AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 2002.
REGISTRATION NO. 333-
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WASTE MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 73-1309529
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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 & 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: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE(1)
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(2) REGISTRATION FEE(2)
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Debt Securities.............................................
Common Stock, par value $0.01 per share(3)..................
Guarantees of Debt Securities(4)............................ $1,868,070,886 $171,862
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(1) Pursuant to Rule 457(o) and the Note to Form S-3, both the Amount to be
Registered and the Proposed Maximum Offering Price per Unit have been
omitted.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) and exclusive of accrued interest, distributions and
dividends, if any. Pursuant to Rule 429 under the Securities Act of 1933, as
amended, the prospectus included herein relates to $1,868,070,886 of
securities registered under Registration Statement No. 333-80063, the
registration fee for which has been previously paid to the Commission. If
any such previously registered securities are offered prior to the effective
date of this registration statement, the amount of such securities will not
be included in any prospectus hereunder. The remaining securities registered
under Registration Statement No. 333-80063, which are being carried forward
to this registration statement, represent the maximum amount of securities
that are expected to be offered for sale. The aggregate principal amount of
the debt securities may be increased if any debt securities are issued at an
original issue discount by an amount such that the offering price to be
received by the registrant shall be equal to the above amount to be
registered.
(3) Includes shares of common stock that may be issued by Waste Management, Inc.
upon conversion of debt securities and an indeterminate number of shares of
common stock that may become issuable as a result of anti-dilution
adjustments.
(4) We are also registering guarantees Waste Management Holdings, Inc. may have
with respect to debt securities that we may issue. No separate consideration
will be received for the guarantees. 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
SHALL 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a) MAY DETERMINE.
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TABLE OF ADDITIONAL REGISTRANT GUARANTORS
STATE OR OTHER IRS ADDRESS INCLUDING ZIP
JURISDICTION OF EMPLOYER CODE AND TELEPHONE
INCORPORATION OF IDENTIFICATION NUMBER OF PRINCIPAL
EXACT NAME AS SPECIFIED IN ITS CHARTER ORGANIZATION NUMBER EXECUTIVE OFFICE
-------------------------------------- ---------------- -------------- ---------------------
Waste Management Holdings, Inc.............. Delaware 36-2660763 1001 Fannin Street
Suite 4000
Houston, Texas 77002
(713) 512-6200
SUBJECT TO COMPLETION, DATED AUGUST 6, 2002
PROSPECTUS
$1,868,070,886
WASTE MANAGEMENT, INC.
DEBT SECURITIES
(AS MAY BE FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN, BY WASTE MANAGEMENT HOLDINGS, INC.)
COMMON STOCK
We may offer from time to time:
- Debt securities, whether or not guaranteed by Waste Management Holdings,
Inc.
- Shares of our common stock
Our shares of common stock are listed on the New York Stock Exchange under
the symbol "WMI."
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 2.
We will provide a prospectus supplement each time we issue the securities
covered by this prospectus. The prospectus supplement will provide specific
information about the terms of that offering and also may add, update or change
information contained in this prospectus.
You should read this prospectus and the related prospectus supplement
carefully before you invest in our securities. This prospectus may not be used
to offer and sell our securities unless accompanied by a prospectus supplement.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2002.
WHERE TO FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 (Reg. No. 333- ) with respect to the
securities we are offering. This prospectus does not contain all the information
contained in the registration statement, including its exhibits and schedules.
You should refer to the registration statement, including the exhibits and
schedules, for further information about us and the securities we are offering.
Statements we make in this prospectus about certain contracts or other documents
are not necessarily complete. When we make such statements, we refer you to the
copies of the contracts or documents that are filed as exhibits to the
registration statement, because those statements are qualified in all respects
by reference to those exhibits. The registration statement, including exhibits
and schedules, is on file at the offices of the Commission and may be inspected
without charge. We file annual, quarterly and current reports, proxy statements
and other information with the Commission. Our Commission filings, including the
registration statement, are available to the public over the Internet at the
Commission's web site at http://www.sec.gov. You can also read and copy any
document we file at:
- the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 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.
Please call the Commission at 1-800-SEC-0330 for more information about the
public reference facilities.
You can also 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.
We are incorporating by reference in this prospectus some information we
file with the Commission. This 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
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- Annual Report on Form 10-K............. Year ended December 31, 2001
- Quarterly Reports on Form 10-Q......... Quarters ended March 31, 2002 and June
30, 2002
- Current Report on Form 8-K............. March 22, 2002
- Proxy Statement for the 2002 Annual
Meeting of Stockholders................ May 17, 2002
We also incorporate by reference the information contained in any future
filings made with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act until we sell all of the securities covered by this
prospectus, which information will be deemed to automatically update and
supersede this information.
YOU MAY REQUEST A COPY OF THESE 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
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 additional registrant guarantor, Waste Management
Holdings, Inc. The term "you" refers to a holder of securities offered by means
of this prospectus.
OUR 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.
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;
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.
Our executive offices and the executive offices of Waste Management
Holdings, Inc., are located at 1001 Fannin Street, Suite 4000, Houston, Texas
77002, and our telephone number is (713) 512-6200.
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RISK FACTORS
In addition to the information set forth in this prospectus, you should
carefully consider the risks described below and in the accompanying prospectus
supplement before making an investment in the securities offered. The risks
described below are not the only ones facing us. There may be additional risks
not presently known to us or that we currently deem immaterial which may also
impair our business operations.
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 have a
material adverse effect on our financial condition, results of operations and
cash flows.
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.
However, we cannot guarantee that we will always be successful in this regard.
Where we are not successful, we may incur fines, penalties or other sanctions
that could have a material adverse effect on our financial condition, results of
operations and cash flows.
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. Due to the limited nature of our
insurance coverage for environmental liability, if we were to incur liability
for environmental damage, such liability could have a material adverse effect on
our financial condition, results of operations and cash flows.
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 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.
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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.
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
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
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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 such
as paper, plastics, aluminum and other commodities, all of which are subject to
significant price fluctuations. 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. These
fluctuations may affect our future operating income and cash flows.
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
under the federal securities laws, including claims that (1) the projections we
made about our June 30, 1999 earnings were false and misleading, (2) we failed
to disclose information about our earnings projections that would have been
important to purchasers of our stock, (3) we made further misrepresentations
after July 29, 1999 about our operations and finances, resulting in our company
taking a pre-tax charge of $1.76 billion in the third quarter of 1999, and (4)
we made false or misleading representations in the registration statement and
prospectus filed with the SEC in connection with our July 1998 acquisition of
Waste Management Holdings. 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 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, in May 2002 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 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.
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.
We cannot predict or determine the outcome or resolution of all of the
proceedings brought against us or our subsidiaries. In addition, the timing of
the final resolutions to these matters is uncertain. The possible outcomes or
resolutions to these matters or any new litigation or governmental proceedings
could include judgments against us or settlements, either of
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which could require substantial payments by us and thus could have a material
adverse effect on our financial condition, results of operations and cash flows.
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.
WE FACE POTENTIAL DIFFICULTIES IMPLEMENTING OUR NEW ORGANIZATIONAL PLAN AND
MANAGING OUR PAST GROWTH
In March 2002, we announced our plan to adopt a new organizational
structure. This structure changes the way in which our field operations are set
up and reduces the staffing levels in the field. The new structure aligns the
decision-making, staff support and operations of our field operations with
metropolitan statistical areas that closely parallel the generation, transport
and movement of solid waste in the United States. We believe that the new
structure will improve our business by optimizing our resources, assets and
people to lower our cost structure and add value for our stockholders. However,
there can be no assurance that implementation of our plan will be without
disruption to our operations or that the new structure will result in the
benefits anticipated. For a more detailed discussion of our new organizational
structure, see Note 25, "Subsequent Events" to the Consolidated Financial
Statements in our Annual Report on Form 10-K for the year ended December 31,
2001 incorporated by reference herein.
In recent years, we have made a number of acquisitions, some of them
substantial. Our future financial results and prospects depend in part on our
ability to successfully manage and improve the operating efficiencies and
productivity of these acquired operations. In particular, whether the
anticipated benefits of our acquired operations are ultimately achieved will
depend on a number of factors, including our ability to achieve administrative
cost savings, rationalization of collection routes, insurance and bonding cost
reductions, general economies of scale and our ability, generally, to capitalize
on our asset base and strategic position. Our acquisitions also involve the
potential risk that we failed to accurately assess all of the pre-existing
liabilities of the companies acquired.
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. We cannot predict which, if any, groups of
employees may seek union representation in the future or the outcome of
collective bargaining. The negotiation of these 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
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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
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 IF OUR CASH FLOW IS LESS THAN EXPECTED
We currently expect to generate sufficient cash flow from operations to
cover our anticipated cash needs for capital expenditures, acquisitions and
other cash expenditures. However, in February 2002 we announced a stock buy back
program of up to $1 billion annually, and we expect to fund the settlement of
our stockholder class action lawsuit in late 2002. If our cash flow from
operations is less than currently expected, or our capital requirements
increase, either due to strategic decisions or otherwise, or if we buy back
stock such that our available cash is reduced, we may elect to incur further
indebtedness or issue equity securities to cover any additional capital needs.
However, we cannot guarantee that we will be successful in obtaining additional
capital on acceptable terms. Our credit facilities require us to comply with
certain financial ratios. If our cash flows are less than expected or our
capital requirements are more than expected, we may not be in compliance with
the ratios. This would result in a default under our credit agreements. If there
were a default, we may not be able to obtain waivers or amendments to our credit
facilities, and the lenders could choose to declare all outstanding borrowings
due and payable. If that happened, there can be no assurances that we could
fully repay the amounts due. Since we are partially dependent on our credit
facilities to fund borrowing and bonding needs, any default would have a
material adverse effect on our consolidated financial condition, results of
operation and cash flows.
WE MAY ENCOUNTER DIFFICULTIES WITH OUR ENTERPRISE SOFTWARE
We have recently deployed enterprise-wide software systems that replaced
our previous financial, human resources and payroll 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.
POTENTIAL EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of our Certificate of Incorporation and Bylaws may make
it more difficult for a third party to acquire us in a transaction that is not
approved by our Board of Directors. For example, our Board of Directors has the
power to issue up to 10,000,000 shares of our preferred stock in one or more
series, and to fix the rights and preferences of any series, without further
authorization by the holders of our common stock. This provision is designed to
permit us to develop our businesses and foster our long-term growth without the
disruption caused by the threat of a takeover that our Board of Directors does
not think is in our best interests or in the best interests of our stockholders.
Also, third parties may be discouraged from making a tender offer or otherwise
attempting to gain control of us even though the attempt might be beneficial
economically to us and our stockholders.
6
FRAUDULENT TRANSFER STATUTES MAY LIMIT YOUR RIGHTS UNDER THE GUARANTEES OF THE
DEBT SECURITIES
Our obligations under the debt securities may be guaranteed by Waste
Management Holdings, our wholly owned subsidiary. The guarantees 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 guarantees as
fraudulent transfers under relevant federal and state laws, by claiming, for
example, that, since a guarantee was incurred for the benefit of Waste
Management (and only indirectly, if at all, for the benefit of Waste Management
Holdings), the obligations of the guarantor were incurred for less than
reasonably equivalent value or fair consideration. Under certain circumstances,
including a finding that Waste Management Holdings was insolvent at the time its
guarantees were issued, a court could hold that the obligations of Waste
Management Holdings under the guarantees may be voided or are subordinate to
other obligations of Waste Management Holdings or that the amount for which
Waste Management Holdings is liable under its guarantees of the debt securities
may be limited. Different jurisdictions define "insolvency" differently.
However, Waste Management Holdings generally would be considered insolvent at
the time it guaranteed the debt securities 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) Waste Management Holdings
were incurring debts beyond its ability to pay as such debts mature. We cannot
assure you as to what standard a court would apply in order to determine whether
Waste Management Holdings was "insolvent" as of the date the debt securities
were guaranteed, and we cannot assure you that, regardless of the method of
valuation, a court would not determine that Waste Management Holdings were
insolvent on that date. Nor can we assure you that a court would not determine,
regardless of whether Waste Management Holdings were insolvent on the date the
guarantees were issued, that the guarantees constituted fraudulent transfers on
another ground.
In an attempt to limit the applicability of fraudulent transfer laws, the
guarantees will limit the amount of the guarantees of Waste Management Holdings
to the amount that will result in the guarantees not constituting fraudulent
transfers or improper corporate distributions, but we cannot be certain which
standard a court would apply in making a determination regarding the maximum
liability of Waste Management Holdings.
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 unless otherwise
required by the securities laws.
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.
7
USE OF PROCEEDS
Except as otherwise described in any prospectus supplement, we will use the
net proceeds from the sale of our debt securities or common stock for general
corporate purposes. These purposes may include funding working capital
requirements, capital expenditures, repayment and refinancing of indebtedness
and repurchases and redemptions of our securities. We will determine any
specific allocation of the net proceeds of an offering to a specific purpose at
the time of such offering and will describe the specific allocation in the
related prospectus supplement. The net proceeds of any offerings under this
prospectus may initially be invested in short-term marketable securities pending
their ultimate application.
We may also issue shares of our common stock to settle litigation and other
claims or to satisfy judgments or arbitration awards. We will not receive any
cash proceeds from these issuances but will eliminate an actual or potential
liability.
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 and 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
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.
8
DESCRIPTION OF DEBT SECURITIES
The debt securities will constitute either our senior debt, or "senior debt
securities," or our subordinated debt, or "subordinated debt securities." Debt
securities may be issued from time to time under one or more indentures, each
dated as of a date on or prior to the issuance of the debt securities to which
it relates. Senior debt securities and subordinated debt securities may be
issued pursuant to separate indentures, respectively, a "Senior Debt Indenture"
and a "Subordinated Debt Indenture."
We have previously entered into a Senior Debt Indenture dated as of
September 10, 1997 with Texas Commerce Bank National Association, now known as
JPMorgan Chase Bank ("JPMorgan Chase"), and a Subordinated Debt Indenture dated
as of February 1, 1997 with JPMorgan Chase. Copies of these indentures are filed
as exhibits to the Registration Statement of which this prospectus is a part.
The Senior Debt Indenture and the Subordinated Debt Indenture, as amended or
supplemented from time to time, are sometimes referred to individually as an
"Indenture" and collectively as the "Indentures." JPMorgan Chase (and any
successors thereto as trustees under the respective Indentures) is referred to
as the "Trustee."
The following summaries of actual or anticipated provisions of the
Indentures and the debt securities do not purport to be complete and such
summaries are subject to the detailed provisions of the applicable Indenture to
which reference is hereby made for a full description of such provisions,
including the definition of certain terms used herein. Section references in
parentheses below are to sections in both Indentures unless otherwise indicated.
Wherever particular sections or defined terms of the applicable Indenture are
referred to, such sections or defined terms are incorporated herein by reference
as part of the statement made, and the statement is qualified in its entirety by
such reference. The Indentures are substantially identical, except for certain
of our covenants and provisions relating to subordination and conversion.
If provided in a prospectus supplement, Waste Management Holdings will
guarantee our obligations under the debt securities on the terms set forth in
the prospectus supplement. See "Description of Guarantees." Our operations are
conducted through our subsidiaries, and therefore, we are primarily dependent on
the earnings and cash flows of our subsidiaries to meet our debt service
obligations. 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 our debt securities 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 securities interest of other creditors of such subsidiary. Therefore, except
as described herein or in a prospectus supplement, our debt securities 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 following description of the debt securities sets
forth certain general terms and provisions of the debt securities of all series.
The particular terms of each series of debt securities offered by any prospectus
supplement will be described therein.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
General. The debt securities will be our unsecured senior or subordinated
obligations and may be issued from time to time in one or more series. The
Indentures do not limit the amount of debt securities, debentures, notes or
other types of indebtedness that we may issue or that any of our subsidiaries
may issue. The Indentures do not, other than as may be set forth in any
prospectus supplement, 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 debt securities, will be limited
to our assets and will not be an obligation of any of our Subsidiaries (other
than any guarantee by Waste Management Holdings). In addition, other than as may
be set forth in any prospectus supplement, the Indentures do not and the debt
securities will not contain any covenants or other provisions that are intended
to afford holders of the debt securities special protection in the event we
experience either a change of control or a highly leveraged transaction.
9
Reference is made to the prospectus supplement for the following terms of
and information relating to the debt securities (to the extent such terms are
applicable to such debt securities):
- the title of the debt securities;
- classification as either senior debt securities or subordinated debt
securities;
- any guarantee by Waste Management Holdings of the debt securities;
- whether the debt securities that constitute subordinated debt securities
are convertible into common stock and, if so, the terms and conditions
upon which such conversion will be effected, including the initial
conversion price or conversion rate and any adjustments thereto in
addition to or different from those described herein, the conversion
period and other conversion provisions in addition to or in lieu of those
described herein;
- any limit on the aggregate principal amount of the debt securities;
- whether the debt securities are to be issuable as Registered Securities
or Bearer Securities or both, whether any of the debt securities are to
be issuable initially in temporary global form and whether any of the
debt securities are to be in permanent global form;
- the price or prices (expressed as a percentage of the aggregate principal
amount thereof) at which the debt securities will be issued;
- the date or dates on which the debt securities will mature;
- the rate or rates per annum (or the method by which such will be
determined) at which the debt securities will bear interest, if any, and
the date from which any such interest will accrue;
- the Interest Payment Dates on which any such interest on the debt
securities will be payable, the date on which payment of such interest,
if any, will commence and the Regular Record Dates for any interest
payable on any debt securities which are Registered Securities on any
Interest Payment Date and the extent to which, or the manner in which,
any interest payable on a temporary global Debt Security on an Interest
Payment Date will be paid;
- any mandatory or optional sinking fund or analogous provisions;
- each office or agency where, subject to the terms of the Indentures as
described below under "-- Payment and Paying Agents," the principal of
and any premium and interest on the debt securities will be payable and
each office or agency where, subject to the terms of the Indentures as
described below under "-- Form, Exchange, Registration and Transfer," the
debt securities may be presented for registration of transfer or
exchange;
- our right, if any, or our obligation, if any, to redeem the debt
securities and the period or periods, if any, within which and the price
or prices at which the debt securities may, pursuant to any optional or
mandatory redemption provisions, be redeemed, in whole or in part, and
the other detailed terms and provisions of any such optional or mandatory
redemption;
- the denominations in which any debt securities which are Registered
Securities will be issuable, if other than denominations of $1,000 and
any integral multiple thereof, and the denomination or denominations in
which any debt securities which are Bearer Securities will be issuable,
if other than the denomination of $5,000;
- the currency or currencies (including composite currencies) in which
payment of principal of and any premium and interest on the debt
securities is payable if other than United States dollars;
- any index used to determine the amount of payments of principal of and
any premium and interest on the debt securities;
- information with respect to book-entry procedures, if any;
- any deletions from, modification of or additions to the Events of Default
or our covenants with respect to such debt securities; and
- any other terms of the debt securities not inconsistent with the
provisions of the Indentures. (Section 301)
Any prospectus supplement will also describe any special provisions for the
payment of additional amounts with respect to the debt securities.
10
Debt securities may be issued as Original Issue Discount Securities. An
Original Issue Discount Security is a debt security, including any zero-coupon
security, which is issued at a price lower than the amount payable upon the
Stated Maturity of the security and which provides that upon redemption or
acceleration of the maturity of the security an amount less than the amount
payable upon the Stated Maturity of the security and determined in accordance
with the terms of such debt security shall become due and payable. We will set
forth any special United States federal income tax considerations applicable to
debt securities issued at an original issue discount, including Original Issue
Discount Securities, and special United States tax considerations and other
terms and restrictions applicable to any debt securities which are issued in
bearer form, offered exclusively to United States aliens or denominated in other
than United States dollars, in a prospectus supplement.
Form, Exchange, Registration and Transfer. Debt securities of a series may
be issuable in definitive form solely as Registered Securities, solely as Bearer
Securities or as both Registered Securities and Bearer Securities. Unless
otherwise indicated in an applicable prospectus supplement, Bearer Securities
will have interest coupons attached. Debt securities of a series may also be
issuable in temporary or permanent global form. (Section 201)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if debt securities of
any series are issuable as both Registered Securities and Bearer Securities, at
the option of the Holder, and subject to the terms of the applicable Indenture,
Bearer Securities (with all unmatured coupons, except as provided below, and all
matured coupons in default) of such series will be exchangeable for Registered
Securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. Bearer Securities surrendered in exchange
for Registered Securities between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest shall be surrendered without the
coupon relating to such date for payment of interest. Interest accrued as of
such date for payment of interest will not be payable in respect of the
Registered Security issued in exchange for such Bearer Security, but will be
payable only to the Holder of such coupon when due in accordance with the terms
of the applicable Indenture. Bearer Securities will not be issued in exchange
for Registered Securities. (Section 305)
Debt securities may be presented for exchange, and Registered Securities
may be presented for registration of transfer, at the office of the Security
Registrar or at the office of any transfer agent designated by us for such
purpose with respect to any series of debt securities and referred to in an
applicable prospectus supplement. Transfer and exchange will be effected without
service charge and upon payment of any taxes and other governmental charges as
described in the Indentures. Such transfer or exchange will be effected upon the
Security Registrar or such transfer agent, as the case may be, being satisfied
with the documents of title and identity of the person making the request.
Unless otherwise indicated in any prospectus supplement, the Trustee for the
series of debt securities will serve as Security Registrar. (Section 305) If a
prospectus supplement refers to any transfer agents (in addition to the Security
Registrar) initially designated by us with respect to any series of debt
securities, we may at any time rescind the designation of any such transfer
agent or approve a change in the location through which any such transfer agent
acts, except that, if debt securities of a series are issuable solely as
Registered Securities, we will be required to maintain a transfer agent in each
Place of Payment for such series and, if debt securities of a series are also
issuable as Bearer Securities, we will be required to maintain (in addition to
the Security Registrar) a transfer agent in a Place of Payment for such series
located outside the United States. We may at any time designate additional
transfer agents with respect to any series of debt securities. (Section 1002)
Title to any Bearer Securities (including Bearer Securities in permanent
global form) and any coupons appertaining thereto will pass by delivery. We, the
Trustee, our agents and the agents of the Trustee may treat the bearer of any
Bearer Security and the bearer of any coupon and the registered holder of any
Registered Security as the owner for the purpose of making payment and for all
other purposes. (Section 308)
11
In the event of any redemption in part, we shall not be required to:
- issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of debt securities of that series for redemption and ending on
the close of business on:
- if debt securities of the series are issuable only as Registered
Securities, the day of mailing of the relevant notice of redemption; and
- if debt securities of the series are issuable as Bearer Securities, the
date of the first publication of the relevant notice of redemption or,
if Securities of the series are also issuable as Registered Securities
and there is no publication, the mailing of the relevant notice of
redemption;
- register the transfer of or exchange any Registered Security, or portion
thereof, called for redemption, except the unredeemed portion of any
Registered Security being redeemed in part; or
- exchange any Bearer Security called for redemption, except to exchange
such Bearer Security for a Registered Security of that series and like
tenor which is immediately surrendered for redemption. (Section 305)
Replacement of Securities and Coupons. We will replace any mutilated Debt
Security or any Debt Security with a mutilated coupon at the expense of the
Holder upon surrender of the Debt Security to the Trustee. We will replace debt
securities or coupons that become destroyed, stolen or lost at the expense of
the Holder upon delivery to the Trustee of the Debt Security and coupons or
evidence of destruction, loss or theft thereof satisfactory to us and the
Trustee; in the case of any coupon which becomes destroyed, stolen or lost, such
coupon will be replaced by issuance of a new Debt Security in exchange for the
Debt Security to which such coupon appertains. In the case of a destroyed, lost
or stolen Debt Security or coupon, an indemnity satisfactory to the Trustee and
to us may be required at the expense of the Holder of such Debt Security or
coupon before a replacement Debt Security will be issued. (Section 306)
Payment and Paying Agents. Unless otherwise indicated in an applicable
prospectus supplement, payment of principal of and any premium and interest on
Bearer Securities will be payable, subject to any applicable laws and
regulations, at the offices of such Paying Agents outside the United States as
we may designate from time to time, in the manner indicated in such prospectus
supplement. (Section 1002) Unless otherwise indicated in an applicable
prospectus supplement, payment of interest on Bearer Securities on any Interest
Payment Date will be made only against surrender to the Paying Agent of the
coupon relating to such Interest Payment Date. (Section 1001) No payment with
respect to any Bearer Security will be made at any of our offices or agencies in
the United States or by check mailed to any address in the United States or by
transfer to any account maintained with a bank located in the United States.
Notwithstanding the foregoing, payments of principal of and any premium and
interest on Bearer Securities denominated and payable in U.S. dollars will be
made at the office of our Paying Agent in the Borough of Manhattan, the City of
New York, if (but only if) payment of the full amount thereof in U.S. dollars at
all offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions. (Section 1002)
Unless otherwise indicated in an applicable prospectus supplement, payment
of principal of and any premium and interest on Registered Securities will be
made at the office of the Paying Agent or Paying Agents 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 Security Register. (Rule 307, 1002)
Unless otherwise indicated in an applicable prospectus supplement, payment of
any installment of interest on Registered Securities will be made to the Person
in whose name such Registered Security is registered at the close of business on
the Regular Record Date for such interest. (Section 307)
Unless otherwise indicated in an applicable prospectus supplement, the
Trustee for the series of debt securities will act as our Paying Agent for
payments with respect to debt securities which are issuable solely as Registered
Securities and we will maintain a Paying Agent outside the United States for
payments with respect to debt securities (subject to limitations described above
in the case of Bearer Securities) which are issuable solely as Bearer Securities
or as both Registered Securities and Bearer
12
Securities. Any Paying Agents outside the United States and any other Paying
Agents in the United States that we initially designate for the debt securities
will be named in an applicable prospectus supplement. We may at any time
designate additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying Agent acts,
except that, if debt securities of a series are issuable solely as Registered
Securities, we will be required to maintain a Paying Agent in each Place of
Payment for such series and, if debt securities of a series are issuable as
Bearer Securities, we will be required to maintain (i) a Paying Agent in the
Borough of Manhattan, The City of New York for principal payments with respect
to any Registered Securities of the series (and for payments with respect to
Bearer Securities of the series in the circumstances described above, but not
otherwise), and (ii) a Paying Agent in a Place of Payment located outside the
United States where debt securities of such series and any coupons appertaining
thereto may be presented and surrendered for payment. (Section 1002)
All moneys paid by us to a Paying Agent for the payment of principal of and
any premium or interest on any Debt Security 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 Debt Security or any coupon will thereafter look only to us for
payment thereof. (Section 1003)
Guarantees. In order to enable us to obtain more favorable interest rates
and terms, payment of principal of, premium, if any, and interest on the debt
securities may (if so specified in the prospectus supplement) be guaranteed by
Waste Management Holdings. See "Guarantees of Debt Securities."
Global Debt Securities. Debt securities of a series may be issued in whole
or in part in the form of one or more global debt securities that will be
deposited with, or on behalf of, a depository identified in the prospectus
supplement relating to such series. Global debt securities may be issued only in
fully registered form and in either temporary or permanent form. (Section 203)
Unless and until it is exchanged in whole or in part for the individual debt
securities represented thereby, a global Debt Security may not be transferred
except as a whole by the depository for such global Debt Security to a nominee
of such depository or by a nominee of such depository to such depository or
another nominee of such depository or by the depository or any nominee to a
successor depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of debt securities in the form of one or more global debt securities will be
described in the prospectus supplement relating to that series.
Satisfaction and Discharge of Indenture. Each Indenture provides that we
may discharge the Indenture (except as to any surviving rights of registration
of transfer or exchange of debt securities and any right to receive additional
amounts) with respect to all debt securities issued under the Indenture, which
debt 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 of and premium, if any, and interest, if any, on all outstanding
debt securities when due. (Section 401)
Defeasance and Discharge. Each Indenture provides that, if we so elect by
Board Resolution with respect to the debt securities of any series issued under
such Indenture (other than convertible subordinated debt securities), we will be
discharged from any and all obligations in respect of the debt securities of
such series 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 debt securities of such series on the Stated Maturity of such
payments in accordance with the terms of such Indenture and the debt securities
of such series. (Sections 1302, 1304) In such case, however, we will not be
discharged from our obligations under the Indenture relating to: temporary debt
securities and exchange of debt securities, registration of transfer or exchange
of debt securities of such series, replacement of stolen, lost or mutilated debt
securities of such series, maintenance
13
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. A trust may only be
established if, among other things, we have delivered to the Trustee an Opinion
of Counsel to the effect that:
- we have received from, or there has been published by, the Internal
Revenue Service a ruling, or
- since the date of such 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. (Section 1304) In the event of
any such defeasance and discharge of debt securities of such series,
Holders of such series would be entitled to look only to such trust fund
for payment of principal of and any premium and any interest on their
debt securities until Maturity.
Covenant Defeasance. Each Indenture also provides that, if we so elect by
Board Resolution with respect to the debt securities of any series issued
thereunder, we may omit to comply with certain restrictive covenants, including
(in the case of the Senior Debt Indenture) the covenants described under
"-- Provisions Applicable Solely to Senior Debt Securities -- Limitation on
Liens" and "-- Limitations on Sale and Leaseback Transactions," but excluding
(in the case of the Subordinated Debt Indenture) any of our applicable
obligations respecting the conversion of debt securities of such series into
common stock, and any such omission shall not be an Event of Default with
respect to the debt securities of such series, 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 debt securities of
such series on the Stated Maturity of such payments in accordance with the terms
of such Indenture and the debt securities of such series. Our obligations under
such Indenture and the debt securities of such series other than with respect to
such covenants shall remain in full force and effect. (Section 1303) 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. (Section 1304)
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
debt securities of such series 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 debt securities of any series as described above, and the debt
securities of such series 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 debt securities of such series 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 applicable 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 debt securities 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 such debt securities
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 such debt securities.
Meetings, Modification and Waiver. We and the Trustee may modify and amend
either Indenture with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Securities
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of each series affected by such modification or amendment. However, no such
modification or amendment may, without the consent of the Holder of each
Outstanding Security affected thereby:
- change the Stated Maturity of the principal of, or any installment of
principal of or interest on, any Debt Security;
- change the Redemption Date with respect to any Debt Security;
- reduce the principal amount of, or premium or interest on, any Debt
Security;
- change our obligation, if any, to pay additional amounts;
- reduce the amount of principal of an Original Issue Discount Security
payable upon acceleration of the Maturity thereof;
- change the coin or currency in which any Debt 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 Debt Security or any conversion right with respect
thereto;
- reduce the percentage in principal amount of Outstanding Securities of
any series, the consent of whose Holders is required for modification or
amendment of such Indenture or for waiver of compliance with certain
provisions of such Indenture or for waiver of certain defaults;
- reduce the requirements contained in such Indenture for quorum or voting;
- change our obligation, if any, to maintain an office or agency in the
places and for the purposes required by such Indenture;
- adversely affect the right to convert subordinated debt securities, if
applicable; or
- modify any of the above provisions. (Section 902)
The Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding subordinated debt securities without the
consent of each holder of Senior Indebtedness (as defined below under
"-- Provisions Applicable Solely to Subordinated Debt Securities") then
outstanding that would be adversely affected thereby. (Section 907 of the
Subordinated Debt Indenture)
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of each series may, on behalf of all Holders of that series, waive,
insofar as that series is concerned, our compliance with certain restrictive
provisions of the Indenture under which such series has been issued. (Section
1007 of the Senior Debt Indenture; Section 1008 of the Subordinated Debt
Indenture) The Holders of a majority in aggregate principal amount of the
Outstanding Securities, of each series may, on behalf of all Holders of that
series, waive any past default under the applicable Indenture with respect to
any debt securities of that series, except a default:
- in the payment of principal of, or premium, if any, or any interest on
any Debt Security of such series; or
- in respect of a covenant or provision of such Indenture which cannot be
modified or amended without the consent of the Holder of each Outstanding
Security of such series affected. (Section 513)
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or are
present at a meeting of the Holders for quorum purposes,
15
- the principal amount of an Original Issue Discount Security that is
deemed to be Outstanding will be the amount of the principal that would
be due and payable as of the date of such determination upon acceleration
of the Maturity thereof, and
- the principal amount of a Debt Security denominated in a foreign currency
or currency units will be the U.S. dollar equivalent, determined on the
date of original issuance of such Debt Security, of the principal amount
of such Debt Security or, in the case of an Original Issue Discount
Security, the U.S. dollar equivalent, determined on the date of original
issuance of such Security, of the amount determined as provided in the
preceding bullet point. (Section 101)
Each Indenture contains provisions for convening meetings of the Holders of
a series if debt securities of that series are issuable as Bearer Securities.
(Section 1401) A meeting may be called at any time by the Trustee, and also,
upon request, by us or the Holders of at least 10% in aggregate principal amount
of the Outstanding Securities of such series, in any such case upon notice given
in accordance with "Notices" below. (Section 1402) Except for any consent which
must be given by the Holder of each Outstanding Security affected thereby, as
described above, any resolution presented at a meeting (or adjourned 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 Outstanding Securities of
that series; provided, however, that 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 Outstanding
Securities of a series 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 Outstanding
Securities of that series. Any resolution passed or decision taken at any
meeting of Holders of any series duly held in accordance with the applicable
Indenture will be binding on all Holders of that series and related coupons. The
quorum at any meeting, and at an reconvened meeting, will be Persons holding or
representing a majority in aggregate principal amount of the Outstanding
Securities of a series. (Section 1404)
Notices. Except as otherwise provided in an applicable prospectus
supplement, notices to Holders of Bearer Securities will be given by publication
at least twice in a daily newspaper in the City of New York and in such other
city or cities as may be specified in such Bearer Securities. Notices to Holders
of Registered Securities will be given by first-class mail to the addresses of
such Holders as they appear in the Security Register. (Section 106)
Governing Law. The Indentures, the debt securities and coupons will be
governed by, and construed in accordance with, the laws of the State of New
York. (Section 113)
Regarding the Trustee. The Trustee appointed and serving as trustee
pursuant to each of the Senior Debt Indenture and the Subordinated Debt
Indenture is JPMorgan Chase.
Each 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. (Section 613) The Trustee is permitted to
engage in certain other transactions but, if it acquires any conflicting
interest (as described in the Indentures), it must eliminate such conflict or
resign. (Section 608)
The holders of a majority in principal amount of all outstanding debt
securities of a series (or if more than one series is affected thereby, all
series so affected, voting as a single class) 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 for such series or all such series so affected.
In case an Event of Default occurs and is not cured under any Indenture
relating to a series of debt securities and is known to the Trustee for such
series, such Trustee shall exercise such of the rights and powers vested in it
by such 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
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applicable Indenture at the request of any of the holders of debt securities
unless they shall have offered to such Trustee security and indemnity
satisfactory to it.
Pursuant to the Trust Indenture Act, a trustee under an indenture may be
deemed to have a conflicting interest, and may, under certain circumstances, be
required to resign as trustee if the securities under such indenture are in
default and the trustee is the trustee under another indenture under which any
other securities of the same obligor are outstanding. In such event, the obligor
must take prompt steps to have a successor trustee appointed in the manner
provided in the indenture from which the trustee has resigned. Accordingly,
JPMorgan Chase, as trustee under the Senior Debt Indenture and the Subordinated
Debt Indenture, could be required to resign as trustee under one of such
Indentures should a default occur under one of such Indentures.
JPMorgan Chase, as the trustee under the Senior Debt Indenture and the
Subordinated Debt Indenture, may be a depositary 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.
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
General. Senior debt securities will be issued under the Senior Debt
Indenture, and each series:
- 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 debt securities issued and
outstanding and that may be issued from time to time.
Any series not guaranteed by Waste Management Holdings will be structurally
subordinated to any senior debt securities that are so guaranteed.
Certain Definitions. For purposes of the following discussion, the
following definitions are applicable (Section 1008 and 1009 of the Senior Debt
Indenture).
"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 of or
(ii) if the implied lease rate is not known to us, then the weighted average
interest rate of all senior debt securities outstanding at the time under the
Senior Debt 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 therefrom: (i) all
the current liabilities (excluding (a) any current liabilities that by their
terms are extendible or renewable at the option of the obligor thereon to a time
more than 12 months after the time as of which the amount thereof 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 and our consolidated
subsidiaries' consolidated balance sheet 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
17
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:
(a) 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;
(b) 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
(c) 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 Restricted Subsidiary, except (a) any such plant or
facility (i) owned or leased jointly or in common with one or more persons other
than us and any Restricted Subsidiaries in which our and our Restricted
Subsidiaries' interest does not exceed 50%, or (ii) which the Board of Directors
determines in good faith is not of material importance to our and our
subsidiaries', as an entity, total business conducted, or assets owned, 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 Restricted Subsidiary in, the storage,
collection, transfer, interim processing or disposal of waste within the United
States 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 and Sale of Assets. The Senior Debt 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 we deliver to the trustee an officers' certificate and an
opinion of counsel to the effect that:
- 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
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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 on the senior
debt securities and the performance or observance of every other covenant
of the Senior Debt Indenture to be performed or observed on our part; and
- immediately after giving effect to such transaction and treating any
indebtedness which becomes our or our subsidiary's obligation as a result
of such transaction as having been incurred by us or our 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 any consolidation of us with, or merger of us 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 our every right and power
under the Senior Debt Indenture with the same effect as if such successor person
had been named as us therein, and thereafter, except in the case of a lease, the
predecessor person shall be relieved of all obligations and covenants under the
Senior Debt Indenture and the senior debt securities and may liquidate and
dissolve. (Sections 801, 802 of the Senior Debt Indenture).
Limitation on Liens. Unless otherwise provided in the applicable
prospectus supplement, for each series of senior debt securities we issued under
the Senior Debt Indenture, we will not, and we 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 of us or of a Restricted Subsidiary, whether owned as of the
date of the Senior Debt Indenture or thereafter acquired, 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 debt securities then
outstanding and any other Indebtedness of us or any Restricted Subsidiary then
entitled thereto shall be secured by such Security Interest equally and ratably
with (or, in the case of the senior debt securities and if we shall so
determine, prior to) any and all other Indebtedness of us or any Restricted
Subsidiary thereby secured for so long as any such other Indebtedness of us or
any Restricted Subsidiary shall be so secured; provided, that nothing in the
Senior Debt Indenture shall prevent, restrict or apply to Indebtedness secured
by:
- (a) any Security Interest upon property or assets which is created prior
to or contemporaneously with, or within 360 days after, (1) in the case
of the acquisition of such property or assets, the completion of such
acquisition; and (2) 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 the acquisition thereof, which
Security Interest secures obligations assumed by us or any Restricted
Subsidiary; or (c) any conditional sales agreement or other title
retention agreement with respect to any property or assets acquired by us
or any Restricted Subsidiary; 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 Restricted Subsidiary 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 Restricted
Subsidiary 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 which shall have become us in
accordance with the provisions described above in "-- Consolidation,
Merger and Sale of Assets"; provided, in each case, that 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
Restricted Subsidiary prior to the event referred to in such clauses; or
19
- mechanics', materialmen's, carriers' or other like liens arising in the
ordinary course of business (including construction of facilities) in
respect of obligations that are not due or which are being contested in
good faith; or
- 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 any of our
subsidiaries or our or their respective affiliates); or
- 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
- 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
- landlords' liens on fixtures located on premises leased by us or any
Restricted Subsidiary in the ordinary course of business; or
- any Security Interest in favor of any governmental authority in
connection with the financing of the cost of construction or acquisition
of property; or
- any Security Interest arising by reason of deposits to qualify us or any
Restricted Subsidiary to conduct business, to maintain self-insurance, or
to obtain the benefit of, or comply with, laws; or
- any Security Interest that secures any Indebtedness of a Restricted
Subsidiary owing to us or another Restricted Subsidiary or by us to a
Restricted Subsidiary; or
- any Security Interest incurred in connection with pollution control,
sewage or solid waste disposal, industrial revenue or similar financing;
or
- 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 Restricted Subsidiary,
provided that such program is on terms comparable for similar
transactions, or any document executed by us or any Restricted Subsidiary
in connection therewith, and provided that 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
- 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, inclusive,
provided that the Security Interest securing such Indebtedness shall be
limited to the property or assets that, immediately prior to such
extension, renewal or refunding, secured such Indebtedness and additions
to such property or assets.
Notwithstanding the foregoing provisions, we or any of our Restricted
Subsidiaries may create, incur, assume or suffer to exist any Indebtedness
secured by a Security Interest without so securing the senior debt securities
if, at the time such Security Interest becomes a Security Interest upon any of
our or our Restricted Subsidiaries' Principal Property and after giving effect
thereto, the aggregate outstanding principal amount of all Indebtedness of us
and our Restricted Subsidiaries secured by Security Interests permitted by this
sentence (excluding Indebtedness secured by a Security Interest existing as of
the date of the Senior Debt 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 the
first
20
bullet point above, other 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 Restricted Subsidiary) does
not exceed 15% of Consolidated Net Tangible Assets. (Section 1008 of the Senior
Debt Indenture)
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 Restricted Subsidiary 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 any Restricted Subsidiary 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 Subsidiary would thereupon become subject to any
Security Interest not permitted by the terms of the foregoing covenant, the
Senior Debt Indenture provides that we, prior to 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
senior debt securities (equally and ratably with or prior to any other
Indebtedness of us or 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.
(Section 1008 of the Senior Debt Indenture)
Limitations on Sale and Leaseback Transactions. Unless otherwise provided
in the applicable prospectus supplement, for each series of senior debt
securities issued under the Senior Debt Indenture, 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 senior debt securities; 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 the senior debt securities that, by their
terms, are subject to redemption, or to the purchase and retirement of
the senior debt 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 with the senior debt securities 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. (Section 1009 of the Senior Debt Indenture)
Notwithstanding the foregoing, we may, and may permit any Restricted Subsidiary
to, effect any Sale and Leaseback Transaction that is not allowable pursuant to
the above clauses, inclusive, of the foregoing covenant, provided that 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 the list of bullet
points for the covenant described in "-- Limitation on Liens," inclusive, do not
exceed 15% of Consolidated Net Tangible Assets. (Section 1009 of the Senior Debt
Indenture).
21
Events of Default. Unless otherwise specified in the applicable prospectus
supplement, for any series of senior debt securities issued under the Senior
Debt Indenture, an Event of Default means one or more of the following events:
- default in the payment of any interest upon any senior debt security 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
senior debt security of that series as and when the same becomes due and
payable whether at stated maturity, by declaration of acceleration, call
for redemption or otherwise; or
- default in the deposit of any sinking fund payment, when and as due by
the terms of a senior debt security of that series; or
- default in the performance, or breach, of any of our other covenants or
warranties in the Senior Debt Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
Section 501 of the Senior Debt Indenture specifically dealt with or which
has expressly been included in the Senior Debt Indenture solely for the
benefit of a series of senior debt securities other than that series),
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 outstanding senior debt securities of that series
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 Debt Indenture; or
- the entry by a court having jurisdiction in the premises of (A) a decree
or order for relief in respect of use 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
respect of us under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of us or of any substantial part of our property, or
ordering the winding up or liquidation of our affairs, and the
continuation 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
- the commencement by us 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 the consent by it to the entry of a decree or
order for relief in respect of us in an involuntary case or proceeding
against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under any applicable Federal of State
law, or the consent by it 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 us or of any
substantial part of our property, or the making by us of an assignment
for the benefit of creditors, or the admission by us in writing of our
inability to pay our debts generally as they become due, or the taking of
corporate action by us in furtherance of any such action; or
- any other Event of Default provided with respect to senior debt
securities of that series. (Section 501 of Senior Debt Indenture)
If an Event of Default with respect to senior debt securities of any series
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 senior debt
securities of that series may declare the principal amount (or, if any of the
senior debt securities of that series are Original Issue Discount Securities,
such portion of the principal amount of such senior debt securities as may be
specified in the terms of those securities) of all of the senior debt securities
of that series 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 (or specified amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to the senior
debt securities of any series has been made and before a judgment or decree for
22
payment of the money due has been obtained by the Trustee, the holders of a
majority in principal amount of the outstanding senior debt securities of that
series, by written notice to us and the Trustee, may rescind and annul such
declaration and its consequences if:
(1) we have paid or deposited with the Trustee a sum sufficient to pay:
- all overdue interest on all senior debt securities of that series;
- the principal of, and premium, if any, on, any senior debt securities
of that series which has become due otherwise than by such declaration
of acceleration and any interest thereon at the rate or rates
prescribed in the senior debt securities;
- to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate or rates prescribed in the senior debt
securities of that series; and
- all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel; and
(2) all Events of Default with respect to the senior debt securities of
that series, other than the non-payment of the principal of senior debt
securities of that series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in
the Senior Debt Indenture.
No rescission of a declaration of acceleration of the senior debt securities
shall affect any subsequent default or impair any right resulting from a
default. (Section 502 of Senior Debt Indenture) If the Trustee or any holder of
a senior debt security or coupon has instituted any proceeding to enforce any
right or remedy under the Senior Debt Indenture and the 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 senior debt
securities and coupons shall be restored severally and respectively to our
former positions under the Senior Debt Indenture and the senior debt securities
and thereafter all rights and remedies of the Trustee and the holders shall
continue as though no such proceeding had been instituted. (Section 509 of
Senior Debt Indenture)
The Senior Debt 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 Debt
Indenture at the request or direction of any of the holders, unless the holders
shall have offered to the Trustee reasonable indemnity. (Section 601, 603 of
Senior Debt Indenture) No holder of any senior debt security shall have any
right to institute any proceeding, judicial or otherwise, with respect to the
Senior Debt 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 senior debt securities of
that series;
- the holders of not less than 25% in principal amount of the outstanding
senior debt securities of that series 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 Debt 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 senior debt securities of that
series. (Section 507 of Senior Debt Indenture)
23
Notwithstanding any other provisions in the Senior Debt Indenture, the right of
any holder of any senior debt security to receive payment of the principal of
and any premium and any interest on the senior debt security on the stated
maturity for the senior debt security, 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. (Section 508, 902 of Senior Debt
Indenture)
The holders of a majority in principal amount of the outstanding senior
debt securities of any series 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
senior debt securities of that series, provided that:
- the direction shall not be in conflict with any rule of law or with the
Senior Debt Indenture;
- the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction; and
- 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 senior
debt securities of any series may on behalf of the holders of all the senior
debt securities of that series waive any past default under the Senior Debt
Indenture with respect to the senior debt securities and its consequences,
except a default in the payment of the principal of or any premium or interest
on any senior debt security of that series or in respect of a covenant or
provision of the Senior Debt Indenture which, pursuant to the Senior Debt
Indenture, cannot be modified or amended without the consent of the holder of
each outstanding senior debt securities affected. Upon any such waiver, the
default shall cease to exist, and any Event of Default arising from the waived
default shall be deemed to have been cured for every purpose of the Senior Debt
Indenture. However, no such waiver shall extend to any subsequent or other
default or impair any right resulting from the default. (Sections 513, 902 of
Senior Debt Indenture)
If a default occurs under the Senior Debt Indenture with respect to the
senior debt securities of any series, the Trustee shall give the holders of
senior debt securities of that series notice of such default as and to the
extent provided by the Trust Indenture Act. However, in the case of any default
or breach of certain covenants or warranties with respect to senior debt
securities, no notice to holders shall be given until at least 30 days after the
occurrence of the default. (Section 602 of Senior Debt Indenture).
We are required to furnish to the Trustee annually a statement as to our
compliance with all conditions and covenants under the Senior Debt Indenture.
(Section 1006).
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
Consolidation, Merger, Sale. The Subordinated Debt Indenture provides that
we may not consolidate with or merge into any other Person or convey, transfer
or lease its properties and assets substantially as an entirety to any person,
unless:
- the person formed by such consolidation or into which we merge 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, organized and validly existing under
the laws of the United States, any State thereof or the District of
Columbia and 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 Subordinated Debt Indenture) on all the subordinated debt
securities and the performance or observance of every other covenant of
the Subordinated Debt Indenture to be performed or observed on our part;
and
- immediately after giving effect to such transaction and treating any
indebtedness which becomes our or our subsidiaries' obligation 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
24
notice or lapse of time or both, would become an Event of Default, shall have
happened and be continuing.
Upon any consolidation of us with, or merger of us 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 our every right and power
under the Subordinated Debt Indenture with the same effect as if such successor
person had been named as us herein, and thereafter, except in the case of a
lease, the predecessor person shall be relieved of all obligations and covenants
under the Subordinated Debt Indenture and the subordinated debt securities and
coupons and may liquidate and dissolve. (Sections 801, 802 of the Subordinated
Debt Indenture)
Events of Default. Unless otherwise specified in the applicable prospectus
supplement, an Event of Default is defined under the Subordinated Debt Indenture
with respect to the subordinated debt securities of any series issued under such
Subordinated Debt Indenture as being one or more of the following events:
- default in the payment of any interest upon any subordinated debt
security of that series 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
Subordinated Debt Security of that series as and when the same becomes
due and payable, whether at Stated Maturity or by declaration of
acceleration, call for redemption or otherwise; or
- default in the deposit of any sinking fund payment, when and as due by
the terms of a Subordinated Debt Security of that series; or
- default in the performance, or breach, of any of our other covenants or
warranties in the Subordinated Debt Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
Section 501 of the Subordinated Debt Indenture specifically dealt with or
which has expressly been included in the Subordinated Debt Indenture
solely for the benefit of a series of subordinated debt securities other
than that series), and continuance of such default or breach for a period
of 90 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 Outstanding subordinated debt securities
of that series 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 Subordinated Debt Indenture; or
- the entry by a court having jurisdiction in the premises of (A) a decree
or order for relief in respect of us 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
respect of us under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of us or of any substantial part of its property, or
ordering the winding up or liquidation of its 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
- the commencement by us 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 the consent by us to the entry of a decree or
order for relief in respect of us 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 the filing by us of a
petition or answer or consent seeking reorganization or relief under any
applicable Federal or State law, or the consent by us 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 us or of any substantial part of our property, or the
making by us of an assignment for the benefit of creditors, or the
admission by us
25
in writing of our inability to pay our debts generally as they become
due, or the taking of corporate action by us in furtherance of any such
action; or
- any other Event of Default provided with respect to subordinated debt
securities of that series. (Section 501 of the Subordinated Debt
Indenture)
Remedies. If an Event of Default with respect to subordinated debt
securities of any series at the time Outstanding occurs and is continuing, then
in every such case, the Trustee or the Holders of not less than 25% in principal
amount of the Outstanding subordinated debt securities of that series may
declare the principal amount (or, if any of the subordinated debt securities of
that series are Original Issue Discount Securities, such portion of the
principal amount of such subordinated debt securities as may be specified in the
terms of the subordinated debt securities) of all of the subordinated debt
securities of that series 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 (or specified amount) shall become immediately
due and payable. At any time after such a declaration of acceleration with
respect to the subordinated debt securities of any series 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
subordinated debt securities of that series, 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:
(A) all overdue interest on all subordinated debt securities of that
series;
(B) the principal of (and premium, if any, on) any subordinated debt
securities of that series which has become due otherwise than by such
declaration of acceleration and any interest thereon at the rate or rates
prescribed therefor in such subordinated debt securities;
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate or rates prescribed therefor in such
subordinated debt securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
- all Events of Default with respect to subordinated debt securities of
that series, other than the non-payment of the principal of subordinated
debt securities of that series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Subordinated Debt Indenture.
No such rescission shall affect any subsequent default or impair any right
consequent thereon. (Section 502 of the Subordinated Debt Indenture) If the
Trustee or any Holder of a Subordinated Debt Security or coupon has instituted
any proceeding to enforce any right or remedy under the Subordinated Debt
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 subordinated debt securities and coupons shall be
restored severally and respectively to their former positions under the
Subordinated Debt Indenture and the subordinated debt securities and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted. (Section 509 of the Subordinated Debt
Indenture)
The Subordinated Debt 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 such Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnity. (Sections 601, 603 of the
Subordinated Debt Indenture) No Holder of any Subordinated Debt Security of any
series or any related coupons shall have any right to
26
institute any proceeding, judicial or otherwise, with respect to the
Subordinated Debt Indenture, or for the appointment of a receiver or trustee, or
for any other remedy, unless:
- such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the subordinated debt
securities of that series;
- the Holders of not less than 25% in principal amount of the Outstanding
subordinated debt securities of that series 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 Subordinated Debt
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 subordinated debt securities of that
series. (Section 507 of the Subordinated Debt Indenture)
Notwithstanding any other provisions in the Subordinated Debt Indenture,
but subject to the subordination provisions of the Subordinated Debt Indenture,
the right of any Holder of any subordinated debt security or coupon to receive
payment of the principal of and any premium and any interest on such
subordinated debt security or payment of such coupon on the Stated Maturity or
Maturities expressed in such Subordinated Debt Security or coupon and, if
applicable, to convert such Subordinated Debt Security as provided in the
conversion provisions of the Subordinated Debt Indenture and to institute suit
for the enforcement of any such payment or conversion right shall not be
impaired without the consent of such Holder. (Sections 508, 902 of the
Subordinated Debt Indenture)
The Holders of a majority in principal amount of the Outstanding
subordinated debt securities of any series 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 subordinated debt securities of such series, provided that
- such direction shall not be in conflict with any rule of law or with the
Subordinated Debt Indenture;
- the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction; and
- 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. (Section 512 of the Subordinated Debt Indenture) The
Holders of a majority in principal amount of the Outstanding subordinated
debt securities of any series may on behalf of the Holders of all the
subordinated debt securities of such series waive any past default under
the Subordinated Debt Indenture with respect to the subordinated debt
securities of such series and its consequences, except a default in the
payment of the principal of or any premium or interest on any
subordinated debt security of such series or in respect of a covenant or
provision of the Subordinated Debt Indenture which, pursuant to the
Subordinated Debt Indenture, cannot be modified or amended without the
consent of the Holder of each Outstanding Subordinated Debt Security of
such series affected. 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 Subordinated Debt Indenture; but no
such waiver shall extend to any subsequent or other default or impair any
right consequent thereon. (Sections 902, 513 of the Subordinated Debt
Indenture)
If a default occurs under the Subordinated Debt Indenture with respect to
subordinated debt securities of any series, the Trustee shall give the Holders
of subordinated debt securities of such series
27
notice of such default as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default or breach of certain
covenants or warranties with respect to subordinated debt securities of such
series, 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 subordinated debt
securities of such series). (Section 602 of the Subordinated Debt Indenture)
In any case in which subordinated debt securities are Outstanding that are
denominated in more than one currency and the Trustee is directed to make
ratable payments under the Subordinated Debt Indenture to Holders of such
subordinated debt securities, unless otherwise provided with respect to any
series of subordinated debt securities, the Trustee shall calculate the amount
of such payments as follows:
- as of the day the Trustee collects an amount under the Subordinated Debt
Indenture, the Trustee shall, as to each Holder of a subordinated debt
security to whom an amount is due and payable under the Subordinated Debt
Indenture that is denominated in a foreign currency, determine that
amount in Dollars that would be obtained for the amount owing such
Holder, using the rate of exchange at which in accordance with normal
banking procedures the Trustee could purchase in the City of New York
Dollars with such amount owing;
- calculate the sum of all Dollar amounts determined under (i) and add
thereto any amounts due and payable in Dollars; and
- using the individual amounts determined in (i) or any individual amounts
due and payable in Dollars, as the case may be, as a numerator, and the
sum calculated in (ii) as a denominator, calculate as to each Holder of a
Subordinated Debt Security to whom an amount is owed under the
Subordinated Debt Indenture the fraction of the amount collected under
the Subordinated Debt Indenture payable to such Holder.
Any expenses incurred by the Trustee in actually converting amounts owing
Holders of subordinated debt securities denominated in a currency other than
that in which any amount is collected under the Subordinated Debt Indenture
shall be likewise (in accordance with the foregoing) borne ratably by all
Holders of subordinated debt securities to whom amounts are payable under the
Subordinated Debt Indenture. (Section 506 of the Subordinated Debt Indenture)
We are required to furnish to the Trustee annually a statement as to our
compliance with all conditions and covenants under the Subordinated Debt
Indenture. (Section 1007 of the Subordinated Debt Indenture)
Subordination. The subordinated debt securities will be subordinate and
junior in right of payment, to the extent set forth in the Subordinated Debt
Indenture, to all our Senior Indebtedness (as defined below). If we should
default in the payment of any principal of or premium or interest on any Senior
Indebtedness when the same become due and payable, whether at maturity or a date
fixed for prepayment or by declaration of acceleration or otherwise, then, upon
written notice of such default to us by the holders of such Senior Indebtedness
or any trustee therefor and subject to certain of our rights to dispute such
default and subject to proper notification of the Trustee, unless and until such
default has been cured or waived or ceases to exist, no direct or indirect
payment (in cash, property, securities, by set-off or otherwise) will be made or
agreed to be made for principal or premium, if any, or interest, if any, on the
subordinated debt securities, or in respect of any redemption, retirement,
purchase or other acquisition of the subordinated debt securities other than
those made in our capital stock (or cash in lieu of fractional shares thereof)
pursuant to any conversion right of the subordinated debt securities or
otherwise made in our capital stock. (Sections 1601, 1604 and 1605 of the
Subordinated Debt Indenture)
28
"Senior Indebtedness" is defined in Section 101 of the Subordinated Debt
Indenture as our Indebtedness (as defined below) outstanding at any time except:
- any Indebtedness as to which, by the terms of the instrument creating or
evidencing the same, it is provided that such Indebtedness is not senior
in right of payment to the subordinated debt securities;
- the subordinated debt securities;
- any of our Indebtedness to any wholly-owned Subsidiary;
- interest accruing after the filing of a petition initiating certain
bankruptcy or insolvency proceedings unless such interest is an allowed
claim enforceable against us in a proceeding under federal or state
bankruptcy laws;
- obligations under performance guarantees, support agreements and other
agreements in the nature thereof relating to the obligations of any
Subsidiary, and
- trade accounts payable.
"Indebtedness" is defined in Section 101 of the Subordinated Debt Indenture
as, with respect to any person:
(a)(i) the principal of and interest and premium, if any, on
indebtedness for money borrowed of such person evidenced by bonds, notes,
debentures or similar obligations, including any guaranty by such person of
any indebtedness for money borrowed of any other person, whether any such
indebtedness or guaranty is outstanding on the date of the Subordinated
Debt Indenture or is thereafter created, assumed or incurred;
(ii) the principal of and premium and interest, if any, on
indebtedness for money borrowed, incurred, assumed or guaranteed by such
person in connection with the acquisition by it or any of its subsidiaries
of any other businesses, properties or other assets; and
(iii) lease obligations which such person capitalizes in accordance
with Statement of Financial Accounting Standards No. 13 promulgated by the
Financial Accounting Standards Board or such other generally accepted
accounting principles as may be from time to time in effect,
(b) any other indebtedness of such person, including any indebtedness
representing the balance deferred and unpaid of the purchase price of any
property or interest in any property, including any such balance that
constitutes a trade account payable, and any guaranty, endorsement or other
contingent obligation of such person in respect of any indebtedness of
another, which is outstanding on the date of the Subordinated Debt
Indenture or is thereafter created, assumed or incurred by such person; and
(c) any amendments, modifications, refundings, renewals or extensions
of any indebtedness or obligation described as Indebtedness in clause (a)
or (b) above.
If (i) without our consent a court having jurisdiction shall enter (A) an
order for relief with respect to us under the United States federal bankruptcy
laws, (B) a judgment, order or decree adjudging us a bankrupt or insolvent, or
(C) an order for relief for reorganization, arrangement, adjustment or
composition of or in respect of us under the United States federal bankruptcy
laws or state insolvency laws or (ii) we shall institute proceedings for the
entry of an order for relief with respect to us under the United States federal
bankruptcy laws or for an adjudication of insolvency, or shall consent to the
institution of bankruptcy or insolvency proceedings against us, or shall file a
petition seeking, or seek or consent to reorganization, arrangement, composition
or similar relief under the United States federal bankruptcy laws or any
applicable state law, or shall consent to the filing of such petition or to the
appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator or similar official in respect of us or of substantially all of our
property, or we shall make a general assignment for the benefit of creditors as
recognized under the United States federal bankruptcy laws, then all Senior
Indebtedness
29
(including any interest thereon accruing after the commencement of any such
proceedings) will first be paid in full before any payment or distribution,
whether in cash, securities or other property, may be made to any Holder of
subordinated debt securities on account thereof. In such event, any payment or
distribution, whether in cash, securities or other property (other than our
securities or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in the subordination provisions with respect to the subordinated debt
securities, to the payment of all Senior Indebtedness then outstanding and to
any securities issued in respect thereof under any such plan of reorganization
or readjustment), which would otherwise (but for the subordination provisions)
be payable or deliverable in respect of subordinated debt securities of any
series will be paid or delivered directly to the holders of Senior Indebtedness
in accordance with the priorities then existing among such holders until all
Senior Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) has been paid in full.
If any payment or distribution of any character, whether in cash,
securities or other property (other than our securities or any other corporation
provided for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in the subordination provisions
with respect to the subordinated debt securities, to the payment of all Senior
Indebtedness then outstanding and to any securities issued in respect thereof
under any such plan of reorganization or readjustment), shall be received by the
Trustee or any holder of any subordinated debt securities in contravention of
any of the terms of the Subordinated Debt Indenture, such payment or
distribution will be received in trust for the benefit of, and will be paid over
or delivered and transferred to, the holders of the Senior Indebtedness then
outstanding in accordance with the priorities then existing among such holders
for application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all such Senior Indebtedness in full. In the event
of the failure of the Trustee or any holder to endorse or assign any such
payment, distribution or security, each Holder of Senior Indebtedness is
irrevocably authorized to endorse or assign the same. In the event of any such
proceeding, after payment in full of all sums owing with respect to Senior
Indebtedness, the holders of subordinated debt securities, together with the
holders of any of our other obligations ranking on a parity with the
subordinated debt securities, will be entitled to be repaid from our remaining
assets the amounts at that time due and owing on account of unpaid principal of
and any premium and interest on the subordinated debt securities and such other
obligations before any payment or other distribution, whether in cash, property
or otherwise, shall be made on account of any of our capital stock or
obligations ranking junior to the subordinated debt securities and such other
obligations. (Section 1601 of the Subordinated Debt Indenture)
The Subordinated Debt Indenture provides that Senior Indebtedness shall not
be deemed to have been paid in full unless the holders thereof shall have
received cash, securities or other property equal to the amount of such Senior
Indebtedness then outstanding. Upon the payment in full of all Senior
Indebtedness, the holders of subordinated debt securities of each series shall
be subrogated to all rights of any holders of Senior Indebtedness to receive any
further payments or distributions applicable to such Senior Indebtedness until
the indebtedness evidenced by the subordinated debt securities of such series
shall have been paid in full, and such payments or distributions received by
such Holders, by reason of such subrogation, of cash, securities or other
property that otherwise would be paid or distributed to the holders of Senior
Indebtedness, shall, as between us and our creditors other than the holders of
such Senior Indebtedness, on the one hand, and such Holders, on the other hand,
be deemed to be a payment by us on account of such Senior Indebtedness, and not
on account of the subordinated debt securities of such series. (Section 1601 of
the Subordinated Debt Indenture)
The prospectus supplement respecting any series of subordinated debt
securities will set forth any subordination provisions applicable to such series
in addition to or different from those described above.
By reason of such subordination, in the event of a liquidation, bankruptcy,
reorganization, insolvency, receivership or similar proceeding involving us or
an assignment for the benefit of creditors of us or any of our Subsidiaries or a
marshaling of assets or liabilities of us and our Subsidiaries, holders of
Senior Indebtedness and holders of our other obligations that are not
subordinated to Senior Indebtedness may receive more, ratably, than holders of
the subordinated debt securities. Such subordination will not prevent
30
the occurrence of any Default or Event of Default or limit the rights of the
Trustee or any Holder, subject to the other provisions of the Subordinated Debt
Indenture, to pursue any other rights or remedies with respect to the
subordinated debt securities.
Conversion. The Subordinated Debt Indenture may provide for a right of
conversion of subordinated debt securities into common stock (or cash in lieu
thereof). (Sections 301 and 1501 of the Subordinated Debt Indenture) The
following provisions will apply to debt securities that are convertible
subordinated debt securities unless otherwise provided in the applicable
prospectus supplement for such debt securities.
The holder of any convertible subordinated debt securities will have the
right exercisable at any time prior to maturity, unless previously redeemed or
otherwise purchased by us, to convert such subordinated debt securities into
shares of common stock at the conversion price or conversion rate set forth in
the applicable prospectus supplement, subject to adjustment. (Section 1502 of
the Subordinated Debt Indenture) The holder of convertible subordinated debt
securities may convert any portion thereof which is $1,000 in principal amount
or any integral multiple thereof. (Section 1502 of the Subordinated Debt
Indenture)
In certain events, the conversion price or conversion rate will be subject
to adjustment as set forth in the Subordinated Debt Indenture. Such events
include the issuance of shares of our common stock as a dividend or distribution
on the common stock; subdivisions, combinations and reclassifications of the
common stock; the issuance to all holders of common stock of rights or warrants
entitling the holders thereof (for a period not exceeding 45 days) to subscribe
for or purchase shares of common stock at a price per share less than the then
current market price per share of common stock (as determined pursuant to the
Subordinated Debt Indenture); and the distribution to substantially all holders
of common stock of evidences of indebtedness, equity securities (including
equity interests in our Subsidiaries) other than common stock, or other assets
(excluding cash dividends paid from surplus) or rights or warrants to subscribe
for securities (other than those referred to above). No adjustment of the
conversion price or conversion rate will be required unless an adjustment would
require a cumulative increase or decrease of at least 1% in such price or rate.
(Section 1504 of the Subordinated Debt Indenture) We have been advised by our
counsel that certain adjustments in the conversion price or conversion rate in
accordance with the foregoing provisions may result in constructive
distributions to either holders of the subordinated debt securities or holders
of common stock which would be taxable pursuant to Treasury Regulations issued
under Section 305 of the Internal Revenue Code of 1986, as amended. The amount
of any such taxable constructive distribution would be the fair market value of
the common stock which is treated as having been constructively received, such
value being determined as of the time the adjustment resulting in the
constructive distribution is made.
Fractional shares of common stock will not be issued upon conversion, but,
in lieu of fractional shares, we will pay a cash adjustment based on the then
current market price for the common stock. (Section 1503 of the Subordinated
Debt Indenture) Upon conversion, no adjustments will be made for accrued
interest or dividends, and therefore convertible subordinated debt securities
surrendered for conversion between an Interest Payment Date and on or prior to
the record date pertaining to the subsequent Interest Payment Date will not be
considered Outstanding and no interest will be paid on the related Interest
Payment Date. Convertible subordinated debt securities (except convertible
subordinated debt securities called for redemption on a redemption date during
such period) surrendered for conversion during the period between the close of
business on any record date for an Interest Payment Date for such convertible
Subordinated Debt Security and the opening of business on the related Interest
Payment Date shall be considered Outstanding for purposes of payment of
interest, and, therefore, must be accompanied by payment of an amount equal to
the interest payable thereon on such Interest Payment Date. (Sections 1504 and
1502 of the Subordinated Debt Indenture)
In the case of any consolidation or merger of us (with certain exceptions)
or any conveyance, transfer or lease of our properties and assets substantially
as an entirety to any person, each holder of convertible subordinated debt
securities, after the consolidation, merger, conveyance, transfer or lease, will
have the right to convert such convertible subordinated debt securities only
into the kind and amount of securities,
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cash and other property which the holder would have been entitled to receive
upon or in connection with such consolidation, merger, conveyance, transfer or
lease, if the holder had held the common stock issuable upon conversion of such
convertible subordinated debt securities immediately prior to such
consolidation, merger, conveyance, transfer or lease. (Section 1505 of the
Subordinated Debt Indenture)
BOOK-ENTRY SYSTEM
The provisions set forth in this "Book-Entry System" section of this
prospectus will apply to the debt securities of any series if the prospectus
supplement relating to such series so indicates.
Unless otherwise indicated in the applicable prospectus supplement, the
debt securities of such series will be represented by one or more global
securities registered with The Depository Trust Company, or DTC, or a depositary
named in the prospectus supplement relating to such series. Except as set forth
below, a global security may be transferred, in whole but not in part, only to
the depositary or another nominee of the depositary.
The general terms of the depositary arrangement with DTC, with respect to a
series of debt securities are described below in the "Description of the
Depository" section of this prospectus, unless otherwise indicated in the
prospectus supplement relating to the series. We anticipate that the following
provisions will generally apply to depositary arrangements.
Unless otherwise provided in the applicable prospectus supplement, debt
securities represented by a global security will be exchangeable for debt
securities in definitive form of like tenor as such global security in
denominations of $1,000 and in any greater amount that is an integral multiple
thereof if:
- the depositary notifies us and the Trustee that it is unwilling or unable
to continue as depositary for such global security or if at any time the
depositary ceases to be a clearing agency registered under the Exchange
Act and a successor depositary is not appointed by us within 90 days;
- we, in our sole discretion, determine not to have all of the debt
securities represented by a global security and notify the Trustee; or
- there shall have occurred and be continuing an event of default or an
event which, with the giving of notice or lapse of time, or both, would
constitute an event of default with respect to the debt securities.
Any debt security that is exchangeable pursuant to the preceding sentence
is exchangeable for debt securities registered in such names as the depositary
shall instruct the Trustee. It is expected that such instructions may be based
upon directions received by the depositary from its participants with respect to
ownership of beneficial interests in such global security. Subject to the
foregoing, a global security is not exchangeable except for a global security or
global securities of the same aggregate denominations to be registered in the
name of the depositary or its nominee.
DESCRIPTION OF THE DEPOSITARY
Unless otherwise provided in the applicable prospectus supplement, DTC (New
York, NY), will act as securities depositary for the debt securities. The debt
securities will be issued as fully registered securities registered in the name
of Cede & Co. (DTC's partnership nominee) or such other name as may be requested
by an authorized representative of DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants (the "Direct
Participants") deposit with DTC. DTC also facilitates the settlement among
Direct Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Direct Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants
32
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange LLC and the National Association of Securities Dealers, Inc. Access to
the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly (the
"Indirect Participants"). The rules applicable to DTC and its Direct and
Indirect Participants are on file with the Commission.
Purchases of the debt securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the debt securities
on DTC's records. The ownership interest of each actual purchaser of each debt
security, a "beneficial owner," is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial owners will not receive written
confirmation from DTC of their purchase, but beneficial owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the beneficial owner entered into the transaction. Transfers of
ownership interests in the debt securities are to be accomplished by entries
made on the books of Direct and Indirect Participants acting on behalf of
beneficial owners. Beneficial owners will not receive certificates representing
their ownership interests in the debt securities, except in the event that use
of the book-entry system for the debt securities is discontinued.
To facilitate subsequent transfers, all debt securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of debt securities with DTC and their
registration in the name of Cede & Co. or such other nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual beneficial
owners of the debt securities; DTC's records reflect only the identity of the
Direct Participants to whose accounts such debt securities are credited, which
may or may not be the beneficial owners. The Direct and Indirect Participants
will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. (nor such DTC nominee) will consent or vote with
respect to the debt securities. Under its usual procedures, DTC will mail an
omnibus proxy to us as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the debt securities are credited on the record date (identified
in a listing attached to the omnibus proxy).
Redemption proceeds, distributions and dividend payments on the debt
securities will be made to Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts upon DTC's receipt of funds and corresponding detail
information from us on the payment date in accordance with their respective
holdings shown on DTC's records. Payments by Direct or Indirect Participants to
beneficial owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
the Direct or Indirect Participant and not of DTC, or the agent, or us, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of redemption proceeds, distributions and dividends to Cede & Co.
(or such other nominee as may be requested by an authorized representative of
DTC) is our responsibility, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursements of such payments to the
beneficial owners shall be the responsibility of Direct and Indirect
Participants.
33
DTC may discontinue providing its services as securities depositary with
respect to the debt securities at any time by giving reasonable notice to us.
Under such circumstances, in the event that a successor securities depository is
not obtained, debt security certificates will be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, debt security
certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe are reliable, but we take no
responsibility for the accuracy thereof.
DESCRIPTION OF GUARANTEES
Our payment obligations under any series of debt securities may be fully
and unconditionally guaranteed by Waste Management Holdings. If a series of debt
securities are so guaranteed, Waste Management Holdings will execute a separate
guarantee agreement or a supplemental indenture as further evidence of its
guarantee. We will provide the specific terms of any guarantee in the prospectus
supplement. The guarantees will be governed by, and construed in accordance
with, the laws of the State of New York.
The obligations of Waste Management Holdings under its guarantee will be
limited to the maximum amount that will not result in the obligations of Waste
Management Holdings under the guarantee constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. See "Risk Factors -- Fraudulent
transfer statutes may limit your rights under the guarantees of the debt
securities." The specific provisions under which Waste Management Holdings may
be released and discharged from its guarantee will be set forth in the
prospectus supplement.
If a series of debt securities is guaranteed by and is designated as
subordinate to our senior indebtedness, then those guarantees by Waste
Management Holdings will be subordinated to the senior indebtedness of Waste
Management Holdings on substantially the same extent as the series is
subordinated to our senior indebtedness.
DESCRIPTION OF CAPITAL STOCK
GENERAL
We may issue shares of our common stock to purchasers or in order to settle
litigation or other claims or to satisfy judgment or arbitration awards. We may
also issue shares of common stock to persons who exercise currently outstanding
warrants or upon exercise of any convertible debt issued hereunder. The terms of
any offering of common stock will be provided in a prospectus supplement.
We are authorized to issue 1,500,000,000 shares of common stock, of which
630,318,033 shares were outstanding at July 31, 2002. We are also authorized to
issue 10,000,000 shares of preferred stock, none of which were outstanding on
that date.
COMMON STOCK
Dividends. Holders of common stock are entitled to receive dividends when
declared by our Board of Directors. In certain cases, common stockholders may
not receive dividends until we satisfy our obligations to any preferred
stockholders.
Voting Rights. Each share of common stock is entitled to one vote in the
election of directors and in each other matter we may ask stockholders to vote
on. Common stockholders do not have cumulative voting rights. Accordingly, the
holders of a majority of shares voting for the election of directors can elect
all of the directors standing for election.
Fully Paid Status. All outstanding shares of our common stock are validly
issued, fully paid and non-assessable. The shares offered hereby will also be,
upon issuance and sale, validly issued, fully paid and non-assessable.
34
Liquidation or Dissolution. If we liquidate, dissolve or wind up our
business, whether or not voluntarily, common stockholders will share ratably in
the assets remaining after we pay our creditors and any preferred stockholders.
Listing. Our common stock is listed on the New York Stock Exchange under
the trading symbol "WMI."
Transfer Agent and Registrar. The transfer agent and registrar for the
common stock is Mellon Investor Services in South Hackensack, New Jersey.
PREFERRED STOCK
The Board of Directors is authorized, without obtaining stockholder
approval, to issue one or more series of preferred stock. The Board's authority
includes determining the number of shares of each series and the rights,
preferences and limitations of each series, including voting rights, dividend
rights, conversion rights, redemption rights and any liquidation preferences. In
this regard, the Board may issue preferred stock with voting and conversion
rights that could adversely affect the voting power of the holders of common
stock, and dividend or liquidation preferences that would restrict common stock
dividends or adversely affect the assets available for distribution to holders
of shares of common stock in the event of our dissolution.
AUTHORIZED BUT UNISSUED SHARES
Authorized but unissued shares of common stock or preferred stock can be
reserved for issuance by the Board of Directors from time to time, without
stockholder action, for stock dividends or stock splits, to raise equity capital
and to structure future corporate transactions, including acquisitions, as well
as for other proper corporate purposes. Stockholders have no preemptive rights.
DELAWARE LAW AND CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION
We are a Delaware corporation and are governed by the Delaware General
Corporation Law, in addition to our Certificate of Incorporation and Bylaws,
certain provisions of which are summarized below. You should read the actual
provisions of these documents.
Section 203 of the Delaware law provides that an "Interested Stockholder,"
which is generally defined to mean any beneficial owner of 15% to 85% of the
corporation's voting stock, may not engage in any "business combination" with
the corporation for a period of three years after the date on which the person
became an Interested Stockholder, unless:
- prior to such date, the corporation's board of directors approved either
the business combination or the transaction in which the stockholder
became an Interested Stockholder; or
- subsequent to such date, the business combination is approved by the
corporation's board of directors and authorized at a stockholders'
meeting by a vote of at least two-thirds of the corporation's outstanding
voting stock not owned by the Interested Stockholder.
Section 203 defines the term "business combination" to include mergers,
asset sales and other transactions resulting in a financial benefit to the
Interested Stockholder.
The provisions of Section 203, combined with the Board of Directors'
authority to issue preferred stock without further stockholder action, could
delay or frustrate a change in control or discourage, impede or prevent a
merger, tender offer or proxy contest involving us, even if such an event would
be favorable to the interests of our stockholders. Our stockholders, by adopting
an amendment to the Certificate of Incorporation, may elect not to be governed
by Section 203. Such an election would be effective 12 months after its
adoption.
35
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Certificate of Incorporation provides that our directors are not liable
for monetary damages for breaches of their fiduciary duty as directors, unless
they violated their duty of loyalty to us or our stockholders, acted in bad
faith, knowingly or intentionally violated the law, authorized illegal dividends
or redemptions or derived an improper personal benefit from their action as
directors.
In addition, our Bylaws provide for indemnification of each officer and
director to the fullest extent permitted by Delaware law. Section 145 of the
Delaware General Corporation Law grants us the power to indemnify each officer
and director against liabilities and expenses incurred by reason of the fact
that he is or was an officer or director if the individual (1) acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the company, and (2) with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was unlawful.
We have also purchased directors' and officers' liability insurance.
Section 145 of the Delaware General Corporation Law allows us to purchase such
insurance whether or not we would have the power to indemnify an officer or
director under the provisions of Section 145.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers or controlling persons pursuant to
the foregoing provisions, we have been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
PLAN OF DISTRIBUTION
We may sell the securities to or through underwriters or dealers, and we
also may sell the securities directly to other purchasers, including issuing
common stock to holders that exercise currently outstanding warrants to purchase
our common stock, or through agents or through a combination of any of these
methods. We may also issue shares of our common stock directly to certain
persons in order to settle litigation and other claims or to satisfy judgments
or arbitration awards. The prospectus supplement will include the following
information:
- the terms of the offering;
- the names of any underwriters, dealers or agents, and the respective
amounts of securities underwritten or purchased by each of them;
- the name or names of any managing underwriter or underwriters;
- the net proceeds to us from the sale of securities;
- any delayed delivery requirements;
- any underwriting discounts, commissions and other items constituting
underwriters' compensation;
- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to dealers; and
- any commissions paid to agents.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
In connection with the sale of the securities, underwriters may receive
compensation from us, or purchasers of securities for whom they may act as
agents in the form of discounts, concessions or commissions. Underwriters,
dealers and agents that participate in the distribution of securities may be
deemed to be underwriters, and any discounts or commissions they receive from us
or the purchasers of securities, and any profit on their resale of securities
may be deemed to be underwriting discounts and
36
commissions under the Securities Act. We will identify any person deemed to be
an underwriter and will describe the compensation they receive from us in a
prospectus supplement.
Debt securities, when first issued, will have no established trading
market. If we sell debt securities to or through any underwriters or agents for
public offering and sale, they may make a market in those debt securities. This
may include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, which means that selling concessions
allowed to syndicate members or other broker-dealers for the offered securities
sold for their account may be reclaimed by the syndicate if the offered
securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the offered securities, which may be higher than the price that
might otherwise prevail in the open market. However, the underwriters or agents
will not be obligated to make a market in our securities and may discontinue any
market making at any time without notice. There can be no assurance as to the
liquidity of any market that may develop for the debt securities.
We may enter into agreements with underwriters, dealers and agents who
participate in the distribution of securities that could entitle them to
indemnification by us against or contribution from us toward certain
liabilities, including liabilities under the Securities Act. Underwriters,
dealers and agents may be customers of, engage in transactions with, or perform
services for us in the ordinary course of their businesses.
DELAYED DELIVERY ARRANGEMENT
If so indicated in a prospectus supplement, we will authorize underwriters
or other persons acting as our agents to solicit offers by certain institutions
to purchase debt securities from us pursuant to contracts providing for payment
and delivery on a future date. Institutions with which such contracts may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but in
all cases will be subject to our approval. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the debt securities shall not at the time of delivery be prohibited under the
laws of any jurisdiction to which such purchaser is subject. The underwriters
and such agents will not be responsible for the validity or performance of those
contracts.
VALIDITY OF SECURITIES
The validity of the securities has been passed upon for us by Baker Botts
L.L.P., and certain legal matters will be passed upon for any agents, dealers or
underwriters, by counsel named in the applicable prospectus supplement.
EXPERTS
The audited consolidated financial statements as of December 31, 1999, 2000
and 2001 and the three year period ended December 31, 2001 appearing in Waste
Management's Annual Report on Form 10-K for the year ended December 31, 2001
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 report in
reliance upon Rule 437a of the Securities Act. 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.
37
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company in
connection with the issuance and distribution of the securities, other than
underwriting discounts and commissions. All the amounts shown are estimates,
except the registration fee.
Registration Fee............................................ $ 0
Fees and expenses of accountants............................ 100,000
Fees and expenses of legal counsel.......................... 100,000
Fees and expenses of trustee and counsel.................... 50,000
Fees of rating agencies..................................... 75,000
Printing and engraving expenses............................. 180,000
Blue Sky fees and expenses (including counsel).............. 20,000
Miscellaneous............................................... 25,000
--------
Total....................................................... $550,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the corporation of stock or any
transaction from which the director derived an improper personal benefit. Both
Waste Management and Waste Management Holdings' Certificates of Incorporation
provide that their directors are not liable to them or their stockholders for
monetary damages for breach of their fiduciary duty, subject to the described
exceptions specified by Delaware law.
Section 145 of the Delaware General Corporation Law grants companies the
power to indemnify each of their officers and directors against liabilities and
expenses incurred by reason of the fact that he is or was an officer or director
of the company if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the company and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The Bylaws of both Waste Management and Waste Management
Holdings provide for indemnification of each of each of its officers and
directors to the fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law also empowers companies
to purchase and maintain insurance on behalf of any person who is or was an
officer or director of the company against liability asserted against or
incurred by him in any such capacity, whether or not the company would have the
power to indemnify such officer or director against such liability under the
provisions of Section 145. Waste Management has purchased and maintains a
directors' and officers' liability policy for such purposes.
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ITEM 16. EXHIBITS
The following documents are filed as exhibits to this Registration
Statement, including those exhibits incorporated herein by reference to a prior
filing under the Securities Act or the Exchange Act as indicated in parentheses:
EXHIBIT
NUMBER EXHIBIT
------- -------
1.1* -- Form of Underwriting Agreement (Debt Securities).
1.2* -- Form of Underwriting Agreement (Common Stock).
3.1 -- Second Amended and Restated Certificate of Incorporation of
Waste Management, Inc. (incorporated by reference to Exhibit
3.1 to Waste Management, Inc.'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, Inc.'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 -- Indenture for senior debt securities dated September 10,
1997, among Waste Management, Inc. and Texas Commerce Bank
National Association, now known as JPMorgan Chase Bank, as
trustee (incorporated by reference to Exhibit 4.1 to Waste
Management, Inc.'s Current Report on Form 8-K filed with the
Commission on September 24, 1997).
4.2 -- Subordinated Indenture, dated as of February 1, 1997, among
Waste Management, Inc. and Texas Commerce Bank National
Association, now known as JPMorgan Chase Bank, as trustee
(incorporated by reference to Exhibit 4.1 to Waste
Management, Inc.'s Current Report on Form 8-K filed with the
Commission on February 7, 1997).
4.3* -- Form of Debt Securities.
4.4 -- Form of Guarantee Agreement.
4.5 -- Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to Waste Management, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1998).
5.1 -- Opinion of Baker Botts L.L.P. as to the legality of the
Securities being registered.
12.1 -- Computation of ratios of earnings to fixed charges.
23.1 -- Consent of Baker Botts L.L.P. (included in Exhibit 5.1).
24.1 -- Powers of Attorney (included on signature page herewith).
25.1 -- Statement of Eligibility of Trustee with respect to Senior
Debt Indenture.
25.2 -- Statement of Eligibility of Trustee with respect to
Subordinated Debt Indenture.
---------------
* We will file any underwriting agreement relating to debt securities or common
stock that we may enter into and any form of debt securities not previously
filed by amendment to this Registration Statement or as an exhibit to a
Current Report on Form 8-K.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) 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
II-2
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 (a)(1)(i) and (a)(1)(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.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The registration hereby undertakes 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 Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to any charter provision, by-law, contract, arrangement,
statute, or otherwise, the registrants have been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a 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 against the registrants by such director, officer or
controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas on the 5th day of August,
2002.
WASTE MANAGEMENT, INC.
By: /s/ A. MAURICE MYERS
------------------------------------
Name: A. Maurice Myers
Title: President, Chief Executive
Officer and Chairman of
the Board
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints A. Maurice Myers, William L. Trubeck and David P.
Steiner and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign, execute and file this registration
statement under the Securities Act and any and all amendments (including,
without limitation, post-effective amendments and any amendment or amendments or
additional registration statements filed pursuant to Rule 462 under the
Securities Act increasing the amount of securities for which registration is
being sought) to this registration statement, and to file the same, with all
exhibits thereto, and all other documents necessary or advisable to comply with
the applicable state securities laws, and to file the same, together with other
documents in connection therewith, with the appropriate state securities
authorities, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 5th day of August, 2002.
SIGNATURE TITLE
--------- -----
/s/ A. MAURICE MYERS President, Chief Executive Officer, Chairman of the
------------------------------------------------ Board and Director (Principal Executive Officer)
A. Maurice Myers
/s/ WILLIAM L. TRUBECK Executive Vice President and Chief Administrative
------------------------------------------------ Officer (Principal Financial Officer)
William L. Trubeck
/s/ ROBERT G. SIMPSON Vice President and Chief Accounting Officer
------------------------------------------------ (Principal Accounting Officer)
Robert G. Simpson
/s/ H. JESSE ARNELLE Director
------------------------------------------------
H. Jesse Arnelle
/s/ PASTORA SAN JUAN CAFFERTY Director
------------------------------------------------
Pastora San Juan Cafferty
II-4
SIGNATURE TITLE
--------- -----
/s/ ROBERT S. MILLER Director
------------------------------------------------
Robert S. Miller
/s/ JOHN C. POPE Director
------------------------------------------------
John C. Pope
/s/ STEVEN G. ROTHMEIER Director
------------------------------------------------
Steven G. Rothmeier
/s/ CARL W. VOGT Director
------------------------------------------------
Carl W. Vogt
/s/ RALPH V. WHITWORTH Director
------------------------------------------------
Ralph V. Whitworth
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
WASTE MANAGEMENT HOLDINGS, INC.
Date: August 5, 2002 By: /s/ DAVID P. STEINER
------------------------------------
David P. Steiner
Vice President, Secretary and Sole
Director
II-6
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
------- -------
1.1* -- Form of Underwriting Agreement (Debt Securities).
1.2* -- Form of Underwriting Agreement (Common Stock).
3.1 -- Second Amended and Restated Certificate of Incorporation of
Waste Management, Inc. (incorporated by reference to Exhibit
3.1 to Waste Management, Inc.'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, Inc.'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 -- Indenture for senior debt securities dated September 10,
1997, among Waste Management, Inc. and Texas Commerce Bank
National Association, now known as JPMorgan Chase Bank, as
trustee (incorporated by reference to Exhibit 4.1 to Waste
Management, Inc.'s Current Report on Form 8-K filed with the
Commission on September 24, 1997).
4.2 -- Subordinated Indenture, dated as of February 1, 1997, among
Waste Management, Inc. and Texas Commerce Bank National
Association, now known as JPMorgan Chase Bank, as trustee
(incorporated by reference to Exhibit 4.1 to Waste
Management, Inc.'s Current Report on Form 8-K filed with the
Commission on February 7, 1997).
4.3* -- Form of Debt Securities.
4.4 -- Form of Guarantee Agreement.
4.5 -- Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to Waste Management, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1998).
5.1 -- Opinion of Baker Botts L.L.P. as to the legality of the
Securities being registered.
12.1 -- Computation of ratios of earnings to fixed charges.
23.1 -- Consent of Baker Botts L.L.P. (included in Exhibit 5.1).
24.1 -- Powers of Attorney (included on signature page herewith).
25.1 -- Statement of Eligibility of Trustee with respect to Senior
Debt Indenture.
25.2 -- Statement of Eligibility of Trustee with respect to
Subordinated Debt Indenture.
---------------
* We will file any underwriting agreement relating to debt securities or common
stock that we may enter into and any form of debt securities not previously
filed by amendment to this Registration Statement or as an exhibit to a
Current Report on Form 8-K.