly harsh weather
conditions may result in the temporary suspension of certain of our operations.
FLUCTUATIONS IN COMMODITY PRICES AFFECT OUR OPERATING REVENUES
Our recycling operations process for sale certain recyclable materials,
including papers, fibers, aluminum and glass, all of which are subject to
significant price fluctuations. The majority of the recyclables that we process
for sale are fibers, including old corrugated cardboard, or OCC, and old
newsprint, or ONP. In the past two years, the year over year changes in the
quarterly average market prices for OCC ranged from a decrease of as much as 63%
to an increase of as much as 64%. The same comparisons for ONP have ranged from
a decrease of as much as 45% to an increase of as much as 46%. These
fluctuations can affect future operating income and cash flows; for example, our
operating revenues for the year ended December 31, 2001 were approximately $161
million less than the corresponding prior period due to such declines.
Additionally, there may be significant price fluctuations in the price of
methane gas, electricity and other energy related products that are marketed and
sold by our landfill gas recovery, waste-to-energy and independent power
production plants operations. Our landfill gas recovery and waste-to-energy
operations generally enter into long-term sales agreements. Therefore, market
fluctuations do not have a significant effect on these operations. However, our
independent power production plants' revenues can be effected; in the past two
years, the year over year changes in the average quarterly electricity prices
have ranged from increases of as much as 50% to decreases of as much as 44%. For
the three and six months ended June 30, 2002, our revenues decreased by $18
million and $33 million, respectively, due to lower electricity prices.
WE FACE UNCERTAINTIES RELATING TO PENDING LITIGATION AND INVESTIGATIONS
On three different occasions during July and August 1999, we lowered our
expected earnings per share for the three months ended June 30, 1999. More than
30 lawsuits that claim to be based on our 1999 announcements have been filed
against us and some of our current and former officers and directors. These
lawsuits, which have been consolidated into one action, assert various claims
alleging we violated the anti-fraud provisions of the federal securities laws by
making false or misleading statements or by not making statements that were
necessary in order to not mislead investors. The plaintiffs also claim that
certain of our current and former officers and directors sold their common stock
during times when they knew the price of our common stock was artificially
inflated by the alleged misstatements and omissions.
On November 7, 2001, we announced that we had reached a settlement
agreement with the plaintiffs in this case, resolving all claims against us as
well as claims against our current and former officers and directors. The
agreement provides for a payment of $457 million to members of the class and for
us to consent to the certification of a class for the settlement of purchasers
or acquirers of our securities from June 11, 1998 through November 9, 1999.
Additionally, as part of the settlement agreement, at our 2002 annual meeting of
stockholders, our stockholders approved an amendment to our certificate of
incorporation so that all of our directors are elected annually. A hearing was
held April 29, 2002 at which the settlement was approved. The settlement
approval is still subject to any appeals that may be filed
13
within thirty days of the approval becoming final. There is currently a motion
to vacate pending before the court, and the appeal period will begin to run once
that motion has been decided. If the motion to vacate is granted, or the
plaintiff files an appeal, we may have to defend our self in further litigation.
If the settlement is subsequently overturned or if the settlement agreement is
terminated, depending on the outcome of later settlement negotiations or
litigation, we may be obligated to pay more than under the current settlement
agreement. Additionally, any further litigation or settlement negotiations could
divert management's attention and also result in additional legal expenses.
Other lawsuits relating to the facts described above, and the February 1998
restatements by Waste Management Holdings of its prior-period financial
statements, including purported class actions, have been filed against Waste
Management Holdings and us. These include lawsuits brought by individuals who
purchased our stock or stock of Waste Management Holdings, sold businesses or
assets to us or Waste Management Holdings, or held their stock allegedly in
reliance on statements we made. For a more detailed discussion of our current
litigation, see Note 8, "Commitments and Contingencies" to our Consolidated
Financial Statements in our Quarterly Report on Form 10-Q for the period ended
June 30, 2002 incorporated by reference herein.
We and some of our subsidiaries are also currently involved in other civil
litigation and governmental proceedings relating to the conduct of our business.
The timing of the final resolutions to these matters is uncertain. Additionally,
the possible outcomes or resolutions to these matters could include judgments
against us or settlements, either of which could require substantial payments by
us, adversely affecting our liquidity and ability to meet our obligation under
the notes.
INTENSE COMPETITION COULD REDUCE OUR PROFITABILITY
We encounter intense competition from governmental, quasi-governmental and
private sources in all aspects of our operations. In North America, the industry
consists of several large national waste management companies, and local and
regional companies of varying sizes and financial resources. We compete with
these companies as well as with counties and municipalities that maintain their
own waste collection and disposal operations. These counties and municipalities
may have financial competitive advantages because tax revenues and tax-exempt
financing are available to them. Also, such governmental units may attempt to
impose flow control or other restrictions that would give them a competitive
advantage. In addition, competitors may reduce their prices to expand sales
volume or to win competitively bid municipal contracts.
EFFORTS BY LABOR UNIONS TO ORGANIZE OUR EMPLOYEES COULD DIVERT MANAGEMENT
ATTENTION AND INCREASE OUR OPERATING EXPENSES
Labor unions constantly make attempts to organize our employees, and these
efforts will likely continue in the future. Certain groups of our employees have
chosen to be represented by unions, and we have negotiated collective bargaining
agreements with some of the groups. Additional groups of employees may seek
union representation in the future and the negotiation of collective bargaining
agreements could divert management attention and result in increased operating
expenses and lower net income. If we are unable to negotiate acceptable
collective bargaining agreements, we might have to wait through "cooling off"
periods, which are often followed by union-initiated work stoppages, including
strikes. Depending on the type and duration of such work stoppages, our
operating expenses could increase significantly, which could adversely affect
our financial condition, results of operations and cash flows.
FLUCTUATIONS IN FUEL COSTS COULD AFFECT OUR OPERATING EXPENSES AND RESULTS
The price and supply of fuel is unpredictable and fluctuates based on
events outside our control, including geopolitical developments, supply and
demand for oil and gas, actions by OPEC and other oil and gas producers, war and
unrest in oil producing countries, regional production patterns and
environmental concerns. Fuel is needed to run our collection and transfer
trucks, and any price escalations or reductions in the supply could increase our
operating expenses and have a negative impact on our
14
consolidated financial condition, results of operations and cash flows. We have
implemented a fuel surcharge to partially offset increased fuel costs. However,
we are not always able to pass through all of the increased fuel costs due to
the terms of certain customers' contracts.
WE FACE RISKS RELATING TO GENERAL ECONOMIC CONDITIONS
We face risks related to general economic and market conditions, including
the potential impact of the status of the economy and interest rate
fluctuations. We also face risks related to other adverse external economic
conditions, such as the ability of our insurers to timely meet their commitments
and the effect that significant claims or litigation against insurance companies
may have on such ability. Any negative general economic conditions could
materially adversely affect our financial condition, results of operation and
cash flows.
WE MAY NEED ADDITIONAL CAPITAL
We currently expect to meet our anticipated cash needs for capital
expenditures, acquisitions and other cash expenditures with our cash flows from
operations and, to the extent necessary, additional financings. However, we
currently have a stock buy back program pursuant to which we anticipate buying
back up to $1 billion of our common stock annually, we expect to pay $230 to
$240 million (net of a tax benefit) in settlement of the class action lawsuit in
late 2002 and have approximately $635.7 million of debt maturities in the fourth
quarter of 2002. If our cash flows from operations are less than is currently
expected, or our capital expenditures increase, we may elect to incur even more
indebtedness. However, there can be no assurances that we will be able to obtain
additional financings on acceptable terms. In these circumstances, our strategy
is to use our revolving credit facilities to meet our cash needs.
Our credit facilities require us to comply with certain financial ratios.
However, if our cash flows are less than expected, our capital requirements are
more than expected or we incur additional indebtedness, we may not be in
compliance with the ratios. This would result in a default under our credit
facilities. If we were unable to obtain waivers or amendments to the credit
facilities, the lenders could choose to declare all outstanding borrowings
immediately due and payable, which we may not be able to pay in full. The
default under or unavailability of our credit agreements could have a material
adverse effect on our ability to meet our borrowing and bonding needs.
WE MAY ENCOUNTER DIFFICULTIES DEPLOYING OUR ENTERPRISE SOFTWARE
We have recently deployed enterprise-wide software systems that replaced
our previous financial, human resources and payroll systems and are in the
process of deploying new revenue management and accounts receivable systems.
These systems may contain errors or cause other problems that could adversely
affect, or even temporarily disrupt, all or a portion of our operations until
resolved.
FORWARD-LOOKING STATEMENTS
When we make statements (i) containing projections about our accounting and
finances, (ii) about our plans and objectives for the future, (iii) on our
future economic performance, (iv) containing any other projections or estimates
about our assumptions relating to the statements in clauses (i)-(iii), we are
making forward-looking statements. This Prospectus, including the information
incorporated by reference, contains forward-looking statements. These statements
usually relate to future events and anticipated revenues, earnings or other
aspects of our operations or operating results. We make these statements in an
effort to keep stockholders and the public informed about our business, and have
based them on our current expectations about future events. You should view such
statements with caution. These statements are not guarantees of future
performance or events. All phases of our business are subject to uncertainties,
risks and other influences, many of which we have no control over. Any of these
factors, either alone or taken together, could have a material adverse effect on
us and could change whether any forward-looking statement ultimately turns out
to be true. Additionally, we assume no obligation to update any forward-looking
statements as a result of future events or developments.
15
Outlined above under the caption "Risk Factors" are some of the risks that
we face and that could affect our business and financial statements for 2002 and
beyond. However, they are not the only risks that we face. There may be
additional risks that we do not presently know of or that we currently believe
are immaterial which could also impair our business. We do not intend to update
the risk factors in this Prospectus unless the securities laws require us to do
so.
USE OF PROCEEDS
There will be no net proceeds payable to us from the issuance of the
exchange notes. In consideration of issuing the exchange notes, we will receive
a like principal amount of outstanding notes. The outstanding notes surrendered
in exchange will be canceled and cannot be reissued. Therefore, the issuance of
the exchange notes will not affect our capitalization. The net proceeds of
approximately $500 million from the sale of the outstanding notes was used to
repay in full approximately $300 million of our outstanding 6.625% Senior Notes
due July 15, 2002 and the remaining amounts will be used for general corporate
purposes. Pending application, we have temporarily invested the net proceeds in
short-term investments.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to fixed
charges for the periods shown:
YEARS ENDED DECEMBER 31, SIX MONTHS
-------------------------------- ENDED JUNE 30,
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- --------------
N/A(1) N/A(2) N/A(3) 1.4x 2.2x 3.1x
---------------
(1) Earnings were insufficient to fund fixed charges in 1997. Additional
earnings of $660.4 million were necessary to cover fixed charges for this
period. The earnings available for fixed charges were negatively impacted by
merger costs of $112.7 million (primarily related to the United Waste
Systems, Inc. merger in August 1997), and asset impairments and unusual
items of $1.8 billion. The asset impairment and unusual items of $1.8
billion primarily related to a comprehensive review performed by Waste
Management Holdings of its operating assets and investments.
(2) Earnings were insufficient to fund fixed charges in 1998. Additional
earnings of $720.4 million were necessary to cover fixed charges for this
period. The earnings available for fixed charges were negatively impacted by
merger costs of $1.8 billion and unusual items of $864.1 million related
primarily to the mergers between Waste Management and Waste Management
Holdings in July 1998, and Waste Management and Eastern Environmental
Services, Inc. in December 1998.
(3) Earnings were insufficient to fund fixed charges in 1999. Additional
earnings available for fixed charges of $173 million were needed to cover
fixed charges for this period. The earnings available for fixed charges were
negatively impacted by merger costs of $45 million primarily related to the
merger between Waste Management and Waste Management Holdings during July
1998 and asset impairments and unusual items of $739 million primarily
related to losses on businesses sold and held-for-sale adjustments for
businesses to be sold and, to a lesser extent, asset impairments related to
landfill sites and other operating assets due to abandonment and closures of
facilities, denials of permits, regulatory problems and a more stringent
criteria used by Waste Management in determining the probability of landfill
expansions.
We computed our consolidated ratios of earnings to fixed charges by
dividing earnings available for fixed charges by fixed charges. For this
purpose, earnings available for fixed charges are the sum of income available
for fixed charges before income taxes, undistributed earnings from affiliated
companies' minority interests, cumulative effect of accounting changes, and
fixed charges, excluding capitalized interest. Fixed charges are interest,
whether expensed or capitalized, amortization of debt expense and discount on
16
premium relating to indebtedness, and such portion of rental expense that can be
demonstrated to be representative of the interest factor in the particular case.
DESCRIPTION OF THE EXCHANGE NOTES
For purposes of this "Description of the Exchange Notes," the term "Senior
Securities" means collectively the outstanding notes (the "Notes"), the exchange
notes (the "Exchange Notes"), and all other senior debt securities of the
Company issued under the indenture. In this description, the words "we," "our,"
and the "Company" refer only to Waste Management, Inc., but not to any of our
subsidiaries, unless the context otherwise requires.
We will issue the Exchange Notes under an indenture (the "Senior
Indenture") dated as of September 10, 1997 between the Company and JPMorgan
Chase Bank, as trustee (the "Trustee"). The Senior Indenture is an exhibit to
the Registration Statement of which this Prospectus is a part. The terms of the
Notes and the Exchange Notes include those stated in the Senior Indenture and
those made part of the Senior Indenture by reference to the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). The Notes, together with the
Exchange Notes issued in the exchange offer, will constitute a single class of
senior debt securities under the Senior Indenture. Holders of Notes who do not
exchange their Notes for Exchange Notes will vote together with the holders of
the Exchange Notes for all relevant purposes under the Senior Indenture. In that
regard, the Senior Indenture requires that certain actions by the holders under
the Senior Indenture must be taken, and certain rights must be exercised, by
specified minimum percentages of the aggregate principal amount of all
outstanding senior debt securities issued under the Senior Indenture or of a
specified series of senior debt securities under the Senior Indenture. In
determining whether holders of the requisite percentage in principal amount have
given any notice, consent or waiver or taken any other action permitted under
the indenture, any Notes that remain outstanding after the exchange offer will
be aggregated with the Exchange Notes, and the holders of the Notes and the
Exchange Notes shall vote together as a single series for all such purposes.
Accordingly, all references in this "Description of the Exchange Notes" to
specified percentages in aggregate principal amount of the notes outstanding
shall be deemed to mean, at any time after the exchange offer is consummated,
such percentage in aggregate principal amount of the Notes and the Exchange
Notes then outstanding.
Anyone who receives this Prospectus may obtain a copy of the Senior
Indenture and registration rights agreement without charge by writing to Waste
Management, Inc., 1001 Fannin Street, Suite 4000, Houston, Texas 77002,
Attention: Corporate Secretary.
GENERAL
The Exchange Notes:
- will constitute a single series of Senior Securities with the Notes under
the Senior Indenture;
- will be our general unsecured senior obligations;
- will rank equally with all of our other senior and unsecured obligations,
including debt under our credit facilities; and
- will be unconditionally guaranteed (the "Subsidiary Guarantee") by our
subsidiary, Waste Management Holdings (the "Subsidiary Guarantor").
We will issue the Exchange Notes under the Senior Indenture; the Exchange
Notes will rank pari passu as to the right of payment of principal and any
premium and interest with each other series issued thereunder and will rank
senior to all series of subordinated securities issued and outstanding and that
may be issued from time to time. The Exchange Notes will be our unsecured senior
obligations. The Senior Indenture does not limit the amount of Senior
Securities, debentures, notes or other types of indebtedness that may be issued
by us or any of our subsidiaries nor does it restrict transactions between us
and our affiliates or the payment of dividends or other distributions by us to
our stockholders. The rights of our creditors, including holders of the Exchange
Notes, will be limited to our assets and the Exchange Notes
17
will not be an obligation of any of our subsidiaries (other than pursuant to the
Subsidiary Guarantee). In addition, the Senior Indenture does not and the
Exchange Notes will not contain any covenants or other provisions that are
intended to afford holders of the Exchange Notes special protection in the event
of either a change of control of the Company or a highly leveraged transaction
by us.
The Subsidiary Guarantee of the Exchange Notes:
- will be a general, unsecured obligation of the Subsidiary Guarantor; and
- will rank equally in right of payment with all existing and future senior
and unsecured indebtedness of the Subsidiary Guarantor.
We conduct our operations through our subsidiaries. Our operating
subsidiaries will not guarantee the Exchange Notes (the Subsidiary Guarantor is
not an operating subsidiary). Thus, in the event of a bankruptcy, liquidation or
reorganization of any of these non-guarantor subsidiaries, it will pay the
holders of its debts and its trade creditors before it will be able to
distribute any of its assets to us.
We will issue the Exchange Notes in the form of one or more global exchange
notes, in registered form, without coupons, in denominations of $100,000 and
integral multiples of $1,000 as described under "-- Book-Entry; Delivery; Form
and Transfer." The global exchange notes will be registered in the name of a
nominee of DTC. Each global exchange note (and any Exchange Note issued in
exchange therefor) will be subject to certain restrictions on transfer set forth
therein as described under "-- Book-Entry; Delivery; Form and
Transfer -- Transfers of Interests in Global Exchange Notes for Certificated
Exchange Notes." Except as set forth herein under "-- Book-Entry; Delivery; Form
and Transfer -- Transfers of Interests in Global Exchange Notes for Certificated
Exchange Notes," owners of beneficial interests in a global exchange note will
not be entitled to have Exchange Notes registered in their names, will not
receive or be entitled to receive physical delivery of any such Exchange Note
and will not be considered the registered holder thereof under the Senior
Indenture.
PRINCIPAL, MATURITY AND INTEREST
We will issue the Exchange Notes in an aggregate principal amount of
$500,000,000. We will issue the Exchange Notes only in fully registered form,
without coupons, in denominations of $100,000 and integral multiples of $1,000
in excess thereof. There is no sinking fund applicable to the Exchange Notes.
The Exchange Notes will mature on May 15, 2032.
The Exchange Notes will bear interest at the rate per year set forth on the
front cover of this Prospectus. Interest on Exchange Notes will be payable
semi-annually in arrears on May 15 and November 15 of each year until maturity,
commencing on November 15, 2002. We will make each interest payment to the
persons in whose name the Exchange Notes are registered at the close of business
on the April 30 and October 31 immediately preceding the relevant interest
payment date. Interest on the Exchange Notes will accrue from and including the
date of original issuance, or if interest has already been paid, from and
including the date it was most recently paid to (but not including) each
interest payment date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
EXCHANGE OFFER
We entered into a registration rights agreement obligating us to use our
best efforts to conduct an exchange offer to exchange the Notes for Exchange
Notes registered under the Securities Act or have a shelf registration statement
(the "Shelf Registration Statement") declared effective with respect to the
Notes. See "-- Registration Rights." Upon the issuance of the Exchange Notes, if
any, or the effectiveness of a Shelf Registration Statement, the Senior
Indenture with respect to the Notes and the Subsidiary Guarantee will be subject
to and governed by the Trust Indenture Act.
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METHODS OF RECEIVING PAYMENTS ON THE EXCHANGE NOTES
If a holder has given wire transfer instructions to us, we will pay all
principal, interest and premium, if any, on those Exchange Notes in accordance
with those instructions. All other payments on Exchange Notes will be made at
the office or agency of the paying agent and registrar within the City and State
of New York unless we elect to make interest payments by check mailed to the
holders at their addresses set forth in the register of holders.
REPLACEMENT OF SECURITIES
We will replace any mutilated Exchange Note at the expense of the holder
upon surrender of such Exchange Note to the Trustee. We will replace Exchange
Notes that become destroyed, stolen or lost at the expense of the holder upon
delivery to the Trustee of evidence of destruction, loss or theft thereof
satisfactory to us and the Trustee. In the case of a destroyed, lost or stolen
Exchange Note, an indemnity satisfactory to the Trustee and to us may be
required at the expense of the holder of such Exchange Note before a replacement
Exchange Note will be issued.
PAYING AGENT FOR THE NOTES
Payment of principal of and any premium and interest on the Exchange Notes
will be made at the office of a paying agent, as we may designate from time to
time, except that at our option, payment of any interest may be made by check
mailed on or before the due date to the address of the person entitled thereto
as such address shall appear in the register of holders. We may at any time
rescind the designation of any paying agent or approve a change in the office
through which any paying agent acts. Payment of any installment of interest on
an Exchange Note will be made to the person in whose name such Exchange Note is
registered at the close of business on the regular record date, as described
above under "-- Principal, Maturity and Interest."
All monies paid by us to a paying agent for the payment of principal of and
any premium or interest on any Exchange Note which remain unclaimed at the end
of two years after such principal, premium or interest shall have become due and
payable will (subject to applicable escheat laws) be repaid to us and the holder
of such Exchange Note will thereafter look only to us for payment thereof.
TRANSFER AND EXCHANGE
A holder may transfer or exchange the Exchange Notes in accordance with the
Senior Indenture. The registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents and we
may require a holder to pay any taxes and fees required by law or permitted by
the Senior Indenture. We are not required to transfer or exchange any Exchange
Note for a period of 15 days before an election to redeem Exchange Notes. See
-- "Optional Redemption."
The registered holder of an Exchange Note will be treated as the owner of
it for all purposes.
SUBSIDIARY GUARANTEE
The Subsidiary Guarantor will guarantee our obligations under the Exchange
Notes. The Subsidiary Guarantee will be a general, unsecured obligation of the
Subsidiary Guarantor and will rank equally in right of payment with all existing
and future senior and unsecured indebtedness of the Subsidiary Guarantor.
However, the guarantee may be subject to review under various laws for the
protection of creditors. Creditors of the Subsidiary Guarantor could claim that
the guarantee was incurred for our benefit (and only indirectly, if at all, for
the benefit of the Subsidiary Guarantor) and therefore the obligations of the
guarantor were incurred for less than reasonably equivalent value or fair
consideration. Under certain circumstances, including a finding that the
Subsidiary Guarantor was insolvent at the time it issued the guarantee, a court
could hold that the obligations of the Subsidiary Guarantor under the guarantee
may be voided or are subordinate to other obligations of the Subsidiary
Guarantor. It could also
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find that the amount for which the Subsidiary Guarantor is liable under its
guarantee of the exchange notes is limited.
Different jurisdictions define "insolvency" differently. However, the
Subsidiary Guarantor generally would be considered insolvent at the time it
guaranteed the notes if (1) the fair market value (or fair saleable value) of
its assets is less than the amount required to pay its total existing debts and
liabilities (including the probable liability on contingent liabilities) as they
become absolute or matured or (2) the Subsidiary Guarantor were incurring debts
beyond its ability to pay as such debts mature.
In an attempt to limit the applicability of fraudulent transfer laws, the
Subsidiary Guarantee limits the amount of the guarantee to the amount that will
result in the guarantee not constituting a fraudulent transfer or improper
corporate distribution.
The Subsidiary Guarantee will be released:
- upon our consolidation or merger with or into the Subsidiary Guarantor;
- upon payment in full of all principal, premium, if any, and interest on
the Exchange Notes; or
- upon the release of the Subsidiary Guarantor's guarantees under our
credit facilities (or any replacement facility). Our credit facilities
currently state that the Subsidiary Guarantor's guarantees under the
credit facilities can only be released with the written consent of each
of the banks that is a party thereto. However, the Subsidiary Guarantee
provides that if that happens, the Subsidiary Guarantee will also be
released.
RANKING
As a holding company, we conduct our operations through our subsidiaries.
Our only significant assets are the capital stock of our subsidiaries.
Accordingly, our ability to meet our cash obligations depends in part upon the
ability of our subsidiaries to make cash distributions to us. The ability of our
subsidiaries to make distributions to us is, and will continue to be, restricted
by, among other limitations, applicable provisions of the laws of national or
state governments and contractual provisions. Our right to participate in the
assets of any subsidiary (and thus the ability of holders of the Exchange Notes
to benefit indirectly from such assets) is generally subject to the prior claims
of creditors, including trade creditors, of that subsidiary, except to the
extent that we are recognized as a creditor of such subsidiary, in which case
our claims would still be subject to any security interest of other creditors of
such subsidiary. Therefore, except as described below, the Exchange Notes will
be subordinated by operation of law to creditors, including trade creditors, of
our subsidiaries with respect to the assets of the subsidiaries, against which
these creditors have a claim.
The Exchange Notes will be guaranteed by our subsidiary Waste Management
Holdings. Our obligations under our credit facilities and our other senior
indebtedness are also currently guaranteed by Waste Management Holdings.
Similarly, we have guaranteed the outstanding senior indebtedness of Waste
Management Holdings. Thus, the Exchange Notes will rank equally in right of
payment with the senior indebtedness of Waste Management Holdings, the debt
under our credit facilities and our other senior indebtedness. However, as
described above, the Exchange Notes will be structurally subordinated to the
claims of creditors of our subsidiaries, other than Waste Management Holdings.
As of June 30, 2002, the amount of this subsidiary indebtedness was
approximately $1.6 billion out of our total consolidated long-term debt of
approximately $8.6 billion.
Upon any release by the lenders under our credit facilities (or any
replacement or new principal credit facility) of the Waste Management Holdings'
guarantee, we and Waste Management Holdings will each be deemed automatically
and unconditionally released and discharged from our respective obligations
under the guarantees of each other's senior indebtedness. In such event, the
claims of creditors of Waste Management Holdings will effectively have priority
with respect to the assets and earnings of Waste Management Holdings over the
claims of our creditors, including the holders of the Exchange Notes. See
"-- Subsidiary Guarantee."
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OPTIONAL REDEMPTION
The Exchange Notes will be redeemable at our option at any time and from
time to time, in whole or in part, upon not less than 30 nor more than 60 days
notice to each holder of Exchange Notes, at a redemption price equal to the
greater of (1) 100% of the principal amount of the Exchange Notes to be redeemed
and (2) the sum of the present values of the remaining scheduled payments of
principal and interest thereon (not including any portion of such payments of
interest accrued as of the date of redemption) discounted to the date of
redemption on a semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the applicable Treasury Yield, plus 35 basis points, plus, in
each case, accrued and unpaid interest thereon to the date of redemption. Unless
we default in payment of the redemption price, on and after the date of
redemption, interest will cease to accrue on the Exchange Notes or portions
thereof called for redemption. If less than all the Exchange Notes are redeemed
at any time, the Trustee will select the Exchange Notes to be redeemed on a pro
rata basis or by any other method the Trustee deems fair and appropriate.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Exchange Notes to be redeemed that would be utilized,
at the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the Exchange Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the bid price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) at 4:00 p.m. on the third business day preceding the
redemption date, as set forth on "Telerate Page 500" (or such other page as may
replace Telerate Page 500), or (2) if such page (or any successor page) is not
displayed or does not contain such bid prices at such time (a) the average of
the Reference Treasury Dealer Quotations obtained by the Trustee for the
redemption date, after excluding the highest and lowest of all Reference
Treasury Dealer Quotations obtained, or (b) if the Trustee obtains fewer than
four such Reference Treasury Dealer Quotations, the average of all Reference
Treasury Dealer Quotations obtained by the Trustee.
"Independent Investment Banker" means any of Deutsche Bank Securities Inc.,
Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (and
their respective successors), or, if all of such firms are unwilling or unable
to select the Comparable Treasury Issue, an investment banking institution of
national standing appointed by the Trustee and reasonably acceptable to us.
"Reference Treasury Dealer" means (1) each of Deutsche Bank Securities
Inc., Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (and their respective successors), unless any of them ceases to be
a primary U.S. government securities dealer in new York City (a "Primary
Treasury Dealer"), in which case we will substitute therefor another Primary
Treasury Dealer, and (2) any other Primary Treasury Dealer selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any date of redemption, the average, as determined
by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such date of redemption.
"Treasury Yield" means, with respect to any date of redemption, the rate
per annum equal to the semi-annual yield to maturity (computed as of the third
business day immediately preceding the redemption date) of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such date of redemption.
Except as set forth above, the Exchange Notes will not be redeemable by us
before maturity and will not be entitled to the benefit of any sinking fund.
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We may purchase the Exchange Notes in the open market, by tender or
otherwise. The Exchange Notes so purchased may be held, resold or surrendered to
the Trustee for cancellation. If applicable, we will comply with the
requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and other securities laws and regulations in connection
with any such purchase. The Exchange Notes may be defeased in the manner
provided in the Senior Indenture.
We do not currently intend to redeem the Exchange Notes due to the
inclusion of the make-whole premium in the redemption price.
CERTAIN COVENANTS
Certain Definitions. For purposes of the following description of certain
covenants of the Senior Indenture that limit our ability and the ability of our
subsidiaries to take certain actions, the following definitions are applicable.
"Attributable Debt" shall mean, as of any particular time, the present
value, discounted at a rate per annum equal to (i) the implied lease rate or
(ii) if the implied lease rate is not known to us, then the weighted average
interest rate of all Senior Securities outstanding at the time under the Senior
Indenture compounded semi-annually, in either case, of the obligation of a
lessee for rental payments during the remaining term of any lease (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended); the net amount of rent required to be paid for any such
period shall be the total amount of the rent payable by the lessee with respect
to such period, but may exclude amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water rates and similar
charges; and, in the case of any lease which is terminable by the lessee upon
the payment of a penalty, such net amount shall also include the amount of such
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated.
"Consolidated Net Tangible Assets" shall mean, at any date of
determination, the total amount of our assets after deducting: (i) all the
current liabilities (excluding (a) any current liabilities that by their terms
are extendible or renewable at the option of the obligor to a time that is more
than 12 months after the time at which the amount is being computed, and (b)
current maturities of long term debt) and (ii) the value (net of any applicable
reserves) of all intangible assets such as excess of cost over net assets of
acquired businesses, customer lists, covenants not to compete, licenses, and
permits, all as set forth on our consolidated balance sheet and our consolidated
subsidiaries for our most recently completed fiscal quarter, prepared in
accordance with United States generally accepted accounting principles.
"Guaranty" shall mean any agreement, undertaking or arrangement by which
any person guarantees, endorses or otherwise becomes or is contingently liable
upon (by direct or indirect agreement, contingent or otherwise, to provide funds
for payment, to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss) the debt, obligation or other
liability of any other person (other than by endorsements of instruments in the
course of collection), or guarantees the payment of dividends or other
distributions upon the shares of any other person. The amount of the obligor's
obligation under any Guaranty shall (subject to any limitation set forth
therein) be deemed to be the amount of such other person's debt, obligation or
other liability or the amount of such dividends or other distributions
guaranteed.
"Indebtedness" of any person shall mean:
- all obligations of such person for borrowed money (including, without
limitation, all notes payable and drafts accepted representing extension
of credit and all obligations evidenced by bonds, debentures, notes or
other similar instruments) or on which interest charges are customarily
paid, all as shown on a balance sheet of such person as of the date at
which Indebtedness is to be determined;
- all other items which, in accordance with generally accepted accounting
principles, would be included as liabilities on the liability side of a
balance sheet of such person as of the date at which Indebtedness is to
be determined; and
22
- whether or not so included as liabilities in accordance with generally
accepted accounting principles,
(i) all indebtedness (excluding, however, prepaid interest thereon)
secured by a Security Interest in property owned or being purchased
by such person (including, without limitation, indebtedness arising
under conditional sales or other title retention agreements)
whether or not such indebtedness shall have been assumed by such
person, and
(ii) all Guaranties of such person.
"Principal Property" shall mean any waste processing, waste disposal or
resource recovery plant or similar facility located within the United States
(other than its territories and possessions and Puerto Rico) or Canada and owned
by, or leased to, us or any of our Restricted Subsidiaries, except (a) any such
plant or facility (i) owned or leased jointly or in common with one or more
persons other than us and our Restricted Subsidiaries in which our interest and
the interest of our Restricted Subsidiaries does not exceed 50%, or (ii) which
the Board of Directors determines in good faith is not of material importance to
the total business conducted, or assets owned, by us and our Subsidiaries as an
entirety, or (b) any portion of such plant or facility which the Board of
Directors determines in good faith not to be of material importance to the use
or operation thereof.
"Restricted Subsidiary" shall mean any subsidiary (other than any
subsidiary of which we own directly or indirectly less than all of the
outstanding voting stock), (a) principally engaged in, or whose principal assets
consist of property used by us or any of our Restricted Subsidiaries in, the
storage, collection, transfer, interim processing or disposal of waste within
the United States of America or Canada, or (b) which we shall designate as a
Restricted Subsidiary in an Officers' Certificate delivered to the Trustee.
"Security Instrument" shall mean any security agreement, chattel mortgage,
assignment, financing or similar statement or notice, continuation statement,
other agreement or instrument, or amendment or supplement to any thereof,
providing for, evidencing or perfecting any Security Interest or lien.
"Security Interest" shall mean any interest in any real or personal
property or fixture which secures payment or performance of an obligation and
shall include any mortgage, lien, encumbrance, charge or other security interest
of any kind, whether arising under a Security Instrument or as a matter of law,
judicial process or otherwise.
Consolidation, Merger, Sale. The Senior Indenture provides that we may not
consolidate with or merge into any other person or convey, transfer or lease our
properties and assets substantially as an entirety to any person, unless:
- the person formed by such consolidation or into which we are merged or
the person which acquires by conveyance or transfer, or which leases, our
properties and assets substantially as an entirety shall be a
corporation, partnership or trust which shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the
principal of and any premium and interest (including all additional
amounts, if any, payable pursuant to the Senior Indenture) on all the
Senior Securities and the performance or observance of every other
covenant of the Senior Indenture on our part to be performed or observed;
and
- immediately after giving effect to such transaction and treating any
indebtedness which becomes our obligation or the obligation of a
subsidiary as a result of such transaction as having been incurred by us
or such subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing.
Upon our consolidation with, or merger into, any other person or any
conveyance, transfer or lease of our properties and assets substantially as an
entirety, the successor person formed by such consolidation or into which we are
merged or to which such conveyance, transfer or lease is made shall succeed to,
and be substituted for, and may exercise every right and power of ours, under
the Senior Indenture with the same
23
effect as if such successor person had been named as herein, and thereafter,
except in the case of a lease, the predecessor person shall be relieved of all
obligations and covenants under the Senior Indenture and the Senior Securities,
and may liquidate and dissolve.
Limitation on Liens. The Senior Indenture provides that:
(a) We will not, and will not permit any of our Restricted
Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Indebtedness secured by a Security Interest upon any
Principal Property, whether owned as of the date of the Senior Indenture or
acquired after the date of the Senior Indenture, without making effective
provision (and we hereby covenant that in any such case we shall make or
cause to be made effective provision) whereby the Senior Securities then
outstanding and any other Indebtedness of ours or our Restricted
Subsidiaries then entitled thereto shall also be secured, equally and
ratably, by such Security Interest, for so long as any of such Indebtedness
is secured by the Security Interest; but nothing in the Senior Indenture
shall prevent, restrict or apply to Indebtedness secured by:
(1) (a) any Security Interest upon property or assets which is
created prior to or contemporaneously with, or within 360 days after,
(i) in the case of the acquisition of such property or assets, the
completion of such acquisition and (ii) in the case of the construction,
development or improvement of such property or assets, the later to
occur of the completion of such construction, development or improvement
or the commencement of operation or use of the property or assets, which
Security Interest secures or provides for the payment, financing or
refinancing, directly or indirectly, of all or any part of the
acquisition cost of such property or assets or the cost of construction,
development or improvement thereof; or
(b) any Security Interest upon property or assets existing at the
time of its acquisition, which Security Interest secures obligations
assumed by us or any of our Restricted Subsidiaries; or
(c) any conditional sales agreement or other title retention
agreement with respect to any property or assets acquired by us or any
of our Restricted Subsidiaries, or
(d) any Security Interest existing on the property or assets or
shares of stock of a corporation or firm at the time such corporation or
firm is merged into or consolidated with us or any of our Restricted
Subsidiaries or at the time of a sale, lease or other disposition of the
property or assets of such corporation or firm as an entirety or
substantially as an entirety to us or any of our Restricted Subsidiaries
or at the time such corporation becomes a Restricted Subsidiary; or
(e) any Security Interest existing on the property, assets or
shares of stock of any successor to us in accordance with the provisions
of the covenant described in "-- Consolidation, Merger, Sale";
if, in each case, any such Security Interest described in the foregoing
clauses (b), (c), (d) or (e) does not attach to or affect property or
assets owned by us or any of our Restricted Subsidiaries before the event
referred to in such clauses; or
(2) Mechanics', materialmen's, carriers' or other like liens arising
in the ordinary course of business (including construction of facilities)
in respect of obligations which are not due or which are being contested in
good faith; or
(3) Any Security Interest arising by reason of deposits with, or the
giving of any form of security to, any governmental agency or any body
created or approved by law or governmental regulation, which is required by
law or governmental regulation as a condition to the transaction of any
business or the exercise of any privilege, franchise or license (including,
without limitation, any Security Interest arising by reason of one or more
letters of credit in connection with any international waste management
contract to be performed by us or by any of our subsidiaries or their
respective affiliates); or
24
(4) Security Interests for taxes, assessments or governmental charges
or levies not yet delinquent or Security Interests for taxes, assessments
or governmental charges or levies already delinquent but the validity of
which is being contested in good faith; or
(5) Security Interests (including judgment liens) arising in
connection with legal proceedings so long as such proceedings are being
contested in good faith and, in the case of judgment liens, execution
thereon is stayed; or
(6) Landlords' liens on fixtures located on premises leased by us or
by any of our Restricted Subsidiaries in the ordinary course of business;
or
(7) Any Security Interest in favor of any governmental authority in
connection with the financing of the cost of construction or acquisition of
property; or
(8) Any Security Interest arising by reason of deposits to qualify us
or any of our Restricted Subsidiaries to conduct business, to maintain
self-insurance, or to obtain the benefit of, or comply with, laws; or
(9) Any Security Interest that secures any Indebtedness of a
Restricted Subsidiary owing to us or another of our Restricted Subsidiaries
or by us to a Restricted Subsidiary, or
(10) Any Security Interest incurred in connection with pollution
control, sewage or solid waste disposal, industrial revenue or similar
financing; or
(11) Any Security Interest created by any program providing for the
financing, sale or other disposition of trade or other receivables
qualified as current assets in accordance with United States generally
accepted accounting principles entered into by us or by any of our
Restricted Subsidiaries, if such program is on terms comparable for similar
transactions, or any document executed by us or by any of our Restricted
Subsidiaries in connection therewith, and if such Security Interest is
limited to the trade or other receivables in respect of which such program
is created or exists and the proceeds thereof, or
(12) Any extension, renewal or refunding (or successive extensions,
renewals or refundings) in whole or in part of any Indebtedness secured by
any Security Interest referred to in the foregoing clauses (1) through
(11), inclusive, but the Security Interest securing such Indebtedness shall
be limited to the property or assets which, immediately before such
extension, renewal or refunding, secured such Indebtedness and additions to
such property or assets.
Notwithstanding the foregoing provisions, we and any of our Restricted
Subsidiaries may create, incur, assume or suffer to exist any Indebtedness
secured by a Security Interest without also securing the Senior Securities
if, at the time such Security Interest becomes a Security Interest upon the
Principal Property and after giving effect thereto, the aggregate
outstanding principal amount of all our Indebtedness and our Restricted
Subsidiaries' Indebtedness secured by Security Interests permitted by this
sentence (excluding Indebtedness secured by a Security Interest existing as
of the date of the Senior Indenture, but including the Attributable Debt in
respect of Sale and Leaseback Transactions, other than Sale and Leaseback
Transactions which, if the Attributable Debt in respect thereof had been
Indebtedness secured by a Security Interest, would have been permitted by
clause (1) (a) above, other than Sale and Leaseback Transactions the
proceeds of which have been applied or committed to be applied in
accordance with the covenant described in "-- Limitations on Sale and
Leaseback Transactions" and other than Sale and Leaseback Transactions
between us and any of our Restricted Subsidiaries) does not exceed 15% of
Consolidated Net Tangible Assets.
(b) If, upon any consolidation or merger of any Restricted Subsidiary
with or into any other corporation, or upon any consolidation or merger of
any other corporation with or into us or any of our Restricted Subsidiaries
or upon any sale or conveyance of the Principal Property of any Restricted
Subsidiary as an entirety or substantially as an entirety to any other
person, or upon any acquisition by us or by any of our Restricted
Subsidiaries by purchase or otherwise of all or any part of the Principal
Property of any other person, any Principal Property theretofore owned by
us or such Restricted
25
Subsidiary would thereupon become subject to any Security Interest not
permitted by the terms of the foregoing covenant, we, before such
consolidation, merger, sale or conveyance, or acquisition, will, or will
cause such Restricted Subsidiary to, secure payment of the principal of and
interest, if any, on the Exchange Notes (equally and ratably with or prior
to any of our other Indebtedness or the other Indebtedness of such
Restricted Subsidiary then entitled thereto) by a direct lien on all such
Principal Property prior to all liens other than any liens theretofore
existing thereon by a supplemental indenture or otherwise.
Limitations on Sale and Leaseback Transactions. The Senior Indenture
provides that we will not, and will not permit a Restricted Subsidiary to, enter
into any arrangement with any person (other than with any Restricted Subsidiary)
providing for the leasing to us or any Restricted Subsidiary of any Principal
Property owned or hereafter acquired by us or such Restricted Subsidiary (except
for temporary leases for a term, including any renewal thereof, of not more than
three years and except for leases between us and a Restricted Subsidiary or
between Restricted Subsidiaries), which Principal Property has been or is to be
sold or transferred by us or such Restricted Subsidiary to such person (a "Sale
and Leaseback Transaction") unless:
- we or such Restricted Subsidiary would be entitled, pursuant to the
covenant described in "-- Limitation on Liens," to incur Indebtedness
secured by a Security Interest on the property to be leased without
equally and ratably securing the Exchange Notes, or
- we shall, and in any such case we covenant that we will, within 180 days
after the effective date of any such arrangement, apply an amount equal
to the fair value (as determined by our Board of Directors) of such
property to the redemption of Senior Securities that, by their terms, are
subject to redemption, or to the purchase and retirement of Senior
Securities, or to the payment or other retirement of funded debt for
money borrowed, incurred or assumed by us which ranks senior to or
equally and ratably with the Exchange Notes or of funded debt for money
borrowed, incurred or assumed by any Restricted Subsidiary (other than,
in either case, funded debt owed by us or any Restricted Subsidiary), or
- we shall within 180 days after entering into the Sale and Leaseback
Transaction, enter into a bona fide commitment or commitments to expend
for the acquisition or capital improvement of a Principal Property an
amount at least equal to the fair value (as determined by our Board of
Directors) of such property.
Notwithstanding the foregoing, we may, and may permit any Restricted
Subsidiary to, effect any Sale and Leaseback Transaction that is not acceptable
pursuant to the bullet points above, if the Attributable Debt associated with
such Sale and Leaseback Transaction, together with the aggregate principal
amount of outstanding debt secured by Security Interests upon Principal Property
not acceptable pursuant to clauses (1) through (12) of the covenant described in
"-- Limitation on Liens," inclusive, do not exceed 15% of Consolidated Net
Tangible Assets.
Compliance Certificates. We are required to furnish to the Trustee
annually a statement as to our compliance with all conditions and covenants
under the Senior Indenture.
EVENTS OF DEFAULT; REMEDIES
Events of Default. An Event of Default with respect to the Exchange Notes
is defined under the Senior Indenture as being one or more of the following
events:
- default in the payment of any interest upon any Exchange Note when it
becomes due and payable, and continuance of such default for a period of
30 days; or
- default in the payment of the principal of (or premium, if any, on) any
Exchange Note as and when the same becomes due and payable whether at
maturity, by declaration of acceleration, call for redemption or
otherwise; or
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- default in the performance, or breach, of any of our other covenants or
warranties in the Senior Indenture and continuance of such default or
breach for a period of 60 days after there has been given, by registered
or certified mail, to us by the Trustee or to us and the Trustee by the
holders of at least 25% in principal amount of the Exchange Notes a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under the
Senior Indenture; or
- the entry by a court having jurisdiction in the premises of (A) a decree
or order for relief in our respect in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging us
a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
our respect under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of ours or of any substantial part of our property, or
ordering the winding up or liquidation of our affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 90 consecutive
days; or
- our commencement of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or our consent to the entry of a decree or order for relief in
our respect in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or the commencement of any bankruptcy or insolvency case or
proceeding against us, or our filing of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State
law, or our consent to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or similar official of ours or of any substantial
part of our property, or our making of an assignment for the benefit of
creditors, or our admission in writing of our inability to pay our debts
generally as they become due, or our taking of corporate action in
furtherance of any such action.
Remedies. If an Event of Default with respect to the Exchange Notes occurs
and is continuing, then in every such case, either the Trustee or the holders of
not less than 25% in principal amount of the outstanding Exchange Notes may
declare the principal amount to be due and payable immediately, by a notice in
writing to us (and to the Trustee if given by holders), and upon any such
declaration such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Exchange
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Trustee, the holders of a majority in principal amount
of the outstanding Exchange Notes, by written notice to us and the Trustee, may
rescind and annul such declaration and its consequences if:
- we have paid or deposited with the Trustee a sum sufficient to pay:
(i) all overdue interest on all Exchange Notes,
(ii) the principal of (and premium, if any, on) the Exchange Notes
which has become due otherwise than by such declaration of acceleration
and any interest thereon at the rate prescribed therefor,
(iii) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate prescribed therefor, and
(iv) all sums paid or advanced by the Trustee and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and
- all Events of Default with respect to Exchange Notes, other than the
non-payment of the principal of Exchange Notes which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in the Senior Indenture.
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No such rescission shall affect any subsequent default or impair any right
consequent thereon. If the Trustee or any holder of an Exchange Note has
instituted any proceeding to enforce any right or remedy under the Senior
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such holder, then and in
every such case, subject to any determination in such proceeding, we, the
Trustee and the holders of Exchange Notes shall be restored severally and
respectively to their former positions under the Senior Indenture and the
Exchange Notes, and thereafter all rights and remedies of the Trustee and the
holders shall continue as though no such proceeding had been instituted.
The Senior Indenture provides that, subject to the duty of the Trustee
during default to act with the required standard of care, the Trustee is under
no obligation to exercise any of its rights or powers under the Senior Indenture
at the request or direction of any of the holders, unless such holders shall
have offered to the Trustee reasonable indemnity. No holder of any Exchange Note
shall have any right to institute any proceeding, judicial or otherwise, with
respect to the Senior Indenture, or for the appointment of a receiver or
trustee, or for any other remedy thereunder, unless:
- such holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Exchange Notes;
- the holders of not less than 25% in principal amount of the outstanding
Exchange Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee under the Senior Indenture;
- such holder or holders have offered to the Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in compliance
with such request;
- the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
- no direction inconsistent with such written request has been given to the
Trustee during such 60-day period by the holders of a majority in
principal amount of the outstanding Exchange Notes.
Notwithstanding any other provision in the Senior Indenture, the right of
any holder of any Exchange Note to receive payment of the principal of and
premium, if any on such Exchange Note on the Stated Maturity or Maturities (each
as defined in the Senior Indenture) expressed in such Exchange Note, or to
institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
holder.
The holders of a majority in principal amount of the outstanding Exchange
Notes shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Exchange Notes, provided
that (1) such direction shall not be in conflict with any rule of law or with
the Senior Indenture; (2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction; and (3) the Trustee
shall not be obligated to take any action unduly prejudicial to holders not
joining in such direction or involving the Trustee in personal liability. The
holders of a majority in principal amount of the outstanding Exchange Notes may
on behalf of the holders of all the Exchange Notes waive any past default under
the Senior Indenture with respect to the Exchange Notes and its consequences,
except a default in the payment of the principal of or any premium or interest
on any Exchange Note or in respect of a covenant or provision of the Senior
Indenture which, pursuant to the Senior Indenture, cannot be modified or amended
without the consent of the holder of each outstanding Exchange Note. Upon any
such waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of the Senior
Indenture; but no such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
If a default occurs under the Senior Indenture with respect to the Exchange
Notes, the Trustee shall give the holders of Exchange Notes notice of such
default as and to the extent provided by the Trust Indenture Act; but in the
case of any default or breach of certain covenants or warranties with respect to
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the Exchange Notes, no such notice to holders shall be given until at least 30
days after the occurrence thereof (the term "default" for purposes of these
provisions being defined as any event which is, or after notice or lapse of time
or both would become, an Event of Default with respect to the Exchange Notes).
To the fullest extent allowed under applicable law, if for the purpose of
obtaining judgment against us in any court it is necessary to convert the sum
due in respect of the principal of, or premium, if any, or interest on, any
Exchange Notes (the "Required Currency") into a currency in which a judgment
will be rendered (the "Judgment Currency"), the rate of exchange used shall be
the rate at which in accordance with normal banking procedures the Trustee could
purchase in the City of New York the Required Currency with the Judgment
Currency on the business day in the City of New York next preceding that on
which final judgment is given. Neither we nor the Trustee shall be liable for
any shortfall nor shall either of them benefit from any windfall in payments to
holders of Exchange Notes under this provision of the Senior Indenture caused by
a change in exchange rates between the time the amount of a judgment against us
is calculated as above and the time the Trustee converts the Judgment Currency
into the Required Currency to make payments under the foregoing provisions of
the Senior Indenture to holders of Exchange Notes, but payment of such judgment
shall discharge all amounts owed by us on the claim or claims underlying such
judgment.
DISCHARGE OF INDENTURE
Satisfaction and Discharge of Indenture. The Senior Indenture provides
that we may at our option at any time, satisfy and discharge the Senior
Indenture (except as to any surviving rights of registration of transfer or
exchange of Senior Securities and any right to receive additional amounts
pursuant to the Senior Indenture) with respect to all Senior Securities issued
under the Senior Indenture, which Senior Securities have not already been
delivered to the Trustee for cancellation and which either have become due and
payable or are by their terms due and payable within one year (or are to be
called for redemption within one year) by depositing with the Trustee as trust
funds an amount sufficient to pay when due the principal (and premium, if any)
and any interest on all outstanding Senior Securities when due.
Defeasance and Discharge. The Senior Indenture provides that, if we so
elect by Board Resolution with respect to the Exchange Notes, we will be
discharged from any and all obligations in respect of the Exchange Notes (except
for certain obligations relating to temporary Exchange Notes and exchange of
Notes, registration of transfer or exchange of Exchange Notes, replacement of
stolen, lost or mutilated Exchange Notes, maintenance of paying agencies to hold
moneys for payment in trust and payment of additional amounts, if any, required
in consequence of United States withholding taxes imposed on payments to
non-United States persons or otherwise required by of the Senior Indenture) upon
the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any), and each installment
of interest on, the Exchange Notes on the stated maturity of such payments in
accordance with the terms of the Senior Indenture and the Exchange Notes. Such a
trust may only be established if, among other things, we have delivered to the
Trustee an opinion of counsel to the effect that (i) we have received from, or
there has been published by, the Internal Revenue Service a ruling, or (ii)
since the date of the Senior Indenture there has been a change in applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the holders of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit, defeasance and discharge, and will be subject to federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not occurred.
Covenant Defeasance. The Senior Indenture also provides that, if we so
elect by Board Resolution with respect to the Exchange Notes, we may omit to
comply with certain restrictive covenants, including the covenants described
under "-- Limitation on Liens" and "-- Limitations on Sale and Leaseback
Transactions," and any such omission shall not be an Event of Default with
respect to the Exchange Notes, upon the deposit with the Trustee, in trust, of
money and/or U.S. Government Obligations which through the payment of interest
and principal in respect thereof in accordance with their terms will provide
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money in an amount sufficient to pay the principal of (and premium, if any), and
each installment of interest on, the Exchange Notes on the stated maturity of
such payments in accordance with the terms of the Senior Indenture and the
Exchange Notes. Our obligations under the Senior Indenture and the Exchange
Notes other than with respect to such covenants shall remain in full force and
effect. Such a trust may be established only if, among other things, we have
delivered to the Trustee an opinion of counsel to the effect that the holders of
such series will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amounts and in the same manner
and at the same time as would have been the case if such deposit and defeasance
had not occurred.
Although the amount of money and U.S. Government Obligations on deposit
with the Trustee would be intended to be sufficient to pay amounts due on the
Exchange Notes at the time of their stated maturity, in the event we exercise
our option to omit compliance with the covenants defeased with respect to the
Exchange Notes as described above, and the Exchange Notes are declared due and
payable because of the occurrence of any Event of Default, such amount may not
be sufficient to pay amounts due on the Exchange Notes at the time of the
acceleration resulting from such Event of Default. We shall in any event remain
liable for such payments as provided in the Senior Indenture.
Federal Income Tax Consequences. Under current United States federal
income tax law, defeasance and discharge would likely be treated as a taxable
exchange of the Exchange Notes to be defeased for an interest in the defeasance
trust. As a consequence, a holder would recognize gain or loss equal to the
difference between the holder's cost or other tax basis for the Exchange Notes
and the value of the holder's interest in the defeasance trust, and thereafter
would be required to include in income the holder's share of the income, gain or
loss of the defeasance trust. Under current United States federal income tax
law, covenant defeasance would ordinarily not be treated as a taxable exchange
of the Exchange Notes.
MEETINGS, MODIFICATION AND WAIVER
We and the Trustee may make modifications and amendments of the Senior
Indenture with the consent of the holders of a majority in aggregate principal
amount of the outstanding Senior Securities of each series affected by such
modification or amendment; but no such modification or amendment may, without
the consent of the holder of each outstanding Senior Security affected thereby,
- change the stated maturity of the principal of, or any installment of
principal of or interest on any Senior Security;
- change the redemption date with respect to any Senior Security;
- reduce the principal amount of, or premium or interest on, any Senior
Security;
- change any of our obligations to pay additional amounts;
- change the coin or currency in which any Senior Security or any premium
or interest thereon is payable;
- change the redemption right of any holder;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any Senior Security;
- reduce the percentage in principal amount of outstanding Senior
Securities of any series, the consent of whose holders is required for
modification or amendment of the Senior Indenture or for waiver of
compliance with certain provisions of the Senior Indenture or for waiver
of certain defaults;
- reduce the requirements contained in the Senior Indenture for quorum or
voting;
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- change any of our obligations to maintain an office or agency in the
places and for the purposes required by the Senior Indenture; or
- modify any of the above provisions.
We may make modifications and amendments of the Senior Indenture without
the consent of any holders of Senior Securities, when authorized by a Board
Resolution, and the Trustee, to:
- evidence the succession of another person and the assumption by any such
successor of our covenants therein and in the Senior Securities pursuant
to the provisions of the Senior Indenture; or
- add to our covenants for the benefit of the holders of all or any series
of Senior Securities (and if such covenants are to be for the benefit of
less than all series of Senior Securities, stating that such covenants
are expressly being included solely for the benefit of such series) or to
surrender any right or power therein conferred upon us; or
- add any additional Events of Default; or
- permit or facilitate the issuance of Senior Securities in uncertificated
form, provided that any such action shall not adversely affect the
interests of the holders of Senior Securities of any series in any
material respect; or
- add to, change or eliminate any of the provisions of the Senior Indenture
in respect of one or more series of Senior Securities, but any such
addition, change or elimination (A) shall neither (i) apply to any Senior
Security of any series created before the execution of such supplemental
indenture and entitled to the benefit of such provision nor (ii) modify
the rights of the holder of any such Senior Security with respect to such
provision or (B) shall become effective only when there is no such Senior
Security outstanding; or
- secure the Senior Securities pursuant to the requirements of the Senior
Indenture or otherwise; or
- establish the form or terms of Senior Securities of any series as
permitted by of the Senior Indenture; or
- evidence and provide for the acceptance of appointment under the Senior
Indenture by a successor Trustee with respect to the Senior Securities of
one or more series and to add to or change any of the provisions of the
Senior Indenture as shall be necessary to provide for or facilitate the
administration of the trusts thereunder by more than one Trustee,
pursuant to the requirements of the Senior Indenture; or
- cure any ambiguity, to correct or supplement any provision therein or in
any supplemental indenture which may be defective or inconsistent with
any other provision therein or in any supplemental indenture, or to make
any other provisions with respect to matters or questions arising under
the Senior Indenture; but such action shall not adversely affect the
interests of the holders of Senior Securities of any series in any
material respect.
The holders of a majority in aggregate principal amount of outstanding
Exchange Notes may, on behalf of all holders of Exchange Notes, waive compliance
by us with certain restrictive provisions of the Senior Indenture. The holders
of a majority in aggregate principal amount of the Exchange Notes may, on behalf
of all holders of Exchange Notes, waive any past default under the Senior
Indenture with respect to the Exchange Notes, except a default (a) in the
payment of the principal of or any premium or interest on the Exchange Notes or
(b) in respect of a covenant or provision of the Senior Indenture which cannot
be modified or amended without the consent of the holder of each outstanding
Exchange Note.
The Senior Indenture contains provisions for convening meetings of the
holders of Exchange Notes. A meeting may be called at any time by the Trustee,
and also, upon our request, or the holders of at least 10% in aggregate
principal amount of the outstanding Exchange Notes, in any such case upon notice
given in accordance with "Notices" below. Except for any consent which must be
given by the holder of each outstanding Exchange Note, as described above, any
resolution presented at a meeting (or adjourned
31
meeting at which a quorum is present) may be adopted by the affirmative vote of
the holders of a majority in aggregate principal amount of the Exchange Notes;
but any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which may be made, given or
taken by the holders of a specified percentage, which is less than a majority,
in aggregate principal amount of the Exchange Notes may be adopted at a meeting
(or adjourned meeting duly reconvened at which a quorum is present) by the
affirmative vote of the holders of such specified percentage in aggregate
principal amount of the Exchange Notes. Any resolution passed or decision taken
at any meeting of holders of Exchange Notes duly held in accordance with the
Senior Indenture will be binding on all the holders of the Exchange Notes. The
quorum at any meeting of the holders of Exchange Notes, and at any reconvened
meeting, will be persons holding or representing a majority in aggregate
principal amount of the Exchange Notes.
Governing Law. The Senior Indenture, the Subsidiary Guarantee, the Notes
and the Exchange Notes will be governed by, and construed in accordance with,
the laws of the State of New York.
NOTICES
We will give notices to holders of the Exchange Notes by first-class mail
to the addresses of such holders as they appear in the security register.
REGARDING THE TRUSTEE
The Trustee appointed and serving as trustee pursuant to the Senior
Indenture is JPMorgan Chase Bank ("JPMorgan Chase").
The Senior Indenture contains certain limitations on the right of the
Trustee, should it become our creditor, to obtain payment of claims in certain
cases, or to realize for its own account on certain property received in respect
of any such claim as security or otherwise. The Trustee is permitted to engage
in certain other transactions. JPMorgan Chase, as the trustee under the Senior
Indenture, may be a depository for funds of, may make loans to and may perform
other routine banking services for us and certain of our affiliates in the
normal course of business. JPMorgan Chase also serves as trustee for our
subordinated debentures. If the Trustee acquires any conflicting interest (as
described in the Senior Indenture), it must eliminate such conflict or resign
within 90 days of the occurrence and the continuance of a default under the
Senior Indenture.
The holders of a majority in principal amount of all outstanding Exchange
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy or power available to the Trustee.
In case an Event of Default with respect to the Exchange Notes shall occur
(and shall not be cured) under the Senior Indenture and is known to the Trustee,
the Trustee shall exercise such of the rights and powers vested in it by the
Senior Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs. Subject to such provisions, no Trustee will be under any
obligation to exercise any of its rights or powers under the Senior Indenture at
the request of any of the holders of the Exchange Notes unless they shall have
offered to the Trustee security and indemnity satisfactory to it.
BOOK-ENTRY, DELIVERY; FORM AND TRANSFER
We will initially issue the Exchange Notes in the form of one or more
registered global Exchange Notes without interest coupons (collectively the
"Global Exchange Notes"). Upon issuance, the Global Exchange Notes will be
deposited with the Trustee, as custodian for DTC, and registered in the name of
DTC or its nominee, in each case for credit to the accounts of DTC's Direct and
Indirect Participants (as defined below).
The Global Exchange Notes may be transferred, in whole and not in part,
only to another nominee of DTC or to a successor of DTC or its nominee in
certain limited circumstances. Beneficial interests in the
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Global Exchange Notes may be exchanged for Exchange Notes in certificated form
in certain limited circumstances. See "-- Transfer of Interests in Global
Exchange Notes for Certificated Exchange Notes."
DEPOSITARY PROCEDURES
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the "Direct
Participants") and to facilitate the clearance and settlement of transactions in
those securities between Direct Participants through electronic book-entry
changes in accounts of Participants. The Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Access to DTC's system is also available to other entities
that clear through or maintain a direct or indirect, custodial relationship with
a Direct Participant (collectively, the "Indirect Participants"). DTC may hold
securities beneficially owned by other persons only through the Direct
Participants or Indirect Participants, and such other persons' ownership
interest and transfer of ownership interest will be recorded only on the records
of the appropriate Direct Participant and/or Indirect Participant, and not on
the records maintained by DTC.
DTC has also advised us that, pursuant to DTC's procedures, (1) upon
deposit of the Global Exchange Notes, DTC will credit the accounts of the Direct
Participants tendering their Notes with portions of the principal amount of the
Global Exchange Notes allocated to such Direct Participants, and (2) DTC will
maintain records of the ownership interests of such Direct Participants in the
Global Exchange Notes and the transfer of ownership interests by and between
Direct Participants. DTC will not maintain records of the ownership interests
of, or the transfer of ownership interests by and between, Indirect Participants
or other owners of beneficial interests in the Global Exchange Notes. Direct
Participants and Indirect Participants must maintain their own records of the
ownership interests of, and the transfer of ownership interests by and between,
Indirect Participants and other owners of beneficial interests in the Global
Exchange Notes.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form, of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Exchange Note
to such persons. Because DTC can act only on behalf of Direct Participants,
which in turn act on behalf of Indirect Participants and others, the ability of
a person having a beneficial interest in a Global Exchange Note to pledge such
interest to persons or entities that are not Direct Participants in DTC, or to
otherwise take actions in respect of such interests, may be affected by the lack
of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the Exchange Notes see "-- Transfers of
Interests in Global Exchange Notes for Certificated Exchange Notes."
EXCEPT AS DESCRIBED IN "-- TRANSFERS OF INTERESTS IN GLOBAL EXCHANGE NOTES
FOR CERTIFICATED EXCHANGE NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
EXCHANGE NOTES WILL NOT HAVE EXCHANGE NOTES REGISTERED IN THEIR NAMES, WILL NOT
RECEIVE PHYSICAL DELIVERY OF EXCHANGE NOTES IN CERTIFICATED FORM AND WILL NOT BE
CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE SENIOR INDENTURE
FOR ANY PURPOSE.
Under the terms of the Senior Indenture, we and the Trustee will treat the
persons in whose names the Exchange Notes are registered (including Exchange
Notes represented by Global Exchange Notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, if any, interest and additional
interest, if any, on Global Exchange Notes registered in the name of DTC or its
nominee will be payable by the Trustee to DTC or its nominee as the registered
holder under the Senior Indenture. Consequently, neither we, the Trustee nor any
of our agents or the Trustee has or will have any responsibility or liability
for (1) any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Exchange Notes or for maintaining, supervising
or reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Exchange Note or (2) any other matter relating to the actions and
practices of DTC or any of its Direct Participants or Indirect Participants.
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DTC has advised us that its current payment practice (for payments of
principal, interest and the like) with respect to securities such as the
Exchange Notes is to credit the accounts of the relevant Direct Participants
with such payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Exchange Notes as
shown on DTC's records. Payments by Direct Participants and Indirect
Participants to the beneficial owners of the Exchange Notes will be governed by
standing instructions and customary practices between them and will not be the
responsibility of DTC, the Trustee or us. Neither we nor the Trustee will be
liable for any delay by DTC or its Direct Participants or Indirect Participants
in identifying the beneficial owners of the Exchange Notes, and we and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Exchange
Notes for all purposes.
The Global Exchange Notes will trade in DTC's Same-day Funds Settlement
System and, therefore, transfers between Direct Participants in DTC will be
effected in accordance with DTC's procedures, and will be settled in immediately
available funds. Transfers between Indirect Participants who hold an interest
through a Direct Participant will be effected in accordance with the procedures
of such Direct Participant but generally will settle in immediately available
funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of Exchange Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Exchange Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Exchange Notes as to which such Direct Participant or Direct Participants
has or have given direction. However, if there is an Event of Default with
respect to the Exchange Notes, DTC reserves the right to exchange Global
Exchange Notes (without the direction of one or more of its Direct Participants)
for legended Exchange Notes in certificated form, and to distribute such
certificated forms of Exchange Notes to its Direct Participants. See
"-- Transfers of Interests in Global Exchange Notes for Certificated Exchange
Notes."
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in Global Exchange Notes among Direct Participants, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. The Trustee will have no
responsibility for the performance by DTC or its respective Direct and Indirect
Participants of their respective obligations under the rules and procedures
governing any of their operations.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that we believe to be reliable, but we do not
take any responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL EXCHANGE NOTES FOR CERTIFICATED EXCHANGE NOTES
We may exchange an entire Global Exchange Note for notes in certificated
form ("Certificated Exchange Notes") if (1) (a) DTC notifies us that it is
unwilling or unable to continue as depositary for the Global Exchange Notes or
we determine that DTC is unable to act as such depositary and we thereupon fail
to appoint a successor depositary within 90 days or (b) DTC has ceased to be a
clearing agency registered under the Exchange Act, (2) we at our option, notify
the Trustee in writing that we elect to cause the issuance of Certificated
Exchange Notes or (3) there shall have occurred and be continuing a Default or
an Event of Default with respect to the Exchange Notes. In any such case, we
will notify the Trustee in writing that, upon surrender by the Direct and
Indirect Participants of their interest in such Global Exchange Note,
Certificated Exchange Notes will be issued to each person that such Direct and
Indirect Participants and the DTC identify as being the beneficial owner of the
related Exchange Notes.
Beneficial interests in Global Exchange Notes held by any Direct or
Indirect Participant may be exchanged for Certificated Exchange Notes upon
request to DTC, by such Direct Participant (for itself or on behalf of an
Indirect Participant), to the Trustee in accordance with customary DTC
procedures. Certificated Exchange Notes delivered in exchange for any beneficial
interest in any Global Exchange Note will be registered in the names, and issued
in any approved denominations, requested by DTC on behalf of such Direct or
Indirect Participants (in accordance with DTC's customary procedures).
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Neither we nor the Trustee will be liable for any delay by the holder of
the Global Exchange Notes or DTC in identifying the beneficial owners of
Exchange Notes, and we and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the holder of the Global Exchange
Note or DTC for all purposes.
CERTIFICATED EXCHANGE NOTES
Certificated Exchange Notes may be exchangeable for other Certificated
Exchange Notes of any authorized denominations and of a like aggregate principal
amount and tenor in accordance with the Senior Indenture. Certificated Exchange
Notes may be presented for exchange, and may be presented for registration of
transfer (duly endorsed, or accompanied by a duly executed written instrument of
transfer), at the designated office of the Trustee (the "Security Registrar").
Such transfer or exchange will be effected upon the Security Registrar or such
other transfer agent, as the case may be, being satisfied with the documents of
title and identity of the person making the request. We may at any time
designate additional transfer agents with respect to the Exchange Notes.
We shall not be required to (a) issue, exchange or register the transfer of
any Certificated Exchange Note for a period of 15 days next preceding the
mailing of notice of redemption of such Exchange Note or (b) exchange or
register the transfer of any Certificated Exchange Note or portion thereof
selected, called or being called for redemption, except in the case of any
Certificated Exchange Note to be redeemed in part, the portion thereof not so to
be redeemed.
If a Certificated Exchange Note is mutilated, destroyed, lost or stolen, it
may be replaced at the office of the Security Registrar upon payment by the
holder of such expenses as may be incurred by us and the Security Registrar in
connection therewith and the furnishing of such evidence and indemnity as we and
the Security Registrar may require. Mutilated Exchange Notes must be surrendered
before new Exchange Notes will be issued.
SAME DAY SETTLEMENT
Payments in respect of the Exchange Notes represented by the Global
Exchange Notes (including principal, premium, if any, and interest) will be made
by wire transfer of immediately available same day funds to the accounts
specified by the holder of interests in such Global Exchange Note. Principal,
premium, if any, and interest, on all Certificated Exchange Notes in registered
form will be payable at the office or agency of the Trustee, except that, at our
option, payment of any interest, may be made (1) by check mailed to the address
of the person entitled thereto as such address shall appear in the security
register or (2) by wire transfer to an account maintained by the person entitled
thereto as specified in the security register.
THE EXCHANGE OFFER
We sold the Notes on May 24, 2002, pursuant to the Purchase Agreement dated
as of May 21, 2002 (the "Purchase Agreement") by and among Waste Management
Holdings, the initial purchasers of the Notes named in the Purchase Agreement,
which is an exhibit to the Registration Statement of which this Prospectus is a
part (the "Initial Purchasers"), and us. The Notes were subsequently offered by
the Initial Purchasers to qualified institutional buyers pursuant to Rule 144A
and to purchasers pursuant to Regulation S under the Securities Act.
REGISTRATION RIGHTS
We, the Subsidiary Guarantor and the Initial Purchasers entered into a
Senior Notes Registration Rights agreement dated as of May 24, 2002 (the
"Registration Rights Agreement"). The following description is a summary of the
material provisions of the Registration Rights Agreement, which is an exhibit to
the Registration Statement of which this Prospectus is a part.
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Pursuant to the Registration Rights Agreement, we and the Subsidiary
Guarantor agreed to file with the Commission the Exchange Offer Registration
Statement of which this Prospectus forms a part on the appropriate form under
the Securities Act with respect to the exchange of Exchange Notes for Notes (the
"Exchange Offer"). Upon the effectiveness of the Exchange Offer Registration
Statement, we agreed to offer to the holders of Transfer Restricted Securities
(as defined below) who are able to make certain representations, as described
below under "-- Your Representations to Us," the opportunity to exchange their
Transfer Restricted Securities for Exchange Notes.
The Registration Rights Agreement provides that if:
- the Exchange Offer is not permitted by applicable law or Commission
policy; or
- any holder of Transfer Restricted Securities notifies us prior to the
20th business day following the date by which the Exchange Offer is
required to be consummated that:
(i) it is prohibited by law or Commission policy from participating in
the Exchange Offer; or
(ii) that it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without restriction under state and federal
securities laws (other than due solely to the status of such holder as an
"affiliate" of us or the Subsidiary Guarantor within the meaning of the
Securities Act); or
(iii) that it is a broker-dealer and owns Notes acquired directly from
us or one of our affiliates,
then we will file with the Commission a Shelf Registration Statement to cover
resales of the Notes by the holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement.
"Transfer Restricted Securities" means:
- Each Note, until the earliest to occur of:
(i) the date on which such Note is exchanged in the Exchange Offer for
an Exchange Note;
(ii) the date on which such Note has been disposed of in accordance
with a Shelf Registration Statement (and the purchasers thereof have been
issued Exchange Notes); and
(ii) the date on which such Note is distributed to the public pursuant
to Rule 144 (and purchasers thereof have been issued Exchange Notes).
- Each Exchange Note until the date on which such Exchange Note is disposed
of by a broker-dealer pursuant to the Plan of Distribution section of
this Prospectus.
The Registration Rights Agreement provides that, unless the Exchange Offer
is not permitted by applicable law or Commission policy:
- we will file an Exchange Order Registration Statement with the Commission
on or prior to 90 days after May 24, 2002;
- we will use our best efforts to have the Exchange Offer Registration
Statement declared effective by the Commission on or prior to 180 days
after May 24, 2002;
- we will:
(i) use our best efforts to cause the Exchange Offer Registration
Statement to be continuously effective and keep the Exchange Offer open
for not less than 20 business days or the minimum period required by law,
if such period is no longer than 20 business days; and
(ii) use our best efforts to consummate the Exchange Offer on or prior
to 230 days after May 24, 2002 (the "Consummation Deadline"); and
36
- if obligated to file the Shelf Registration Statement, we will file the
Shelf Registration Statement with the Commission on or prior to 60 days
after such filing obligation arises and use its best efforts to cause the
Shelf Registration to be declared effective by the Commission on or prior
to 120 days after such Shelf Registration Statement is required to be
filed.
The Registration Rights Agreement provides that if:
- we fail to file any of the registration statements required to be filed
by the Registration Rights Agreement on or before the date specified for
such filing;
- any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness;
- we fail to consummate the Exchange Offer on or prior to the Consummation
Deadline; or
- the Shelf Registration Statement or the Exchange Offer Registration
Statement is declared effective but thereafter ceases to be effective or
usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each
such event referred to in clauses, a "Registration Default"),
then we will pay, as liquidated damages, additional interest to each holder of
Notes subject to such Registration Default in an amount equal to 0.25% per annum
for the first 90-day period immediately following the occurrence of the first
Registration Default ("Additional Interest").
The amount of Additional Interest will increase by an additional 0.25% per
annum with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Additional Interest of 1.0%,
provided that we will not be required to pay Additional Interest for more than
one Registration Default at any given time.
Any Additional Interest due will be paid directly by us on each relevant
Interest Payment Date for the Notes to the persons whose names are registered at
the close of business on the relevant Regular Record Date.
Following the cure of all Registration Defaults, the accrual of Additional
Interest will cease.
Each holder of Notes will be required to make certain representations to us
(as described in the Registration Rights Agreement and the Letter of
Transmittal, the form of which is an exhibit to the Registration Statement of
which this Prospectus is a part) in order to participate in the Exchange Offer
and will be required to deliver certain information to be used in connection
with the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have such holder's Notes included in the Shelf
Registration Statement and benefit from the provisions regarding Additional
Interest set forth above. By acquiring Notes, a holder will be deemed to have
agreed by virtue of the Registration Rights Agreement to indemnify us, against
certain losses arising out of information furnished by such holder in writing
for inclusion in any Shelf Registration Statement. Holders of Notes will also be
required to suspend their use of the Prospectus included in the Shelf
Registration Statement under certain circumstances upon receipt of written
notice to that effect from us.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean , 2002,
unless we, in our sole discretion, extend the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
To extend the Expiration Date, we will notify the Exchange Agent of any
extension by oral or written notice and will notify the holders of the Exchange
Notes by means of a press release or other public announcement prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that we are extending the
Exchange Offer for a specified period of time.
37
We reserve the right (i) to delay acceptance of any Notes, to extend the
Exchange Offer or to terminate the Exchange Offer and not permit acceptance of
Notes not previously accepted if any of the conditions set forth herein under
"-- Conditions" shall have occurred and shall not have been waived by us, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner
deemed by us to be advantageous to the holders of the Notes. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the Exchange Agent. If the
Exchange Offer is amended in a manner determined by us to constitute a material
change, we will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Notes of such amendment.
Without limiting the manner in which we may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, we shall have no obligations to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will accrue interest at a rate of 7 3/4% per annum.
Interest on the Exchange Notes will accrue from the last date on which interest
was paid on the Notes, or, if we have paid no interest on such Notes, from May
24, 2002, the date of issuance of the Notes for which the Exchange Offer is
being made. Interest on the Exchange Notes is payable semi-annually on May 15
and November 15, commencing on November 15, 2002.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, you must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
medallion guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
any other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date. In addition, either (i) a timely confirmation
of a book-entry transfer (a "Book-Entry Confirmation") of such Notes into the
Exchange Agent's account at the depositary (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (ii) you must
comply with the guaranteed delivery procedures described below. THE METHOD OF
DELIVERY OF LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS
BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTERS OF TRANSMITTAL OR OTHER REQUIRED DOCUMENTS SHOULD BE SENT TO THE
COMPANY. Delivery of all documents must be made to the Exchange Agent at its
address set forth below. You may also request your respective brokers, dealers,
commercial banks, trust companies or nominees to effect such tender on your
behalf.
Your tender of Notes will constitute an agreement between you and us in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal. Any beneficial owner whose Notes are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on his behalf.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be medallion guaranteed by any member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor" institution within
the meaning of
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Rule 17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the
Notes tendered pursuant thereto are tendered for the account of an Eligible
Institution.
If the Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations, or
others acting in a fiduciary or representative capacity, such person should so
indicate when signing, and unless waived by us, evidence satisfactory to us of
their authority to so act must be submitted with the Letter of Transmittal.
We will determine questions as to the validity, form, eligibility
(including time of receipt) and withdrawal of the tendered Notes, in our sole
discretion, which determination will be final and binding. We reserve the
absolute right to reject any and all Notes not properly tendered or any Notes
which, if accepted, would, in the opinion of our counsel, be unlawful. We also
reserve the absolute right to waive any irregularities or conditions of tender
as to particular Notes. Our interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Notes must be cured within such time as we shall
determine. Neither we, the Exchange Agent nor any other person shall be under
any duty to give notification of defects or irregularities with respect to
tenders of Notes, nor shall any of them incur any liability for failure to give
such notification. Tenders of Notes will not be deemed to have been made until
such irregularities have been cured or waived. The Exchange Agent will return
any Notes it receives that are not properly tendered and as to which the defects
or irregularities have not been cured or waived without cost to such holder by
the Exchange Agent, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, we reserve the right, in our sole discretion, subject to the
provisions of the Senior Indenture, to purchase or make offers for any Notes
that remain outstanding subsequent to the Expiration Date or, as set forth under
"-- Conditions," to terminate the Exchange Offer in accordance with the terms of
the Registration Rights Agreement, and to the extent permitted by applicable
law, purchase Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
YOUR REPRESENTATIONS TO US
By signing or agreeing to be bound by the Letter of Transmittal, you will
represent that, among other things:
- you are not an "affiliate" (as defined in Rule 405 of the Securities Act)
of us or a broker-dealer tendering Notes acquired directly from us for
your own account;
- if you are not a broker-dealer or are a broker-dealer but will not
receive Exchange Notes for your own account in exchange for Notes, you
are not engaged in and do not intend to participate in a distribution of
the Exchange Notes;
- you have no arrangement or understanding with any person to participate
in a distribution of the Notes or the Exchange Notes within the meaning
of the Securities Act;
- you are acquiring the Exchange Notes in the ordinary course of your
business; and
- if you are a broker-dealer that will receive Exchange Notes for your own
account in exchange for Notes, you represent that the Notes to be
exchanged for Exchange Notes were acquired by you as a result of
market-making activities or trading activities and you acknowledge that
you will deliver a prospectus meeting the requirements of the Securities
Act in connection with the resale of any Exchange Notes. It is understood
that you are not admitting that you are an "underwriter" within the
meaning of the Securities Act by acknowledging that you will delivery,
and by delivery of, a prospectus.
39
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
we will accept all Notes properly tendered promptly after the Expiration Date,
and we will issue the Exchange Notes promptly after acceptance of the Notes. See
"-- Conditions." For purposes of the Exchange Offer, Notes shall be deemed to
have been accepted as validly tendered for exchange when, as and if we have
given oral or written notice thereof to the Exchange Agent.
In all cases, we will issue the Exchange Notes for Notes that are accepted
for exchange pursuant to the Exchange Offer only after timely receipt by the
Exchange Agent of a Book-Entry Confirmation of such Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If we do
not accept any tendered Notes for any reason set forth in the terms and
conditions of the Exchange Offer, we will credit such unaccepted or such
unexchanged Notes to an account maintained with such Book-Entry Transfer
Facility as promptly as practicable after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Notes at the Book-Entry Transfer Facility for purposes of the Exchange
Offer within two business days after the date of this Prospectus. Any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of Notes by causing the Book-Entry Transfer
Facility to transfer such Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for transfer. However, the Letter of Transmittal (or
facsimile) thereof with any required signature guarantees and any other required
documents must, in any case, be transmitted to and received by the Exchange
Agent at one of the addresses set forth under "-- Exchange Agent" no later than
the Expiration Date or the guaranteed delivery procedures described below must
be complied with.
TENDERING THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's automated tender offer
program to tender Notes. Participants in the program may, instead of physically
completing and signing the Letter of Transmittal and delivering it to the
Exchange Agent, transmit their acceptance of the Exchange Offer electronically.
They may do so by causing DTC to transfer the Notes to the Exchange Agent
according to its procedures for transfer. DTC will then send an agent's message
to the Exchange Agent. An "agent's message" means a message transmitted by DTC,
received by the Exchange Agent and forming part of the book-entry confirmation,
stating that:
- DTC has received an express acknowledgement from a participant in its
automated tender program that is tendering Notes that are the subject of
Book-Entry Confirmation;
- the participant has received and agrees to be bound by the terms of the
Letter of Transmittal or, in the case of an agent's message relating to
guaranteed delivery, that the participant has received and agrees to be
bound by the Notice of Guaranteed Delivery; and
- the agreement may be enforced against the participant.
GUARANTEED DELIVERY PROCEDURES
If the procedures for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) before the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form we provided (by facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of Notes and the
amount of Notes tendered, stating that the tender is being made thereby and
40
guaranteeing that within three New York Stock Exchange, Inc. ("NYSE") trading
days after the date of execution of the Notice of Guaranteed Delivery, a
Book-Entry Confirmation and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) a Book-Entry Confirmation and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent before 5:00 p.m., New York City time, on the
Expiration Date at one of the addresses set forth under "-- Exchange Agent." Any
such notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility from which the Notes were tendered, identify the
principal amount of the Notes to be withdrawn, and specify the name and number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Notes and otherwise comply with the procedures of such Book-Entry
Transfer Facility. We will determine all questions as to the validity, form and
eligibility (including time of receipt) of such notice, and our determination
shall be final and binding on all parties. Any Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer. Any Notes which have been tendered for exchange but which are not
exchanged for any reason will be credited to an account maintained with such
Book-Entry Transfer Facility for the Notes as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Notes may be retendered by following one of the procedures described
under "-- Procedures for Tendering" and "-- Book-Entry Transfer" at any time on
or prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Notes will not be
required to be accepted for exchange, nor will Exchange Notes be issued in
exchange for any Notes, and we may terminate or amend the Exchange Offer as
provided herein before the acceptance of such Notes, if, because of any change
in law, or applicable interpretations thereof by the Commission, we determine
that we are not permitted to effect the Exchange Offer. In addition, we will not
be obligated to accept for exchange the Notes of any holder that has not made
the following:
- the representations in the Letter of Transmittal described under "-- Your
Representations to Us"; and
- other representations as may be necessary under applicable Commission
rules, regulations or interpretations to make available to us an
appropriate form for registration of the Exchange Notes under the
Securities Act.
We have no obligation to, and will not knowingly, permit acceptance of
tenders of Notes from our affiliates or from any other holder or holders who are
not eligible to participate in the Exchange Offer under applicable law or
interpretations thereof by the Staff of the Commission, or if the Exchange Notes
to be received by such holder or holders of Notes in the Exchange Offer, upon
receipt, will not be tradable by such holder without restriction under the
Securities Act and the Exchange Act and without material restrictions under the
"blue sky" or securities laws of substantially all of the states of the United
States. These conditions are for our sole benefit, and we may assert them or
waive them in whole or in part at any time or at various times in our sole
discretion.
41
EXCHANGE AGENT
JP Morgan Chase Bank has been appointed as Exchange Agent for the Exchange
Offer. You should direct your questions and requests for assistance and requests
for additional copies of this Prospectus or of the Letter of Transmittal to the
Exchange Agent addressed as follows:
By Mail (Certified, Registered, Overnight or First Class) or Hand Delivery:
JP Morgan Chase Bank
600 Travis Street, Suite 1150
Houston, Texas 77002
Telephone Number (713) 216-7000
Attention: Rebecca A. Newman
FEES AND EXPENSES
We will bear the expenses of soliciting tenders pursuant to the Exchange
Offer. We are making the principal solicitation for tenders pursuant to the
Exchange Offer by mail; however we may make additional solicitations by
telephone, telecopy or in person by our officers and regular employees.
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. We, however, will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith.
We will bear the expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and the Trustee, and
accounting, legal, printing and related fees and expenses.
We will pay all transfer taxes, if any, applicable to the exchange of Notes
pursuant to the Exchange Offer. If, however, Exchange Notes or Notes for
principal amounts not tendered or accepted for exchange are to be registered or
issued in the name of any person other than the registered holder of the Notes
tendered, or if tendered Notes are registered in the name of any person other
than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, we believe that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Notes may be offered for resale,
resold and otherwise transferred by any owner of such Exchange Notes (other than
any such owner which is our "affiliate" within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, if such Exchange Notes are acquired in the
ordinary course of such owner's business and such owner does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of such Exchange Notes. Any owner of Notes who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the Exchange Notes may not rely
on the position of the staff of the Commission enunciated in the "Exxon Capital
Holdings Corporation" or similar no-action letters but rather must comply with
the registration and Prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, any such resale transaction
should be covered by an effective registration statement containing the selling
security holders information required by Item 507 of Regulation S-K of the
Securities Act. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Notes, where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must
42
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes.
By tendering in the Exchange Offer, each holder (or DTC participant, in the
case of tenders of interests in the Global Notes held by DTC) will represent to
us (which representation may be contained the Letter of Transmittal) to the
effect that (A) it is not our affiliate, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes to be issued in the
Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course
of business. Each holder will acknowledge and agree that any broker-dealer and
any such holder using the Exchange Offer to participate in a distribution of the
Exchange Notes acquired in the Exchange Offer (1) could not under Commission
policy as in effect on the date of the Registration Rights Agreement rely on the
position of the Commission enunciated in the No-Action Letters, and (2) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of Exchange
Notes obtained by such holder in exchange for Notes acquired by such holder
directly from us or our affiliate.
To comply with the securities laws of certain jurisdictions, it may be
necessary to qualify for sale or to register the Exchange Notes before offering
or selling such Exchange Notes. We have agreed, pursuant to the Registration
Rights Agreement and subject to certain specified limitations therein, to
cooperate with selling holders or underwriters in connection with the
registration and qualification of the Exchange Notes for offer or sale under the
securities or "blue sky" laws of such jurisdictions as may be necessary to
permit the holders of Exchange Notes to trade the Exchange Notes without any
restrictions or limitations under the securities laws of the several states of
the United States.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Notes who do not exchange their Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Notes as set forth in the legend thereon as a consequence of
the issuance of the Notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. We do not currently anticipate that we will register the
Notes under the Securities Act. To the extent that Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Notes could be adversely affected.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of the material United States federal income tax
consequences of the exchange of the Notes for the Exchange Notes and the
ownership and disposition of the Exchange Notes by a purchaser that is a
non-U.S. holder. For this purpose, a non-U.S. holder is a holder that is, for
the United States federal income tax purposes:
- a nonresident alien individual;
- a foreign corporation; or
- a foreign estate or trust that is not subject to United States federal
income taxation on its worldwide income.
If a partnership (including for this purpose an entity treated as a
partnership for United States federal income tax purposes) is a beneficial owner
of Notes, the treatment of a partner in that partnership will generally depend
upon the status of the partner and upon the activities of the partnership.
Holders of Notes that are a partnership or partners in such partnership should
consult their tax advisors about the
43
United States federal income tax consequences of purchasing, owning and
disposing of the Exchange Notes.
This summary is based upon the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), administrative pronouncements, judicial decisions
and final temporary and proposed Treasury Regulations, each of which is subject
to change, possibly retroactively. This summary does not discuss all aspects of
Untied States federal income taxation that may be important to particular
non-U.S. holders in light of their individual investment circumstances, such as
Notes held by investors subject to special tax rules (e.g., U.S. expatriates,
financial institutions, insurance companies, broker-dealers and tax-exempt
organizations) or to person that will hold the Exchange Notes as a part of a
straddle, hedge or synthetic security transaction for United States federal
income tax purposes or that have a functional currency other than the United
States dollar, all of whom may be subject to tax rules that differ significantly
from those summarized below. In addition, this summary does not discuss any
foreign, state or local tax consideration.
This summary assumes that investors will hold the Exchange Notes as
"capital assets" (generally, property held for investment) under the Code.
Prospective investors are urged to consult their tax advisors regarding the
United States federal, state, local and foreign income and other tax
consequences of the exchange of the Notes for Exchange Notes and ownership and
disposition of the Exchange Notes.
THE EXCHANGE OFFER
The exchange of an Exchange Note for Note will not constitute a taxable
exchange for United States federal income tax purposes because the Exchange
Notes will not differ materially either in kind or extent from the Notes for
which they will be exchanged. Accordingly, holders who receive an Exchange Note
in exchange for Note will not recognize gain or loss, because for United States
federal income tax purposes, the Exchange Notes will be treated as continuations
of the Notes.
PAYMENT OF INTEREST
Interest paid by Waste Management to non-U.S. holders will not be subject
to United States federal income or withholding tax provided:
- the beneficial owner of the Exchange Note does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of Waste Management entitled to vote;
- the beneficial owner of the Exchange Note is not a controlled foreign
corporation that is related to Waste Management through stock ownership;
- the beneficial owner of the Exchange Note is not a bank that acquired the
Note as an extension of credit made pursuant to a loan agreement made in
the ordinary course of business; and
- the requirements of section 871(h) or 881(c) of the Code are satisfied as
described below under the heading "Owner Statement Requirement."
Notwithstanding the above, unless the holder qualified for an exemption
from such tax or a lower tax rate under an applicable treaty, a non-U.S. holder
that is engaged in the conduct of a United States trade or business will be
subject to:
- United States federal income tax on interest that is effectively
connected with the conduct of such trade or business; and
- if the non-U.S. holder is a corporation, a United States branch profits
tax equal to 30% of its "effectively connected earnings and profits" ad
adjusted for the taxable year.
44
GAIN ON DISPOSITION
A non-U.S. holder will generally not be subject to United states federal
income tax on gain recognized on a sale, redemption or other disposition of an
Exchange Note unless:
- the gain is effectively connected with the conduct of a trade or business
within the United States by the non-U.S. holder; or
- in the case of a non-U.S. holder who is a nonresident alien individual,
such holder is present in the United States for 183 or more days during
the taxable year and certain other requirements are met.
However, to the extent that disposition proceeds represent interest accruing
between interest payment dates, a non-U.S. Holder may be required to establish
an exemption from United Stated federal income tax. (See "-- Payment of
Interest" above.)
Any gain recognized on a sale, redemption or other disposition of an
Exchange Note that is effectively connected with the conduct of a United States
trade or business by a non-U.S. holder will be subject to United States federal
income tax on a net income basis in the same manner as if such holder were a
United States person and, if such non-U.S. holder is a corporation, such gain
may also be subject to the 30% United States branch profits tax (or lower treaty
rate, if applicable) described above.
FEDERAL ESTATE TAXES
An Exchange Note held by an individual who at the time of death is not a
citizen or resident of the United States will not be subject to United States
federal estate tax as a result of such individual's death, provided;
- the individual does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Waste Management
entitled to vote; and
- the interest accrued on the Exchange Note was not effectively connected
with a United States trade or business of the individual at the
individual's death.
OWNER STATEMENT REQUIREMENT
In order to claim an exemption from United States federal withholding tax
with respect to payments of interest on an Exchange Note, sections 871(h) and
881(c) of the Code require that either the beneficial owner of the Exchange Note
or a securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business and
that holds an Exchange Note on behalf of such owner file a statement with Waste
management or its agent representing that the beneficial owner is not a United
States person. Under current regulations, this requirement will be satisfied if
Waste Management or its agent receives:
- a statement from the beneficial owner certifying under penalty of perjury
that such owner is not a United States person and that provides certain
information required under the regulations; or
- a statement from the financial institution holding the Exchange Note on
behalf of the beneficial owner certifying, under penalties of perjury,
that it has received the owner's statement, together with a copy of the
owner's statement.
The beneficial owner must inform Waste Management or its agent, as
applicable, or the financial institution, as applicable, within 30 days of any
change in information on the owner's statement.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, an Exchange Note may be
subject to a "backup" withholding tax unless the holder furnishes to the paying
agent or broker an owner's statement or otherwise establishes an exemption. Any
withheld amounts would generally be allowed as a credit against a holder's
federal income tax, provided the required information is timely filed with the
Internal Revenue Service.
45
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE TO A HOLDER'S PARTICULAR
SITUATION. HOLDERS OF THE EXCHANGE NOTES SHOULD CONSULT TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF THE NOTES FOR THE
EXCHANGE NOTES AND THE OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN THE UNITED STATES FEDERAL OR OTHER TAX
LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant the Exchange Offer must acknowledge that it will deliver a Prospectus
in connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connections with resales of the Exchange Notes received in exchange for the
Notes where such Notes were acquired as a result of market-making activities or
other trading activities. We have agreed that, starting on the Expiration Date
and ending on the close of business on the first anniversary of the Expiration
Date, we will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of the Exchange Notes by
broker-dealers. The Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the counter market, in negotiated transaction,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a Prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, we will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. We have agreed to pay all expenses incident to the Exchange Offer
and will indemnify the holders of the Exchange Notes against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Baker Botts L.L.P. has issued an opinion about the legality of the Exchange
Notes.
EXPERTS
The audited consolidated financial statements as of December 31, 1999, 2000
and 2001 and for the three years ended December 31, 2001 appearing in Waste
Management's Annual Report on Form 10-K incorporated by reference in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report. Arthur Andersen has not consented to
the inclusion of their report in this Prospectus, and we have dispensed with the
requirement to file their consent in reliance upon Rule 437a of the Securities
Act of 1933. Because Arthur Andersen has not consented to the inclusion of their
report in this Prospectus, you will not be able to recover against Arthur
Andersen under Section 11 of the Securities Act for any untrue statements of a
material fact contained in the financial statements audited by Arthur Andersen
or any omissions to state a material fact required to be stated therein.
46
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANY INFORMATION OTHER THAN THE INFORMATION CONTAINED IN
THIS PROSPECTUS. YOU SHOULD NOT RELY ON ANY UNAUTHORIZED INFORMATION OR
REPRESENTATIONS AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS IS AN OFFER TO
EXCHANGE THE EXCHANGE NOTES FOR THE OUTSTANDING NOTES ONLY UNDER CIRCUMSTANCES
AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
WASTE MANAGEMENT, INC.
OFFERS TO EXCHANGE
REGISTERED
$500,000,000 7 3/4% SENIOR NOTES DUE 2032
FOR
OUTSTANDING
$500,000,000 7 3/4% SENIOR NOTES DUE 2032
[WASTE MANAGEMENT LOGO]
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--------------------------------------------------------------------------------
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except in cases where the director breached his or her duty of loyalty
to the corporation or its stockholders, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of the law, willfully or
negligently authorized the unlawful payment of a dividend or approved an
unlawful stock redemption or repurchase or obtained an improper personal
benefit. Each of the Registrants' Certificates of Incorporation (the
"Registrants' Charters") contains provisions which eliminates directors'
personal liability as set forth above.
The Registrants' Charters and the Bylaws of each of the registrants provide
in effect that the Registrants shall indemnify its directors and officers, and
may indemnify its employees and agents, to the extent permitted by the DGCL.
Section 145 of the DGCL provides that a Delaware corporation has the power to
indemnify its directors, officers, employees and agents in certain
circumstances.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director, officer, employee or agent, or former director, officer,
employee or agent who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding provided that such director,
officer, employee or agent acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
that such director, officer, employee or agent had no reasonable cause to
believe that his or her conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any director, officer, employee or agent, or former director, officer,
employee or agent, who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit provided that such person acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery shall determine that, despite the adjudication
of liability, such person is fairly and reasonably entitled to indemnity for
such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that, to the extent that a
director or officer of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
of the DGCL or in the defense of any claim, issue or matter therein, he or she
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith; that indemnification
provided by Section 145 of the DGCL shall not be deemed exclusive of any other
rights to which the party seeking indemnification may be entitled; and the
corporation is empowered to purchase and maintain insurance on behalf of a
director, officer, employee or agent of the corporation against any liability
asserted against him or her or incurred by him or her in any such capacity or
arising out of his or her status as such whether or not the corporation would
have the power to indemnify him or her against such liabilities under Section
145 of the DGCL; and that, unless indemnification is ordered by a court, the
determination that indemnification under subsections (a) and (b) of Section 145
of the DGCL is proper because the director, officer, employee or agent has met
the applicable standard of conduct under such subsections shall be made with
respect to a person who is a
II-1
director or officer at the time of such determination (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors designated by
majority vote of such directors, even though less than a quorum, or (3) if there
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (4) by the stockholders.
Waste Management has also purchased certain liability insurance for its
officers and directors as permitted by Section 145(g) of the DGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 -- Second Restated Certificate of Incorporation of Waste
Management, Inc. [Incorporated by reference to Exhibit 3.1
to Waste Management's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002].
3.2 -- Amended and Restated Bylaws of Waste Management, Inc.
[Incorporated by reference to Exhibit 3.2 to Waste
Management's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002].
3.3+ -- Certificate of Incorporation of Waste Management Holdings,
Inc.
3.4+ -- Bylaws of Waste Management Holdings, Inc.
4.1 -- Specimen Stock Certificate [Incorporated by reference to
Exhibit 4.1 to Waste Management's Annual Report on Form 10-K
for the year ended December 31, 1998].
4.2 -- Indenture for Senior Debt Securities dated September 10,
1997, among the Registrant and Texas Commerce Bank National
Association, as trustee, now known as JP Morgan Chase Bank
[Incorporated by reference to Exhibit 4.1 to the Waste
Management's Current Report on Form 8-K dated September 10,
1997].
4.3+ -- Form of Exchange Note.
4.4+ -- Registration Rights Agreement dated as of May 24, 2002 by
and among Waste Management, Inc., Waste Management Holdings,
Inc. and Deutsche Bank Securities Inc., Goldman, Sachs & Co.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.5+ -- Guarantee by Waste Management Holdings, Inc. in Favor of the
Holders of Certain Debt Securities of Waste Management, Inc.
dated May 24, 2002.
5.1 -- Opinion of Baker Botts L.L.P.
23.1 -- Consent of Baker Botts L.L.P. (included in Exhibit 5.1).
24.1+ -- Power of Attorney (set forth on signature page).
25.1+ -- Statement of Eligibility of Trustee.
99.1+ -- Form of Letter of Transmittal.
99.2+ -- Form of Notice of Guaranteed Delivery.
99.3+ -- Form of Letter to DTC Participants.
99.4+ -- Form of Letter to Clients.
Exhibits listed above which have been filed with the Commission are incorporated
herein by reference with the same effect as if filed with this Registration
Statement.
---------------
+ Previous filed.
ITEM 22. UNDERTAKINGS
The undersigned Registrants hereby undertake:
(1) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrants' annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of
II-2
1934 that is incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrants have been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that as claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and be governed by the final
adjudication of such issue.
(3) To respond to requests for information that is incorporated by
reference in to the Prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(5) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (5)(i) and (5)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic report filed with or furnished to the
Commission by the registrants pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration statement.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Pre-Effective Amendment No. 1 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
WASTE MANAGEMENT, INC.
By: /s/ A. MAURICE MYERS
------------------------------------
A. Maurice Myers
President, Chief Executive Officer
and
Chairman of the Board
Date: October 2, 2002
Pursuant to the requirements of the Securities Act, this Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on October 2, 2002.
SIGNATURE TITLE
--------- -----
/s/ A. MAURICE MYERS President and Chief Executive Officer and
----------------------------------------- Director (Principal Executive Officer)
A. Maurice Myers
/s/ WILLIAM L. TRUBECK Executive Vice President and Chief
----------------------------------------- Administrative Officer (Principal Financial
William L. Trubeck Officer)
/s/ ROBERT G. SIMPSON Vice President and Chief Accounting Officer
----------------------------------------- (Principal Accounting Officer)
Robert G. Simpson
* Director
-----------------------------------------
H. Jesse Arnelle
* Director
-----------------------------------------
Pastora San Juan Cafferty
* Director
-----------------------------------------
Robert S. Miller
* Director
-----------------------------------------
John C. Pope
* Director
-----------------------------------------
Steven G. Rothmeier
* Director
-----------------------------------------
Carl W. Vogt
* Director
-----------------------------------------
Ralph V. Whitworth
By: /s/ DAVID P. STEINER
-----------------------------------------
David P. Steiner
As Attorney-in-Fact
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Pre-Effective Amendment No. 1 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
WASTE MANAGEMENT HOLDINGS, INC.
Date: October 2, 2002 By: /s/ DAVID P. STEINER
------------------------------------
David P. Steiner
Vice President, Secretary and Sole
Director
II-5
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 -- Second Restated Certificate of Incorporation of Waste
Management, Inc. [Incorporated by reference to Exhibit 3.1
to Waste Management's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002].
3.2 -- Amended and Restated Bylaws of Waste Management, Inc.
[Incorporated by reference to Exhibit 3.2 to Waste
Management's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2002].
3.3+ -- Certificate of Incorporation of Waste Management Holdings,
Inc.
3.4+ -- Bylaws of Waste Management Holdings, Inc.
4.1 -- Specimen Stock Certificate [Incorporated by reference to
Exhibit 4.1 to Waste Management's Annual Report on Form 10-K
for the year ended December 31, 1998].
4.2 -- Indenture for Senior Debt Securities dated September 10,
1997, among the Registrant and Texas Commerce Bank National
Association, as trustee, now known as JP Morgan Chase Bank
[Incorporated by reference to Exhibit 4.1 to the Waste
Management's Current Report on Form 8-K dated September 10,
1997].
4.3+ -- Form of Exchange Note.
4.4+ -- Registration Rights Agreement dated as of May 24, 2002 by
and among Waste Management, Inc., Waste Management Holdings,
Inc. and Deutsche Bank Securities Inc., Goldman, Sachs & Co.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.5+ -- Guarantee by Waste Management Holdings, Inc. in Favor of the
Holders of Certain Debt Securities of Waste Management, Inc.
dated May 24, 2002.
5.1 -- Opinion of Baker Botts L.L.P.
23.1 -- Consent of Baker Botts L.L.P. (included in Exhibit 5.1).
24.1+ -- Power of Attorney (set forth on signature page).
25.1+ -- Statement of Eligibility of Trustee.
99.1+ -- Form of Letter of Transmittal.
99.2+ -- Form of Notice of Guaranteed Delivery.
99.3+ -- Form of Letter to DTC Participants.
99.4+ -- Form of Letter to Clients.
Exhibits listed above which have been filed with the Commission are incorporated
herein by reference with the same effect as if filed with this Registration
Statement.
---------------
+ Previous filed.