-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LZJwN9rWyLwZAIwf/6hvB9eA9PRvBOP8LkTicGpdp8+UAal1ZALckv16r/pw77VQ aQet5PB7I6DNuaBp9f91bg== 0000950131-94-000428.txt : 19940330 0000950131-94-000428.hdr.sgml : 19940330 ACCESSION NUMBER: 0000950131-94-000428 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHEELABRATOR TECHNOLOGIES INC /DE/ CENTRAL INDEX KEY: 0000790159 STANDARD INDUSTRIAL CLASSIFICATION: 3728 IRS NUMBER: 222678047 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-10296 FILM NUMBER: 94518624 BUSINESS ADDRESS: STREET 1: 3003 BUTTERFIELD ROAD CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 6039293000 MAIL ADDRESS: STREET 1: 3003 BUTTERFIELD ROAD CITY: OAK BROOK STATE: IL ZIP: 60521 FORMER COMPANY: FORMER CONFORMED NAME: WHEELABRATOR GROUP INC DATE OF NAME CHANGE: 19890904 FORMER COMPANY: FORMER CONFORMED NAME: HENLEY GROUP INC DATE OF NAME CHANGE: 19890118 10-K 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K --------------- (MARK ONE) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 0-14246 WHEELABRATOR TECHNOLOGIES INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 22-2678047 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) LIBERTY LANE HAMPTON, NEW HAMPSHIRE 03842 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 603/929-3000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered ------------------- --------------------- Common Stock, $0.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K . [X] THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY STOCKHOLDERS WHO WERE NOT AFFILIATES (AS DEFINED BY REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION) OF THE REGISTRANT WAS APPROXIMATELY $1,593,000,000 AT FEBRUARY 1, 1994 (BASED ON THE CLOSING SALE PRICE ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON JANUARY 31, 1994, AS REPORTED BY THE WALL STREET JOURNAL (MIDWEST EDITION)). AT MARCH 1, 1994, THE REGISTRANT HAD ISSUED AND OUTSTANDING AN AGGREGATE OF 188,897,599 SHARES OF ITS COMMON STOCK. DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1993 ARE INCORPORATED BY REFERENCE INTO PARTS II AND IV. PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 5, 1994 ARE INCORPORATED BY REFERENCE INTO PART III. ================================================================================ PART I ITEM 1 -- BUSINESS GENERAL Wheelabrator Technologies Inc. provides a wide array of environmental products and services in North America and abroad through three principal business lines. The Company's energy group ("Wheelabrator Clean Energy") is a leading developer of facilities and systems for, and provider of services to, the trash-to-energy, energy and independent power markets. Through the subsidiaries comprising Wheelabrator Clean Energy, the Company develops, arranges financing for, operates and owns facilities that dispose of trash and other waste materials in an environmentally acceptable manner by recycling it into energy in the form of electricity and steam. The Company's water group ("Wheelabrator Clean Water") is comprised of several subsidiaries principally involved in the design, manufacture and operation of facilities and systems used to purify water, to treat municipal and industrial wastewater, to treat and manage biosolids resulting from the treatment of wastewater by converting them into useful fertilizers, and to recycle organic wastes into compost material useable for horticultural and agricultural purposes. Wheelabrator Clean Water also designs and manufactures various products and systems used in water and wastewater treatment facilities and industrial facilities, precision profile wire screens for use in groundwater wells and other industrial applications, and certain other industrial equipment. The Company's air group ("Wheelabrator Clean Air") designs, fabricates and installs technologically-advanced air pollution emission control and measurement systems and equipment, including systems which remove pollutants from the emissions of the Company's trash-to-energy facilities as well as power plants and other industrial facilities. Through its subsidiaries, Wheelabrator Clean Air also provides technologies and systems designed to treat air streams which contain nitrogen oxide ("NOx") and volatile organic compounds ("VOCs"), the major contributors to the creation of smog. The majority of the businesses of the Company have been managed together as a group since the early 1980s. The Company's predecessor companies and subsidiaries have been active in project development for approximately 20 years, and in related activities since the turn of the century. Unless the context indicates to the contrary, as used in this report, the terms "Company" and "WTI" refer to Wheelabrator Technologies Inc. and its subsidiaries. Unless otherwise indicated, all statistical and financial information under Item 1 and Item 2 of this report is given as of December 31, 1993. The Company (then known as The Henley Group, Inc.) was incorporated in Delaware in December 1985. The name of the Company was changed in December 1988 to The Wheelabrator Group Inc. and again in August 1989 to Wheelabrator Technologies Inc. Approximately 55% of the Company's common stock, par value $0.01 per share (the "Common Stock"), outstanding as of March 1, 1994 was owned by WMX Technologies, Inc. ("WMX") or its affiliates. All Common Stock share and per share figures have been adjusted to reflect the two-for-one stock split in the form of a 100% stock dividend distributed in January 1993. 1 ORGANIZATION OF RUST INTERNATIONAL INC. On December 31, 1992, WTI entered into an Organizational Agreement (the "Organizational Agreement") with Chemical Waste Management, Inc., an approximately 79%-owned subsidiary of WMX ("CWM"), and The Brand Companies, Inc., which as of that date was an approximately 56%-owned subsidiary of CWM ("Brand"), pursuant to which WTI and CWM agreed to organize Rust International Inc. ("Rust") and to acquire newly issued shares of Rust in exchange for contributing certain of their respective businesses and assets to Rust. Pursuant to the Organizational Agreement, on January 1, 1993 WTI contributed 100% of the stock of its engineering, design, construction and environmental consulting subsidiaries, 100% of the stock of its international engineering unit based in London, certain disposal credits for use at facilities owned or operated by subsidiaries of WMX (see "Patents, Trademarks, Licenses and Other Agreements"), and cash, prefunded acquisition costs and promissory notes having an aggregate value of approximately $68 million. CWM contributed its hazardous substances remediation services business and all of its shares of Brand, as well as its 12% interest in the ordinary shares of Waste Management International plc ("WM International") and approximately $141 million in indebtedness due to CWM from Brand. On May 7, 1993, Brand merged into a subsidiary of Rust. Pursuant to such merger, Brand stockholders (other than Rust) received one share of common stock of Rust or, at the option of each Brand stockholder, $18.75 in cash for each share of Brand common stock. As a result of such merger, Rust is owned approximately 40% by WTI, 56% by CWM, and 4% by public stockholders. Through its equity ownership of Rust, the Company will continue to have an interest in that company's engineering, construction and environmental and infrastructure consulting businesses, as well as the hazardous substance remediation and other on-site industrial and related businesses operated by Rust. The business of Rust is discussed below under "Equity Investments--Rust International Inc." The organization of Rust had no effect on the Company's 1992 and prior historical financial statements. The Company accounts for its investment in Rust using the equity method, which results in a reduction of revenue, operating expenses and selling and administrative costs for 1993 compared to prior years. SERVICES AND PRODUCTS Prior to January 1, 1993, the Company's operations were categorized into two business segments -environmental operations and environmental and infrastructure engineering services. Environmental operations accounted for 66% of the Company's total consolidated revenue in 1991, 63% in 1992 and 100% in 1993. Environmental and infrastructure engineering services accounted for 34% of the Company's total consolidated revenue in 1991 and 37% in 1992. The operations which comprised the environmental and infrastructure engineering services were contributed to Rust on January 1, 1993. Thus, the Company did not realize any revenue from such operations in 1993. See "Equity Investments--Rust International Inc." For information relating to revenues, operating profit and identifiable assets attributable to the Company's segments, see Note 9 to the Company's Consolidated Financial Statements incorporated by reference into this part. For 1993, the Company reports in a single segment with three lines of business: Wheelabrator Clean Energy, Wheelabrator Clean Water and Wheelabrator Clean Air. Wheelabrator Clean Energy The Company, through Wheelabrator Environmental Systems Inc. and its subsidiaries, is a leading developer, operator and owner of trash-to-energy and independent power facilities in the United States. These facilities, either owned, operated or under construction, give WTI approximately 854 megawatts of electric generating capacity, which ranks it among the nation's largest independent power producers. WTI's 2 trash-to-energy projects utilize proven boiler and grate technology capable of processing up to 3,000 tons of trash per day per facility. The heat from this combustion process is converted into high-pressure steam, which typically is used to generate electricity for sale to public utility companies under long- term contracts. WTI's trash-to-energy development activities involve a number of contractual arrangements with a variety of private and public entities, including municipalities (which supply trash for combustion), utilities or other power users (which purchase the energy produced by the facility), lenders, public debtholders, joint venture partners and equity investors (which provide financing for the project) and the contractors or subcontractors responsible for building the facility. In addition, the Company often identifies and acquires sites for the facility and for the disposal of residual ash produced by the facility and obtains necessary permits and licenses from local, state and federal regulatory authorities. The Company also develops, operates and, in some cases, owns independent power projects, which either cogenerate electricity and thermal energy or generate electricity alone for sale to utilities. Cogeneration is a technology which allows the consecutive use of two or more useful forms of energy from a single primary fuel source, thus providing a more efficient use of a fuel's total energy content. These power systems use waste wood, waste tires, waste coal or natural gas as fuel, and employ state-of-the-art technology, such as fluidized-bed combustion, to insure the efficient burning of fuel with reduced emission levels. One of the most significant costs of developing and operating the Company's energy and biosolids projects may be debt service or lease rentals payable in connection with financing for the project. See "Wheelabrator Clean Water." Financing structures vary substantially from transaction to transaction. The amount of annual financing cost is directly related to the capital cost of the facility, which may vary greatly from plant to plant, even with regard to similarly sized plants, due to a number of factors. These include the type of technology utilized, the amount of site preparation required and, where applicable, the form of energy generated and the proximity to the energy delivery point. For a description of some of the methods used to finance WTI's facilities, see "Financing Capabilities and Funding Support Agreements." A description of Wheelabrator Clean Energy projects in operation or under construction which are owned, leased or operated under long-term operating agreements by the Company's subsidiaries or affiliates is contained in Item 2 -- Properties. In addition to the projects described in Item 2, the Company has a number of projects in development that, in most cases, are subject to contingencies, many of which are beyond WTI's control. Such contingencies include, without limitation, obtaining required permits or approvals, obtaining equity and/or debt financing and consummating required project agreements. Wheelabrator Clean Water Through Wheelabrator Clean Water, the Company develops projects that purify water, treat wastewater, treat and manage biosolids, and compost organic wastes. The Company also provides technologies and services used to treat drinking water as well as industrial and municipal process and wastewater. The Company offers generators of biosolids, consisting of the non-hazardous sludges resulting from treatment of industrial and municipal wastewater, alternatives to landfilling or ocean dumping. Wheelabrator Clean Water provides a range of biosolids management services to over 400 communities, including land application, drying, pelletizing, stabilization and composting of non-hazardous biosolids. See "Regulations--Environmental Regulations." Wheelabrator Clean Water typically enters into multi-year contracts with biosolids generators under which the Company is paid by the generator to beneficially use the biosolids. Regulations 3 governing sludge management were issued by the Environmental Protection Agency ("EPA") in December 1992 under the Clean Water Act. The regulations encourage the beneficial use of municipal sewage sludge by recognizing the resource value of biosolids as a fertilizer and soil conditioner, and establish requirements for land application designed to protect health and the environment. These new regulations are expected to expand opportunities available to the Company. Land application involves the application of non-hazardous biosolids as a natural fertilizer on farmland pursuant to rigorous site-specific permits issued by applicable state authorities. Biosolids are also used in land-reclamation projects such as strip mines. Land-applied sludges are often stabilized prior to application using proprietary technology. Wheelabrator Clean Water also develops and operates facilities at which biosolids are dried and pelletized. The Company has three facilities currently in operation, including a recently completed facility in New York City, and two other facilities, one under construction and the other in the late stages of development, in Baltimore, Maryland. These facilities incorporate a variety of biosolids drying and emission control technologies, some proprietary and some licensed to the Company under exclusive licensing arrangements. See "Patents, Trademarks, Licenses and Other Agreements." The Company has approximately 565 dry-tons-per-day of biosolids drying capacity either in operation, under construction or in advanced stages of development. Biosolids which have been dried are generally used as fertilizer by farmers, commercial landscapers and nurseries and as a bulking agent by fertilizer manufacturers. Development of dryer facilities generally involves various contractual arrangements with a variety of private and public entities, including municipalities (which generate the biosolids), lenders, contractors and subcontractors which build the facilities, and end-users of the fertilizer generated from the treatment process. See "Financing Capabilities and Funding Support Agreements." A description of dryer projects in operation or under construction which are owned or operated by Wheelabrator Clean Water under long- term operating agreements is contained in Item 2 -- Properties. Wheelabrator Clean Water is also a leading provider of a comprehensive range of water and wastewater treatment services to municipalities throughout the United States. The Company provides services pursuant to approximately 30 contracts, including water and wastewater treatment plant start-up assistance, plant operations and maintenance, planning and management, training of plant supervisors, operators and laboratory and maintenance personnel, refining process systems, management systems for process control, and plant diagnostic evaluations and energy audits. During 1993, Wheelabrator Clean Water geographically expanded its operations by obtaining contracts to operate two industrial wastewater treatment facilities in Canada. Plant maintenance and operation agreements generally range in length from 3 to 10 years and often provide the owner of the facility with renewal options. The majority of the contracts are fixed price or lump sum contracts. During 1993, the Company continued negotiations with a municipality towards the privatization of a publicly-owned water and wastewater treatment system pursuant to an Executive Order issued in 1992 intended to facilitate the privatization of municipally- owned facilities. In addition, during 1993 the Company commenced negotiations with several industrial concerns towards the development, ownership and operation of wastewater treatment facilities adjacent to existing industrial facilities. Because development of such facilities will generally involve a variety of contractual arrangements, as with development of the Company's other projects, there can be no assurance that such discussions will result in the development of any such facilities. Wheelabrator Clean Water also designs and supplies enclosed automated composting systems which recycle organic wastes into beneficial products which are used by commercial landscapers, nurseries and fertilizer manufacturers. These composting systems, which consist of a series of parallel concrete bays through which organic waste is advanced and agitated during the composting process, are sold to municipalities and landfill 4 operators, among others. The Company has provided its proprietary and automated in-vessel composting technology to 17 facilities in operation, eight more under construction, and three additional facilities in development that it will own and operate. Through its Wheelabrator Engineered Systems Inc. subsidiary ("WES"), Wheelabrator Clean Water engineers and manufactures a variety of environmental products and systems. WES provides single-source, advanced-systems solutions related to drinking water, industrial process water, wastewater, slurry pumping and high solids dewatering. WES also provides systems designed to remove solids from liquid streams through the use of self-cleaning bar/filter screens, grinders, macerators, conveyors and compactor systems. WES provides high technology water purification and wastewater treatment systems which utilize a variety of technologies including demineralizers, reverse osmosis and vacuum degasification. WES also designs and installs process technology systems utilizing evaporators, crystallizers, electrodialysis, dialysis, reverse osmosis and ultrafiltration for treating industrial process wastewater. Through its Johnson Screen unit, WES produces profile wire screen products for groundwater production, hydrocarbon processing, food processing and coal/mineral processing. The Company's engineered products are provided to municipal and industrial customers. In most situations, the Company will provide assistance to help the end-user select the appropriate technology for a given application. Turnkey systems provided by the Company range in value from $250,000 to over $30 million, and are typically designed and installed within 12 months following acceptance of a customer order. On such projects, the Company typically enters into lump-sum contracts under which the Company receives payments throughout the contract term based upon a predetermined schedule. The Company also manufactures Wheelabrator machines, a line of nonpolluting materials cleaning equipment for use by a variety of industrial customers, including foundries, steel processors, automobile producers and rubber and plastics producers, in cleaning and finishing metal and other materials. The Company manufactures portable, fully-enclosed Wheelabrator systems for cleaning surfaces such as ship decks and hulls and other difficult-to-clean surfaces. These systems capture the emissions particulate generated by such operations, preventing contamination of the environment. In addition, spare parts for materials cleaning systems are produced. The Company also manufactures high- alloy combustion grates used in the high-temperature furnaces of its trash-to- energy facilities. Wheelabrator Clean Air Wheelabrator Clean Air designs, fabricates and installs advanced air pollution emission control and measurement technologies. The Company offers electrostatic precipitators, flue-gas desulfurization systems (scrubbers), fabric-filter systems (baghouses) and Nox control systems, which remove pollutants from the emissions of WTI's trash-to-energy facilities, as well as power plants and other industrial facilities. Wheelabrator Clean Air also designs and constructs tall concrete chimneys and silos to help utilities and industrial companies meet environmental requirements. The Company's expertise in air pollution control technologies and chimney design and construction, as well as the expertise in mechanical construction and process engineering of the Company's Rust affiliate, are used in the design and construction of the Company's trash-to-energy and biosolids facilities. These capabilities strengthen WTI's competitive position, while reducing its exposure to risk in the management of large-scale projects, by providing greater ability to ensure quality control and timely completion. 5 Wheelabrator Clean Air's activities involve both custom and pre-engineered systems for emissions control. The custom engineering division licenses a patented process for the removal of hydrogen sulfide from gaseous and liquid streams. The process prevents the formation of sulfur dioxide emissions, thereby controlling acid rain and odor problems. Wheelabrator Clean Air also provides a full range of technologies and services for destroying or recycling VOCs from air and liquid sources and Nox from air sources. Both VOCs and Nox are major contributors to the creation of smog. The Company's VOC and Nox control systems are utilized by customers in a variety of industries, including oil refineries, chemical plants and automobile production facilities. Complementing the emission control divisions is a measurement division which designs and installs continuous emissions monitoring systems ("CEMs") for the utility, waste-to- energy, industrial furnace and petrochemical industries, all of which are affected by regulations requiring the continuous monitoring of stack emissions. WTI anticipates that the Clean Air Act Amendments of 1990, along with existing and proposed regulations issued thereunder, will generate additional business opportunities to apply its expertise in VOC and Nox control systems and scrubbers, as well as additional applications for CEMs. Pursuant to the Clean Air Act Amendments, the EPA has issued a list of hazardous chemicals, over half of which are VOCs requiring the implementation of maximum available control technology ("MACT") to limit emissions. The existing MACT rules, as well as those in development for specific industries, will require compliance from both new and existing VOC emissions sources. The "acid rain" provisions of the Clean Air Act Amendments require additional controls for Nox emissions from a variety of sources. See "Regulations--Environmental Regulations." REGULATIONS Environmental Regulations The Company's business has benefitted in general from increased governmental regulation relating to solid waste, wastewater, air pollution and other environmental concerns, including increasingly stringent air and water quality regulations (which in turn benefit its air pollution control and water and biosolids treatment businesses). WTI's own business activities are also subject to environmental regulation under the same federal, state and local laws and regulations which apply to the Company's customers, including the Clean Air Act, the Clean Water Act, and the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"). WTI believes that it conducts its businesses in an environmentally responsible manner and believes itself to be in material compliance with applicable laws and regulations. WTI does not anticipate that maintaining compliance with current requirements will result in any material decrease in earnings. There can be no assurance, however, that such requirements will not change so as to require significant additional expenditures. In particular, pursuant to the Clean Air Act Amendments it is probable that the air pollution control systems at certain trash-to-energy projects owned or operated by the Company's subsidiaries will be required to be modified by the end of the decade to comply with the more stringent regulations promulgated thereunder. The Company has already completed a retrofit of the air pollution control systems at its oldest trash-to-energy facility located in Saugus, Massachusetts. Although the expenditures related to such modifications, to the extent required, will likely be significant, they are not expected to have a material adverse effect on the Company's liquidity or results of operations. WTI frequently obtains the right to pass on to the long-term contract users of its trash-to-energy facilities increased capital and operating costs resulting from changes in law. There can be no assurance, however, that in such event WTI would be able to recover, for each project, all such increased costs from its customers. Moreover, it is possible that future developments, such as increasingly strict requirements of environmental laws and enforcement policies thereunder, could affect the manner in which WTI operates its projects and conducts its business, including the handling, processing or disposal of the wastes, 6 by-products and residues generated thereby. See Item 3 -- Legal Proceedings - Regulatory. Regulations issued by the EPA in December 1992 under the Clean Water Act may affect the Company's ability to market pellets derived from its drying and pelletizing facilities as fertilizer without first obtaining additional permits for their use. The Company anticipates that the EPA may suspend enforcement of certain provisions of such regulations for a period of three years pending additional study. The Company does not believe, however, that implementation of these regulations in their original form would have a material adverse effect on the Company's operations or financial position. During 1992, the U.S. Court of Appeals for the Seventh Circuit issued a ruling in a case in which the Company was not a party, finding that the ash generated by a trash-to-energy facility could be subject to regulation as a hazardous waste. The Seventh Circuit decision was contrary to an earlier decision issued by the U.S. Court of Appeals for the Second Circuit, upholding a District Court determination in a case involving a subsidiary of the Company. In that case, the Court determined that the residual ash generated at the Company's facility is not subject to regulation as a hazardous waste within the provisions of RCRA. In late 1992, the Supreme Court vacated the Seventh Circuit decision and ordered the Seventh Circuit to reconsider the case in light of an EPA interpretation of RCRA stating that ash from trash-to-energy facilities is not subject to regulation as a hazardous waste. Upon reconsideration, the Seventh Circuit reaffirmed its original decision. The parties each filed a writ of certiorari with the U.S. Supreme Court. The Court granted the writs and heard oral arguments in the case in January 1994. A decision is pending. WTI does not believe that a decision upholding the Seventh Circuit's earlier ruling would adversely affect the Company in any material manner, primarily because of the patented Wes-Phix(R) technology utilized by the Company. Wes-Phix(R) immobilizes certain constituents in the ash which thereby enables it to be disposed of as non-hazardous waste. Any such development could, however, require significant additional expenditures to achieve compliance with such requirements or policies. There can be no assurance that, in such event, the Company would be able to recover all such costs from its customers. Public Utility Regulatory Policies Act Wheelabrator Clean Energy's business is subject to the provisions of various energy-related laws and regulations, including the Public Utility Regulatory Policies Act of 1978 ("PURPA"). The ability of WTI's trash-to-energy and small power production facilities to sell power to electric utilities on advantageous terms and conditions and to avoid burdensome public utility regulation depends, in part, upon the continuance in effect of PURPA, which generally exempts WTI from state and federal regulatory control over electricity prices charged by, and the finances of, WTI and its energy producing subsidiaries. While most of WTI's existing projects sell electricity pursuant to long-term contracts or rate orders, which management believes would not be affected by the repeal or modification of PURPA, the future growth of the Company's trash-to-energy and other small power production facilities business and the legal status of its existing projects could be materially and adversely affected if the various benefits of PURPA were repealed or substantially reduced. COMPETITION WTI experiences substantial competition in all aspects of its business. It competes with a number of firms, both nationally and internationally, some of which may have greater financial and technical resources than WTI. The principal competitive factors with respect to its Wheelabrator Clean Water and Wheelabrator Clean Energy project development activities include technological performance, service, technical know-how, price and performance guarantees. Competing for selection as a project developer may require commitment of substantial resources over a long period of time, without any certainty of being ultimately selected. Competition for 7 attractive development opportunities is intense, as there are a number of competitors in the trash-to-energy, biosolids management and water and wastewater treatment industries interested in such opportunities. The Company believes that its comprehensive project development capabilities, operating experience, financing capabilities and, through its affiliation with Rust, engineering and turnkey construction experience, will enable it to continue to compete effectively. In the air pollution control business, the Company competes with a relatively small group of large national and international firms. The primary competitive factors in the air pollution control industry are price, technological capabilities and service. In its biosolids handling and treatment and composting businesses, the Company competes with several large national and regional firms and numerous competitors who provide service in local markets. In the biosolids and composting markets, the principal competitive factors are price, availability of sites for beneficial reuse of biosolids and technical experience. See "Patents, Trademarks, Licenses and Other Agreements." At the time of the 1990 merger between WTI and a subsidiary of WMX which resulted in WMX's acquisition of a controlling interest in the Company (the "1990 Merger"), the Company was granted an option to acquire an equity interest in WMX's international waste services operations, now conducted through WM International. In connection with the acquisition of an equity interest in WM International in 1991, the Company agreed that it would not conduct waste management services operations or engage in the operation and maintenance of water and wastewater treatment facilities outside of North America, other than through its ownership interest in WM International, until the later of (i) July 1, 2000 and (ii) the date on which WMX ceases to beneficially own a majority of the outstanding shares of Common Stock or a majority of all outstanding voting equity interests of WM International. In connection with the initial public offering of ordinary shares of WM International, the Company, WM International, CWM and WMX entered into an International Business Opportunities Agreement, which incorporates certain previously existing agreements among certain of the parties thereto which were made in connection with the 1990 Merger. The International Business Opportunities Agreement was amended and restated in connection with the organization of Rust, described above under "Organization of Rust International Inc.," and Rust became a party thereto. Under the Amended and Restated International Business Opportunities Agreement, the parties agreed that in order to minimize the potential for conflicts of interest among various subsidiaries under the common control of WMX, WMX has the right to direct business opportunities to the WMX controlled subsidiary which, in the reasonable and good faith judgment of WMX, has the most experience and expertise in the particular line of business involved. Opportunities in North America relating to (i) the manufacture or assembly of well screens, materials cleaning equipment, pumps and packaged water and wastewater treatment facilities; (ii) the operation and maintenance and, with respect to item (c) below, design, engineering and construction, of (a) municipal trash-to-energy facilities, (b) water, wastewater and sewage treatment facilities (excluding facilities designed to treat hazardous waste streams), (c) chimneys and air pollution control equipment and facilities, and (d) small power projects and independent power generation facilities (except for landfill gas recovery facilities which are covered under the Intellectual Property Licensing Agreement described under "Patents, Trademarks, Licenses and Other Agreements"); and (iii) facilities which treat or otherwise stabilize ash residues from trash-to-energy facilities, have been allocated to the Company. The Agreement allocates certain business opportunities, some of which were previously allocated to WTI, to Rust in connection with the transfer (described above) of WTI's engineering, environmental consulting and construction businesses to Rust. 8 RESEARCH AND DEVELOPMENT The Company undertakes research and development in numerous areas of its operations, including energy generation, environmental control and the handling and recovery of waste materials and waste gases, water, wastewater and industrial process water technologies, and VOC catalyst and control technologies. WTI spent approximately $3.9 million, $2.6 million and $4.1 million on research and development during 1991, 1992 and 1993, respectively. In addition, WTI receives significant benefits from technological advances realized in connection with specific projects undertaken on its own behalf or under contracts with customers. Significant technological benefits are also realized through WTI's experience in operating its existing projects. PATENTS, TRADEMARKS, LICENSES AND OTHER AGREEMENTS The Company owns or licenses a number of patents and patent applications or other proprietary technology that are important to various aspects of its business. While certain of such licenses or patented technology may be material to the development of a given project, the Company believes that its overall business depends primarily on such factors as project development capability, engineering skill, and research and production techniques rather than on patent protection. Pursuant to a long-standing arrangement between WTI and von Roll Ltd. ("von Roll"), WTI has an exclusive license in the United States and Mexico to use certain combustion-grate technology owned by von Roll. WTI uses this technology in its trash-to-energy projects. The license agreement runs through December 31, 1995, subject to additional three-year-term renewals unless either party gives 12 months' written notice of termination to the other. Either party to the license agreement may also terminate the contract upon one year's written notice and payment of a termination fee. WTI has an agreement (the "Boiler Purchase Agreement") with Babcock & Wilcox Company ("B&W"), whereby B&W has agreed to provide, and WTI has agreed to purchase, certain boilers suitable for use in WTI's trash-to-energy facilities having a combustion capacity equal to or greater than 250 tons-per-day. In addition, B&W agrees to maintain the confidentiality of the Company's proprietary information incorporated in the boiler design, and not to use such information except for the purpose of manufacturing boilers for sale to WTI or its affiliates. The confidentiality provisions will survive the termination of the Boiler Purchase Agreement. The Boiler Purchase Agreement will remain in effect until June 30, 1994, subject to additional three-year term renewals unless either party gives 12 months written notice of termination to the other. Neither party has provided such notice. Accordingly, the Boiler Purchase Agreement will automatically renew as of July 1, 1994 for a three-year term ending June 30, 1997. The Company possesses foreign and domestic patents on various biosolids treatment processes. The Company has a license agreement with Seghers Engineering N.V. of Bruges, Belgium, granting Wheelabrator Clean Water the exclusive right to use and market the Seghers Zerofuel sludge incineration system, including the Seghodryer indirect multi-stage dryer for sludge, within the United States and Canada. The license agreement was renegotiated in April 1993 to remain in effect through the year 2011 provided that Wheelabrator Clean Water meets specified levels of equipment orders or makes certain minimum payments under the agreement. The new agreement also gives Wheelabrator Clean Water additional options with respect to pricing and manufacturing, and includes a future option allowing Wheelabrator Clean Water to acquire the unrestricted right to use the Seghers technology within the United States and Canada. In addition, Wheelabrator Clean Water holds several patents relating to the processing of biosolids through an indirect biosolids dryer system. 9 In 1988, the Company entered into a Land Option Agreement, amended as of June 1, 1992, with Waste Management of North America, Inc., now known as Waste Management, Inc. ("WMI"), a wholly-owned subsidiary of WMX, providing WTI with the right, subject to certain restrictions and payment of a $10 million option renewal fee after 10 years, to acquire or lease sites for future trash-to- energy, biosolids management, organic waste composting or, subject to certain pre-conditions, medical waste incineration and autoclave facilities at any of WMI's existing or future landfills in the United States and Canada. In addition, in 1988 the Company entered into an Airspace Dedication Agreement (the "ADA") with WMI permitting WTI, for a period ending August 12, 2008, and subject to certain conditions and restrictions, to reserve capacity at WMI landfills for the disposal of ash residue ("Ash Residue") from the Company's trash-to-energy facilities, to dispose of such residues and waste at such landfills for fees generally on terms at least as favorable as those charged to other customers, and granting disposal credits aggregating $70 million to be credited against future Ash Disposal fees (of which $30 million in disposal credits were transferred to Rust on January 1, 1993). In 1992, the ADA was amended and restated to expand the types of waste covered by the ADA to include non- hazardous biosolids, by-pass waste from facilities owned or operated by WTI and special wastes removed from third-party sites being remediated by WTI or any of its affiliates (the "Other Waste"). In addition, the definition of Ash Residue was expanded to include, under certain circumstances, ash residue from medical waste incineration facilities. As amended and restated, the ADA also provides for disposal credits to be applied against disposal fees paid by WTI and its subsidiaries under separately negotiated disposal arrangements with WMI. Under the ADA, as amended and restated, WTI may reserve not more than a total of 35% of the airspace available for the disposal of the type of waste proposed for disposal at any disposal site at a price-per-ton rate that will generally not be greater than the most favorable per ton price charged by the disposal site to customers other than WTI. In connection with the 1990 Merger, the predecessor of WM International, Waste Management International, Inc. ("WMII"), and WMI entered into an Intellectual Property Licensing Agreement with WTI. WM International has succeeded to the rights and obligations of WMII under the Intellectual Property Licensing Agreement as well as certain other agreements to which WTI and WMII were parties. Pursuant to the Intellectual Property Licensing Agreement: (i) WM International granted WTI a 10-year, non-exclusive, royalty-free license, with two successive 5-year renewal options, to the "BRINI" recycling and composting technology owned by WM International; (ii) WMI granted WTI a 10-year, non- exclusive, royalty-free license, with two successive 5-year renewal options, to the Recycle America(R) and Recycle Canada(R) trademarks and logos and the related materials separation and processing technology of WMI for use in conjunction with recycling operations at or adjacent to any WTI facility; (iii) WMI agreed to use reasonable efforts to enable WTI to sell recyclable materials to joint ventures or other markets developed by WMI; (iv) WMI agreed, to the extent consistent with its business plans, to use good faith efforts to develop its curbside recycling programs and free-standing recyclable materials recovery facilities to also support WTI facilities; (v) WTI agreed to designate WMI as the provider of recyclable collection services for WTI facilities to the extent possible, before offering such opportunity to any third party; (vi) WMI granted WTI a 10-year, non-exclusive, royalty-free license, with two successive 5-year renewal options, to all of WMI's proprietary technology and know-how in the area of landfill gas recovery and the conversion of such gas to energy (such license does not extend to the use by WTI of technology and know-how at sanitary landfill sites owned, operated or maintained by WMI or its subsidiaries and affiliates, other than WTI and its subsidiaries); and (vii) WMI agreed that only WTI, and not WMI, may develop the business of designing, constructing, operating and maintaining landfill gas recovery facilities for governmental, industrial and third party customers. To the extent WTI develops landfill gas recovery technology and know-how during the period of its license (and renewals) from WMI, it will share such technology and know-how with WMI on a similar royalty- free basis. WTI may waive its rights to develop landfill gas recovery systems on a case-by-case basis in those situations in which financial objectives specified by the Company's Board of 10 Directors can not be achieved by WTI through development of such projects. Projects waived by WTI may be developed by WMI. The licenses and related rights and obligations to conduct business granted under the Intellectual Property Licensing Agreement terminate, as to facilities not already operational, contractually committed or the subject of, or contemplated by, a bid or other submission previously made by the Company or WMI, as the case may be, at the earlier of the termination of the stated license periods, the expiration of any patent licensed under the agreement, or the date on which the Company is no longer a majority-owned subsidiary of WMX. WTI, WMX, CWM, Rust and WM International are also parties to a First Amended and Restated Master License Agreement which was modified on January 1, 1993 to add Rust as a party to the existing Master License Agreement originally entered into in connection with the public offering of ordinary shares of WM International. Under the Master License Agreement, as amended, each of WTI, WMX, Rust and CWM, on the one hand, and WM International, on the other, is granted the right to license, on a non-exclusive basis, certain proprietary rights of the other. The consideration for any such license will be based upon the fair market value of a license for the licensed technology at the time of grant, but may not exceed the most favorable price charged an unaffiliated licensee for a comparable license. BACKLOG WTI's backlog was $11.7 billion and $11.4 billion as of December 31, 1992 and 1993, respectively. WTI expects that approximately $912 million, or 8%, of the December 1993 backlog will be executed during 1994. Approximately $11.0 billion of this backlog relates to long-term contracts associated with trash-to- energy, cogeneration, biosolids drying and pelletizing and coal-handling services at facilities operated by WTI, of which approximately $589 million, or 5%, will be executed during 1994. Approximately $358 million of backlog at December 31, 1992 related to the businesses contributed by WTI to Rust on January 1, 1993. RAW MATERIALS Raw materials used by the Company, including fuel for its projects (such as trash, waste wood, waste tires, waste coal and natural gas) and construction materials, are generally readily available from many different suppliers. Substantially all of the solid waste disposed at the Company's energy projects is commonly obtained through long-term supply contracts with solid waste disposal authorities and municipalities under which minimum disposal fees are fixed and which generally provide for escalation in accordance with various price indexes. With respect to WTI's manufacturing businesses, the principal raw materials are carbon steel, steel alloy plate, stainless steel wire and plate and scrap metals. The raw materials necessary to each of the Company's businesses are readily available from a variety of sources and the Company does not anticipate any difficulty in obtaining such materials. EMPLOYEES As of December 31, 1993, the Company had approximately 3,800 full-time employees. WTI considers relations with its employees to be satisfactory. 11 FINANCING CAPABILITIES AND FUNDING SUPPORT AGREEMENTS Financing Capabilities Each trash-to-energy, cogeneration, and biosolids drying and pelletizing project developed by the Company requires substantial amounts of capital that generally range from $30 million to $400 million. Historically, such capital requirements have been financed through the issuance of project debt and the investment of internal funds and outside equity. The debt has primarily consisted of long-term tax-exempt or taxable bonds secured by a pledge of project revenues and assets, with certain additional security being provided, in some cases, directly or indirectly, by WTI, WMX or another project support entity. WTI has also used partnership, joint venture and sale and leaseback structures to bring third-party equity into its project financings. The Company expects to finance its working capital requirements with its available cash. To the extent required, the Company has additional cash available to it pursuant to the Restated Funding Agreement described below or through the working capital program established between the Company and WMX described below under "Master Intercorporate Agreement." Certain agreements with respect to the Company's financing capabilities and funding support are described below. Restated Funding Agreement Pursuant to a Restated Funding Agreement between WMX and WTI, WMX agreed to use reasonable efforts to assist WTI, at WTI's request, in obtaining and maintaining a credit rating of "A" or better from Standard & Poor's Corporation or Moody's Investors Service for WTI's long-term unsecured debt securities. WMX's obligations under the Restated Funding Agreement, which terminate on August 12, 2008, may involve anything from contingent credit support obligations to and including WMX's purchase from WTI of up to $200 million principal amount of WTI securities, which may be either debt, equity or a combination thereof (the "Securities"). WMX's obligations will be deemed satisfied by the purchase of such Securities, even if the purchase of all of the Securities does not enable WTI to obtain an "A" rating. In addition, the obligation to purchase any of the Securities will be suspended if WTI does not reasonably demonstrate its ability to pay interest or cash dividends, as the case may be, on the Securities. WMX's obligations will also be suspended during any period in which WTI obtains and maintains an "A" rating and will be reduced to the extent that the purchase of a lesser amount of Securities will allow WTI to obtain or maintain such a rating. Any Securities issued to WMX will be subject to mandatory repayment or redemption in equal annual installments during the twenty-five years following their date of issuance, and they may be prepaid or redeemed by WTI, at its option, if the directors of WTI not otherwise affiliated with WMX or WTI conclude that such repayment or redemption is in the best interests of the Company and its stockholders. Any Securities redeemed or prepaid prior to August 12, 2008 will restore availability under the $200 million purchase obligation referred to above. WTI has an implied "A" credit rating from Standard & Poor's Corporation and an implied "A3" credit rating from Moody's Investors Service. The attainment of such ratings did not involve the sale of any Securities to WMX. Master Support Agreement Under a Master Support Agreement between Resco Holdings Inc. ("Resco"), a wholly-owned subsidiary of WTI, and Allied-Signal Inc. ("Allied Signal"), Resco is required to reimburse Allied-Signal for any credit support payments Allied- Signal is required to make under various credit support agreements with respect to trash-to-energy projects of Resco. In addition, Resco is required to maintain its Consolidated Tangible Net Worth (as defined in the Master Support Agreement) at an amount which, as of December 31, 1993, equalled $547.3 million, and which is automatically increased (but not decreased) to 90% of Resco's Consolidated 12 Tangible Net Worth at the end of each quarter. As of December 31, 1993, Resco was in compliance with this provision. Resco is prohibited from paying cash dividends or acquiring any shares of its capital stock if its Consolidated Tangible Net Worth is, or would as a consequence of such payment or acquisition be, less than the required amount. The Master Support Agreement also restricts the ability of Resco to subject its property or the properties of its subsidiaries to liens securing indebtedness for money borrowed or similar indebtedness and may require Resco, under certain circumstances, to refinance indebtedness of trash-to-energy projects for which Allied-Signal's credit support is provided. Allied-Signal is providing credit support in respect of two of the Company's trash-to-energy facilities pursuant to the Master Support Agreement. Master Intercorporate Agreement In connection with the 1990 Merger, WTI, WMX and CWM entered into a Master Intercorporate Agreement. Among other things, WTI and WMX agreed to implement a cash management and working capital program under the agreement. The agreement was amended and restated in 1993 to modify certain aspects of the cash management program established thereunder. Subject to certain restrictions specified in the agreement, WMX agreed to fund WTI's working capital requirements at rates equal to or lower than those WTI would otherwise be able to obtain on the open market. The Company may borrow up to $100 million from WMX until September 1995 pursuant to the Master Intercorporate Agreement, plus the amount of cash invested by WTI with WMX. Except for the $100 million funding commitment which expires in September 1995, the remaining obligations of WMX under the Master Intercorporate Agreement will terminate at the time that both (i) WMX does not own a majority of the capital stock of WTI and (ii) WMX does not exercise, prior to its expiration, the option to maintain majority ownership of the capital stock of WTI (as provided in the Master Intercorporate Agreement). ACQUISITIONS During 1993, the Company acquired a number of businesses engaged in providing various environmentally-related services. The amounts and types of consideration generally have been determined by direct negotiations with the owners of the businesses acquired. The acquisitions involved several businesses engaged in providing water and air quality-related environmental products and services as well as independent power. EQUITY INVESTMENTS Rust International Inc. The Company owns approximately 40% of the outstanding common stock of Rust. Approximately 56% of Rust's common stock is held by CWM and the remaining 4% is held by public stockholders. Rust is a leading provider, through its subsidiaries, of engineering, construction and environmental and infrastructure consulting services, hazardous substance remediation services and other on-site industrial and related services, primarily to clients in government and in the chemical, petrochemical, nuclear, energy, utility, pulp and paper, manufacturing, environmental services and other industries. In addition, Rust provides engineering and environmental and infrastructure consulting services to clients in several countries outside of North America. 13 Rust's engineering, construction and environmental and infrastructure consulting services business provides process and design engineering, construction, marine construction, dismantling and demolition services, architectural, automation, environmental and infrastructure engineering services and project management services to clients in federal, state and local governments, to municipalities and utilities and to clients in the chemical, petrochemical, pulp and paper, automotive, iron and steel, aerospace, food and beverage, tobacco, mining, utility and industrial power and general manufacturing industries. The industrial engineering services provided by Rust are of two general types -- process engineering and facility design engineering. Process engineers create the processes by which facilities operate, such as chemical, petrochemical, energy and pulp and paper plants. Design engineering services provided by Rust encompass the following disciplines: architectural; electrical; control systems (which involves developing the logic and instrumentation necessary to control, for instance, a plant's electrical system); process piping; mechanical (equipment layout); structural; heating, ventilation and air conditioning ("HVAC"); and civil (site work, grading and draining). Rust's construction services include primarily the new construction and retrofitting of power generation facilities including coal-fired powerplants, nuclear power plants, gas turbine and cogeneration plants, industrial facilities, including chemical, petrochemical, pulp and paper, food and beverage, iron and steel, automotive, utility and industrial power and other manufacturing facilities. Rust also provides infrastructure and marine construction services, which include building, maintaining and repairing infrastructure such as highways, airports, ports, major civil work, piers, wharves and bridges. In addition, the Company provides dredging and underwater diving services to its clients. Rust also provides dismantling and demolition services. Rust's environmental and infrastructure consulting services provide alternative solutions for client problems relating to removing and disposing of hazardous and toxic substances and managing solid waste, water and wastewater, groundwater and air resources. Rust provides such services primarily to private industry but also to federal, state and local governments, including the Department of Defense ("DOD") and Department of Energy ("DOE"). Rust's services include performing remedial investigations for the purpose of characterizing hazardous waste sites and preparing feasibility studies setting forth recommended remedial actions. Rust also provides services in connection with the siting, permitting, design and construction oversight (including construction quality assurance) of solid and hazardous waste landfills and related facilities such as leachate collection and disposal and gas recovery and electric generation systems. Study, design and construction oversight services are also provided, primarily to municipalities and, to some extent, private industry in connection with wastewater collection and treatment, potable water supply treatment and distribution, stormwater management and the building of streets, highways, airports, bridges, waterways and rail services. In addition, Rust designs systems required to properly and safely store, convey, treat and dispose of industrial, hazardous and radioactive materials and provides consulting services to its clients regarding disposal and waste minimization methods and techniques. Rust performs on-site hazardous chemical and radioactive substance remediation services for clients in the chemical, petrochemical, automotive and other manufacturing industries and for federal, state and local government entities, including the DOD and DOE in connection with such projects as the remediation of military bases and other government installations, the Environmental Protection Agency in connection with Superfund projects, and various state environmental agencies. Rust's hazardous substance remediation services also include the containment and closure of contaminated sites and the cleaning, relining and sealing of liquid containment and treatment ponds, lagoons and other surface impoundments. 14 Rust provides scaffolding services primarily to the refinery, chemical, petrochemical and electric utility industries, and to a lesser extent, pulp and paper plants, nuclear facilities and general commercial clients. In most cases, Rust's scaffolding services are provided in conjunction with periodic, routine cleaning and maintenance of refineries, chemical plants and utilities, although such services are also performed in connection with new construction projects. Rust performs four types of industrial cleaning services--water blasting, chemical cleaning, vacuuming and water filtration--primarily for clients in the petrochemical, chemical, and pulp and paper industries, utilities, and to a lesser extent, the government sector. Rust provides additional on site plant services to the chemical, petrochemical, and pulp and paper industries as well as to general commercial and industrial clients, including mechanical and electrical services, equipment installation, welding, HVAC, warehousing and inventory management. Rust assists clients in the nuclear and utility industries in solving electrical, mechanical, engineering and related technical services problems. Rust also provides spent fuel storage (rerack) services to the nuclear power industry. In addition, Rust also designs and provides to its clients other nuclear and utility maintenance service-related products, including fire protection seals, nozzle dams and manway cover elevator systems. Waste Management International plc The Company owns approximately 12% of the outstanding ordinary shares of WM International. Approximately 56% of WM International's outstanding ordinary shares are held indirectly by WMX, and an additional 12% of such shares are held by Rust, in which the Company owns a 40% equity interest. The remaining outstanding ordinary shares of WM International are held by public stockholders. WM International is a leading international provider of comprehensive waste management and related services and conducts essentially all of the waste management operations located outside of North America of WMX and its affiliates. The operations of WM International are managed on a country by country basis and are divisible into two broad categories: collection services and treatment and disposal services. Collection services provided by WM International include collection and transportation of solid, hazardous and medical wastes and recyclable material from residential, commercial and industrial customers. Through its subsidiaries, WM International provides collection services to governmental and private customers in nine European countries, Argentina, Australia, Brunei, Malaysia, New Zealand and Taiwan. Business is obtained through public bids or tenders, negotiated contracts, and, in the case of commercial and industrial customers, direct contracts. WM International's collection services encompassed approximately 1,700 separate municipal contracts (the largest number of which are in Italy) serving over 6.3 million households and commercial and industrial collection services to more than 140,000 solid waste customers and approximately 29,600 hazardous waste customers, as well as related services. The size, specifications, provisions and duration of municipal contracts vary substantially, with some such contracts also covering landfill disposal or street-sweeping or other cleaning services. Pricing for municipal contracts is generally based on volume of waste, number and frequency of collection pick-ups and disposal arrangements. Longer-term contracts typically have formulae for periodic price increases or adjustments. Street, industrial premises, office, parking lot and port cleaning services are also performed by WM International, along with portable sanitation/toilet services for such occasions as outdoor concerts and special events. 15 Treatment and disposal services include processing of recyclable materials, operation of both solid waste landfills and hazardous waste landfills, operation of municipal, trash-to-energy and hazardous waste incinerators, provision of hazardous waste treatment and site remediation services, and water treatment services. The operation of solid waste landfills is currently WM International's most significant treatment and disposal service. Treatment and disposal services are provided under contracts which may be obtained through public bid or tender or direct negotiation, and are also provided directly to other waste service companies. At December 31, 1993, Waste Management International operated 23 waste treatment facilities, 32 recycling and recyclables processing facilities, 11 incinerators and 57 landfills. Three of the 11 incinerators are hazardous waste incinerators. At present, in most countries in which WM International operates, landfilling is the predominant disposal method employed. WM International owns or operates landfills in Italy, Sweden, France, Spain, Australia, the United Kingdom, Germany, Denmark, Argentina and New Zealand. WM International is also constructing a solid waste landfill in Hong Kong. Landfill disposal agreements may be separate contracts or an integrated portion of collection or treatment contracts. In addition, landfills may accept waste on a reserved space or per load basis. WM International believes it has access to sufficient solid waste landfill capacity to meet its current needs. WM International's trash-to-energy incinerator in Hamm is a German-designed plant and the only privately operated trash-to-energy facility in Germany. It is among the first trash-to-energy facilities to fully comply with that country's stringent new air pollution requirements. The facility serves the household and commercial solid waste incineration needs of a population of over 550,000 in Hamm and nearby towns. WM International also operates five small conventional municipal solid waste incinerators in Italy and one small plant in each of Sweden and New Zealand. WM International owns or operates hazardous waste treatment facilities in Finland, Italy, Sweden, Germany, the United Kingdom, The Netherlands, Hong Kong and New Zealand, has nearly completed construction of a hazardous waste treatment facility in Indonesia, and has entered into agreements with the governments of Argentina and Venezuela to develop hazardous waste treatment facilities in those countries. While WM International has considerable experience in mobilizing for and managing foreign projects, its operations continue to be subject generally to such risks as currency fluctuations and exchange controls, the need to recruit and retain suitable local labor forces and to control and coordinate operations in different jurisdictions, changes in foreign laws or governmental policies or attitudes concerning their enforcement, political changes, local economic conditions and international tensions. WM International records and reports its earnings in pounds sterling. Currency fluctuations affecting the pounds sterling exchange rates will cause the Company's earnings from WM International to fluctuate. The Company may from time to time engage in hedging transactions in order to mitigate the effect of such exchange fluctuations. EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the names and ages of the Company's executive officers (as defined by the regulations of the Securities and Exchange Commission), the principal positions they hold with the Company and with WMX and its affiliates as of December 31, 1993, and summaries of their business experience. Experience shown with WTI includes experience with a predecessor of WTI prior to the August 1989 merger of such 16 predecessor into Resco. Executive officers are elected by the Board of Directors and serve at the discretion of the Board of Directors. Phillip B. Rooney, the Company's Chairman and Chief Executive Officer, is also an executive officer of WMX and certain of its affiliates. While he will devote less than all of his working time to WTI's business, the Company anticipates that he will devote sufficient time to the Company's business as reasonably may be required to fulfill the duties of his office.
NAME AND TITLE AGE BUSINESS EXPERIENCE - -------------------------------------- --- --------------------------------------------------------------- Phillip B. Rooney..................... 49 A director of WTI since September 1988. Chairman of the Chairman of the Board and Board and Chief Executive Officer of WTI since November Chief Executive Officer 1990. President and Chief Operating Officer of WMX since November 1984. Chairman of the Board of Rust since January 1993. Chairman of the Board and Chief Executive Officer of WMI since January 1994. Mr. Rooney is also a director of WMX, CWM, WM International and Rust. John M. Kehoe, Jr..................... 60 President and Chief Operating Officer of WTI since January President and 1993. Vice President of WTI from December 1991 to Chief Operating Officer December 31, 1992. President of Wheelabrator Environmental Systems Inc. ("WESI"), a subsidiary of WTI, from November 1990. Managing Director of WTI from June 1988 to November 1990. John T. Dowd.......................... 56 Senior Vice President and General Manager of Wheelabrator Senior Vice President and Clean Water Systems Inc. and Wheelabrator Clean Air Systems General Manager Inc. since November 1992. Vice President and General Wheelabrator Clean Air Systems Manager of Wheelabrator Clean Water Systems Inc. from Inc. and Wheelabrator Clean Water August 1991 to November 1992. Vice President - Business Systems Inc. Development of WESI from January 1989 to August 1991. James F. Wood......................... 51 Senior Vice President and General Manager of WESI since Senior Vice President November 1992. Vice President-Plant Operations of WESI from and General Manager September 1990 to November 1992. Managing Director of WTI Wheelabrator Environmental from April 1989 to September 1990. Vice President-Plant Systems Inc. Services of WESI from May 1988 to April 1989. John D. Sanford....................... 40 Vice President, Chief Financial Officer and Treasurer of WTI Vice President, since May 1993. Staff Vice President-Finance of WTI from Chief Financial Officer February 1993 to May 1993. Vice President and Chief Financial and Treasurer Officer of WESI from August 1987 to May 1993. Mark P. Paul.......................... 44 Vice President and General Counsel of WTI since May 1993. Vice President and Associate General Counsel and Staff Vice President of WTI General Counsel from February 1993 to May 1993. Vice President and General Counsel of WESI from September 1987 to May 1993.
17 NAME AND TITLE AGE BUSINESS EXPERIENCE - -------------------------------------- --- ----------------------------------------------------------------------------- Richard S. Haak, Jr................... 39 Controller of WTI since November 1993. Vice President and Controller Controller-Operations of WESI from September 1987 until November 1993.
ITEM 2 -- PROPERTIES The Company's principal executive offices are located at Liberty Lane, Hampton, New Hampshire 03842. These offices also serve as the headquarters of the Company's Wheelabrator Clean Energy group. The Company believes that its property and equipment are generally well maintained, in good operating condition and adequate for its present needs. The inability to renew any short- term real property lease by the Company or any of its subsidiaries would not have a material adverse effect on its results of operations. WTI regularly upgrades and modernizes facilities and equipment and expands its facilities as necessary. The following tables set forth the Company's principal facility locations in operation or under construction and their use (including those operated by the Company for others under long-term contracts or similar arrangements) as of December 31, 1993. DESCRIPTION OF OWNED, LEASED AND/OR LONG-TERM OPERATED PROJECTS Set forth below is a description of projects in operation or under construction which are owned, leased or operated under long-term operating agreements by WTI subsidiaries, partnerships or joint ventures controlled by WTI subsidiaries. Unless indicated to the contrary below, each project is owned by subsidiaries or affiliates of the Company. While WTI exercises, or will exercise, operating control over each such project, WTI has no ownership interest in certain of the projects. Projects in Operation
DESIGN DESIGN PROJECT OUTPUT CAPACITY COMMENTS - ----------------------------------------------------- ------ ---------- --------------------------------------------- 1. Amarillo, Texas N/A 3,500,000 Owned and operated since 1976 by WTI Coal Handling Facility TPY and its predecessors. 2. Anderson, California 6mW 210 TPD Owned and operated by WTI since mid- Wood Waste Cogeneration 1993. Facility 3. Baltimore, Maryland 60mW 2,250 TPD Owned and operated by WTI from 1985 Trash-to-Energy Facility to 1988. Operated by WTI since 1988 Owner: Ford Motor Credit Company ("Ford Credit") under a long-term lease expiring in 2007, with certain renewal and purchase options. 4. Bridgeport, Connecticut 70mW 2,250 TPD Operated since 1988 by WTI under a Trash-to-Energy Facility long-term lease expiring in 2008, with Owner: Ford Credit certain renewal and purchase options.
18
DESIGN DESIGN PROJECT OUTPUT CAPACITY COMMENTS ------- ------ ---------- ------------------------------------- 5. Broward County, Florida 70mW 2,250 TPD Owned and operated by WTI since mid- South Site 1991. Trash-to-Energy Facility 6. Broward County, Florida 70mW 2,250 TPD Owned and operated by WTI since early North Site 1992. Trash-to-Energy Facility 7. Claremont, 5mW 200 TPD Owned and operated by WTI since 1987. New Hampshire Trash-to-Energy Facility 8. Cobb County, Georgia N/A 35 DTPD Operated by WTI since late 1992 under a Biosolids Dryer and subcontract expiring in 1996, with a Pelletizer renewal option. Owner: Cobb County, Georgia 9. Concord, New Hampshire 14mW 575 TPD Owned and operated by WTI since 1989. Trash-to-Energy Facility 10. Earth, Texas N/A 3,500,000 Owned and operated since 1982 by WTI Coal Handling Facility TPY and its predecessors. 11. Frackville, Pennsylvania 47mW 1,700 TPD Owned and operated by WTI since 1989. Anthracite Culm Cogeneration Facility 12. Hagerstown, Maryland N/A 16 DTPD Operated by WTI since late 1992 under a Biosolids Dryer and lease expiring in 1998, with a renewal Pelletizer option. Owner: Hagerstown, Maryland 13. Gloucester County, 14mW 575 TPD Owned and operated by WTI since 1990. New Jersey Trash-to-Energy Facility 14. Millbury, Massachusetts 45mW 1,500 TPD Operated by WTI since 1987 under a Trash-to-Energy Facility long-term lease expiring in 2007, with Owner: Ford Credit certain renewal and purchase options. 15. New York, New York N/A 300 DTPD Owned and operated by WTI since mid- Biosolids Dryer and 1993. Pelletizer 16. North Andover, Massachusetts 40mW 1,500 TPD Owned and operated by WTI since 1985. Trash-to-Energy Facility
19
DESIGN DESIGN PROJECT OUTPUT CAPACITY COMMENTS ------- ------ ---------- -------- 17. Norwalk, California 28mW 5,600 MCF Operated by WTI since 1988 under a Gas Cogeneration Facility per day lease expiring in 2008, with an option to Owner: Signal Capital buy, subject to prior rights of the State of Corporation California to purchase the lease and the facility after 2003. 18. Pinellas County, Florida 75mW 3,000 TPD Operated by WTI since 1983 under a Trash-to-Energy Facility long-term contract expiring in 2003. Owner: Pinellas County, Florida 19. Saugus, Massachusetts 40mW 1,500 TPD Operated by WTI since 1975; wholly- Trash-to-Energy Facility owned by WTI since 1987. 20. Shasta County, California 49mW 2,400 TPD Operated by WTI since 1988 under a Wood Waste Small Power long-term lease expiring in 2007, with Production Facility renewal and purchase options. Owner: Ford Credit 21. Sherman Station, Maine 18mW 800 TPD Operated by a partnership in which WTI Wood Waste Cogeneration has a 60% interest since 1986. Leased by Facility under a long-term contract expiring Owner: Chrysler Financial in 2006, with renewal and purchase Corporation options. 22. Spokane, Washington 26mW 800 TPD Operated by WTI since late 1991 under a Trash-to-Energy Facility long-term contract expiring in 2011. Owner: City of Spokane, Washington 23. Tampa, Florida 20mW 1,000 TPD Operated by WTI since 1988 under a Trash-to-Energy Facility long-term contract expiring in 2005. Owner: City of Tampa, Florida 24. Westchester County, 60mW 2,250 TPD Owned and operated since 1984 by New York Westchester Resco Company L.P. Trash-to-Energy Facility ("Westchester Resco") (1)
- --------------------- (1) Westchester Resco is a limited partnership, 75% held by WTI, and 25% held indirectly by John Hancock Mutual Life Insurance Co. as a limited partner. 20 Projects Under Construction DESIGN DESIGN PROJECT OUTPUT CAPACITY COMMENTS ------- ------ ---------- --------------------------------------- 1. Baltimore County, Maryland N/A 110 DTPD Construction financing provided by WTI Biosolids Dryer and from available cash; construction Pelletizer expected to be completed in mid-1994. 2. Falls Township, Pennsylvania 53mW 1,500 TPD Construction financing provided by WTI Trash-to-Energy Facility from available cash; construction expected to be completed in mid-1994. 3. Lisbon, Connecticut 13mW 500 TPD Construction expected to be completed Trash-to-Energy Facility in late 1995. Will be operated by WTI Owner: Eastern Connecticut under a long-term contract expiring 25 Resource Recovery Authority years from commencement of principal operations. 4. Polk County, Florida 40mW 1,000 TPD Construction financing provided by WTI Urban Waste-To-Energy from available cash; construction Facility expected to be completed in mid-1994. Owned by a partnership in which WTI owns an 81% interest.
KEY: mW--Megawatts DTPD--Dry Tons Per Day TPD--Tons Per Day TPY--Tons Per Year MCF--Thousands of Cubic Feet Non-Project Facilities Set forth below is a list of all of the primary non-project facilities owned by the Company as of December 31, 1993, and each of the principal plants and offices leased by the Company as of that date. Such list does not purport to be a complete list of all of the Company's leased properties.
LOCATION SITE USE NATURE OF INTEREST -------- -------- ------------------ Annapolis, Maryland......... Offices Lease Altrincham, United Kingdom.. Manufacturing facility and office space Own Commerce, California........ Manufacturing facility and office space Lease Chatelleurault, France...... Manufacturing facility Own Dublin, Ireland............. Manufacturing facility Own Hampton, New Hampshire...... Offices Lease LaGrange, Georgia........... Manufacturing facility and office space Own Largo, Florida.............. Manufacturing facility Lease Moorpark, California........ Manufacturing facility and office space Lease New Brighton, Minnesota..... Manufacturing facility and office space Own Naperville, Illinois........ Offices Lease Parker, Arizona............. Carbon regeneration facility Own building/lease site Pittsburgh, Pennsylvania.... Offices Lease
21
LOCATION SITE USE NATURE OF INTEREST -------- -------- ------------------ Rochester, New Hampshire.... Biosolids compost facility Own building/lease site Schaumburg, Illinois........ Offices Lease Sturbridge, Massachusetts... Manufacturing facility Own Walterboro, South Carolina.. Foundry Own
ITEM 3 -- LEGAL PROCEEDINGS Saugus, Massachusetts Trash-to-Energy Facility On December 4, 1990, a lawsuit was filed against the Company in Essex County Superior Court in the Commonwealth of Massachusetts ("Essex County Court") over the estimated cost of retrofitting certain pollution control equipment at the Company's Saugus, Massachusetts trash-to-energy facility (the "Saugus Facility"), together with the cost of certain modifications to the ash disposal site located adjacent to the Saugus Facility, and the costs associated with operation and maintenance expenses of the Saugus Facility. The lawsuit, brought by thirteen communities whose municipal waste is disposed at the Saugus Facility, sought declaratory judgment, monetary damages and other relief based upon allegations that some of the costs incurred were not properly recoverable under the terms of their respective service agreements with the Company. The lawsuit also named as defendants several of the Company's other subsidiaries. On March 2, 1992, the Company filed a lawsuit in Essex County Court against the plaintiffs in the foregoing action alleging non-payment of costs billed to them pursuant to their respective service agreements for amounts expended by the Company in retrofitting the Saugus Facility. Upon the Company's motion, the parties were ordered to arbitrate the dispute as provided in the various service agreements. The Company and the communities commenced the arbitration in early 1993. The "Arbitrator's Final Award," issued on November 9, 1993, provided that: (i) the Company was not entitled to recover the cost of capital improvements to the ash landfill or to receive incremental operating costs related to such capital improvements; (ii) the Company was entitled to charge the communities their proportionate shares of approximately $54 million of capital improvements to the Saugus Facility (the Company had sought approximately $59 million); and (iii) the Company was entitled to charge the communities their proportionate shares of incremental operating costs resulting from such capital improvements. Following the issuance of the Arbitrator's Final Award, the parties voluntarily dismissed with prejudice the communities' appeal of the order to arbitrate issued in the Company's 1992 lawsuit. These actions conclusively ended all disputes arising out of the retrofit of the Saugus Facility and the adjacent ash disposal site. Regulatory The business in which the Company is engaged is intrinsically connected with the protection of the environment and involves the potential for the discharge of materials into the environment. In the ordinary course of conducting its business activities, the Company becomes involved in judicial and administrative proceedings involving governmental authorities at the federal, state and local level including, in certain instances, proceedings instituted by citizens or local governmental authorities seeking to overturn governmental action in which governmental officials or agencies are named as defendants together with the Company or one or more of its subsidiaries, or both. In the majority of the situations where proceedings are commenced by governmental authorities, the matters involved relate to alleged technical violations of licenses or permits pursuant to which 22 the Company operates or is seeking to operate or laws or regulations to which its operations are subject or are the result of different interpretations of the applicable requirements. At December 31, 1993, the Company was involved in one such proceeding relating to activities at its Westchester, New York trash-to- energy facility. The EPA has alleged that the facility exceeded its emission limits of sulphur dioxide ("SO\\2\\"). The EPA and the Company are negotiating a consent order which is expected to include the installation of a sorbent injection system (to reduce the SO\\2\\ emissions) and sanctions in an amount which may exceed $100,000. Other In January 1993, the Internal Revenue Service ("IRS") completed an examination of the Company's consolidated federal income tax returns for the period 1986-1988. The IRS proposed a significant adjustment related to the 1988 sale of a former subsidiary, which the Company disputed. In March 1994, WTI and the IRS filed a Stipulation of Settlement with the U.S. Tax Court which resolved the treatment of the disputed matter. Although the Company is primarily liable for the amount of the tax due as a result of the settlement (plus interest), under a Tax Sharing Agreement between the Company and a predecessor of the Company now known as Koll Real Estate Group, Inc. ("KREG"), the Company is indemnified by KREG and a former subsidiary of KREG, Abex, Inc. ("Abex"), for the full amount of any liability assessed with regard to this issue by the IRS (subject to the remaining availability of any portion of the Company's $50 million obligation referred to in Note 3 of Notes to Consolidated Financial Statements included elsewhere in this report). Management believes that KREG and Abex will be able to satisfy their indemnification obligations in respect of the agreed tax liability. In addition, there are other routine lawsuits and claims pending against WTI and its subsidiaries incidental to their businesses. In the opinion of the Company's management, the ultimate liability, if any, with respect to the above proceedings and such other lawsuits and claims will not have a material adverse effect on the business and properties of the Company, taken as a whole, or its financial position or results of operations. ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock is traded on The New York Stock Exchange under the symbol "WTI." The table below sets forth by quarter, for the last two years, the high and low sales prices of the Common Stock on The New York Stock Exchange Composite Tape as reported by The Wall Street Journal (Midwest Edition) and also shows the cash dividends declared per share during such periods:
Market Price (1) ---------------------- Cash Dividends 1992 High Low Declared Per Share ---- --------- --------- ------------------ First Quarter $ 18-5/16 $14-15/16 $0.01 Second Quarter $15-15/16 $ 13 $0.01 Third Quarter $ 17-1/8 $ 13 $0.01 Fourth Quarter $ 19-1/2 $ 15-5/16 $0.01
23
1993 ---- First Quarter $23-1/2 $18-1/8 $0.02 Second Quarter $21-1/4 $17-5/8 $0.06 Third Quarter $20 $14-3/4 -- Fourth Quarter $18-1/8 $14-5/8 --
- ------------------ (1) All per share prices and dividends have been adjusted to reflect the two- for-one stock split in the form of a 100% stock dividend distributed in January 1993. ---------------------------------------- The approximate number of holders of record of Common Stock as of March 1, 1994 was 22,600. In January 1993, the Company effected a two-for-one stock split paid in the form of a 100% stock dividend. During 1993, the Board of Directors declared, and the Company paid, total dividends in the amount of $0.08 per share. In May 1993, the Board of Directors announced its intention to thereafter consider the payment of an annual dividend in lieu of quarterly dividends. Future cash dividends will be considered by the Board of Directors based upon the Company's earnings and financial position and such other business considerations as the Board of Directors considers relevant. On March 15, 1994, WTI announced that the Board of Directors had authorized the repurchase of up to 3,800,000 shares of Common Stock from time to time over the following 24-month period in the open market or in privately negotiated transactions. Under a similar program initiated in 1992, WTI repurchased a total of approximately 4,160,000 shares of Common Stock over a period of two years. 24 ITEM 6 -- SELECTED FINANCIAL DATA The following selected consolidated financial information for each of the five years in the period ended December 31, 1993 is derived from the Company's Consolidated Financial Statements, which have been audited by Arthur Andersen & Co., independent public accountants, whose report thereon is incorporated by reference in this report. The information below should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Company's Consolidated Financial Statements, and the related Notes, and the other financial information which are filed as exhibits to this report and incorporated herein by reference. WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED SELECTED FINANCIAL DATA (000's omitted except per share amounts)
Years Ended December 31 ----------------------------------------------------------- 1989 1990 1991 1992 1993 RESULTS OF OPERATIONS Revenue $1,006,964 $1,151,873 $1,173,449 $1,483,054 $1,142,219 Income before extraordinary item and accounting changes 58,481 47,406 126,059 176,382 163,102 Net income (loss) 58,481 (70,190) 126,059 134,152 163,102 Earnings (loss) per common share: Before extraordinary item and accounting changes 0.37 0.30 0.73 0.94 0.86 Net income (loss) 0.37 (0.44) 0.73 0.71 0.86 Weighted average common shares outstanding 156,400 158,400 172,400 188,200 188,900 Dividends declared per share -- -- -- .04 .08 FINANCIAL CONDITION (at year end) Total assets $2,249,652 $2,325,818 $2,743,830 $2,997,073 $3,090,278 Working capital 197,804 265,363 516,084 251,464 5,570 Long-term project debt 945,282 987,949 987,058 857,625 776,858 Stockholders' equity 577,487 545,978 891,351 1,039,343 1,286,838
- ---------------------------- . The 1990 loss of $70.2 million, or $0.44 per share, reflects a restructuring charge, an unrealized loss on investments in common stock and the cumulative effect of a change in accounting method. . 1991 net income includes a $47.1 million pretax gain on the sale of certain foreign equity investments. . 1992 income before extraordinary item and accounting changes includes a $47.0 million nontaxable gain relating to the initial public offering of shares by Waste Management International plc. See Note 2 of Notes to Consolidated Financial Statements. . 1992 net income includes one-time charges of $42.2 million relating to the adoption of two new financial accounting standards. See Note 1 of Notes to Consolidated Financial Statements. 25 . Beginning in 1993, the Company no longer consolidates the financial results of certain businesses contributed to form, in part, Rust International Inc. ("Rust"). Revenues from the contributed businesses amounted to approximately $380.4 million, $423.8 million, $397.8 million and $554.7 million in 1989, 1990, 1991 and 1992, respectively. Beginning in 1993, the Company's share of Rust's net income is included in equity in earnings of affiliates. See Note 2 of Notes to Consolidated Financial Statements. . 1993 income includes a $7.7 million nontaxable gain related to issuance of stock by Rust and a $6.5 million increase in the tax provision due to the revaluing of deferred taxes as a result of the August enactment of the Omnibus Budget Reconciliation Act of 1993. See Notes 2 and 3 of Notes to Consolidated Financial Statements. . Share and per share data for all periods reflect the two-for-one stock split effected on January 7, 1993. See Note 1 of Notes to Consolidated Financial Statements. . The increases in weighted average shares outstanding in 1991 and 1992 are primarily due to shares issued in connection with acquisitions. See Note 2 of Notes to Consolidated Financial Statements. . The increases in stockholders' equity at December 31, 1991 and 1992 primarily reflect income for each year and the effect of acquisitions. The increase in stockholders' equity at December 31, 1993 primarily reflects income for the year, the effects of acquisitions and the January 1, 1993 formation of Rust. See Note 2 of Notes to Consolidated Financial Statements. ---------------------------------------------- ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations set forth on pages 25 through 31 of the Company's 1993 Annual Report to Stockholders (the "Annual Report") which discussion is filed as an exhibit to this report and incorporated herein by reference. ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (a) The Consolidated Balance Sheets as of December 31, 1992 and 1993, Consolidated Statements of Income, Cash Flows and Changes in Stockholders' Equity for each of the years in the three-year period ended December 31, 1993 and Notes to Consolidated Financial Statements set forth on pages 32 through 53 of the Annual Report are filed as an exhibit to this report and incorporated herein by reference. (b) Selected Quarterly Financial Data (Unaudited) is set forth in Note 10 of the Notes to Consolidated Financial Statements referred to in Item 8(a) above and incorporated herein by reference. (c) Rust International Inc.'s Consolidated Balance Sheets as of December 31, 1992 and 1993, Consolidated Statements of Income, Cash Flows and Changes in Stockholders' Equity for each of the years in the three-year period ended December 31, 1993 and Notes to Consolidated Financial Statements are incorporated herein by reference to pages F-1 through F-17 of Rust's 1993 annual report on Form 10-K. Rust's file number under the Securities Exchange Act of 1934 is 1-11896. 26 ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Directors. The information appearing under the caption "Election of Directors" on pages 2 through 4 of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held May 5, 1994 (the "Proxy Statement"), is incorporated herein by reference. Executive Officers. Information with respect to executive officers of WTI is set forth under the caption "Executive Officers of the Registrant" in Item 1 of this report. ITEM 11 -- EXECUTIVE COMPENSATION Information appearing under the caption "Compensation" on pages 7 through 11 of the Proxy Statement is incorporated herein by reference. ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information appearing under the caption "Principal Stockholder" on page 2 of the Proxy Statement and under the caption "Securities Ownership of Management" on pages 4 through 6 of the Proxy Statement is incorporated herein by reference. ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information appearing under the caption "Certain Transactions and Other Matters" on pages 18 through 25 of the Proxy Statement, under the second full paragraph on page 3 of the Proxy Statement and under the first full paragraph on page 4 of the Proxy Statement is incorporated herein by reference. PART IV ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A)(1) FINANCIAL STATEMENTS: The following financial statements and supplementary data of the Company are filed as an exhibit hereto and incorporated herein by reference: (i) Consolidated Statements of Income for the years ended December 31, 1991, 1992 and 1993. (ii) Consolidated Balance Sheets as of December 31, 1992 and 1993. (iii) Consolidated Statements of Cash Flows for the years ended December 31, 1991, 1992 and 1993. (iv) Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1991, 1992 and 1993. 27 (v) Notes to Consolidated Financial Statements. (vi) Report of Independent Public Accountants -- Arthur Andersen & Co. Rust International Inc.'s Consolidated Balance Sheets as of December 31, 1992 and 1993, Consolidated Statements of Income, Cash Flows and Changes in Stockholders' Equity for each of the years in the three-year period ended December 31, 1993 and Notes to Consolidated Financial Statements are incorporated herein by reference to pages F-1 through F-17 of Rust's 1993 annual report on Form 10-K. Rust's file number under the Securities Exchange Act of 1934 is 1-11896. (2) SCHEDULES: The following financial statement schedules of the Company are included in this report: (i) Report of Independent Public Accountants on Schedules--Arthur Andersen & Co. (ii) Schedule II--Amounts Receivable From Officers, Employees and Related Parties. (iii) Schedule V--Property and Equipment. (iv) Schedule VI--Accumulated Depreciation and Amortization of Property and Equipment. Financial statement schedules of Rust International Inc. are incorporated by reference to pages F-18 through F-23 of Rust's 1993 annual report on Form 10-K. Rust's file number under the Securities Exchange Act of 1934 is 1-11896. All other schedules have been omitted since they are not applicable, not required, or the information is included in the above-referenced financial statements or notes thereto. (3) EXHIBITS: The exhibits to this report are listed in the Exhibit Index contained elsewhere herein. Included in the exhibits listed therein are the following exhibits which constitute management contracts or compensatory plans or arrangements:* (i) Restricted Unit Plan for Non-Employee Directors of the registrant as amended through June 10, 1991 (incorporated by reference to Exhibit 19.03 to the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1991). (ii) Amendment, dated as of December 6, 1991, to the Restricted Unit Plan for Non-Employee Directors of the registrant (incorporated by reference to Exhibit 19.05 to registrant's 1991 annual report on Form 10-K). (iii) Deferred Director's Fee Plan adopted June 10, 1991 (incorporated by reference to Exhibit 19.02 to the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1991). - ------------------ * In the case of incorporation by reference to documents filed under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. Exhibits not incorporated by reference are filed with this report. 28 (iv) 1988 Stock Plan for Executive Employees of Old WTI and its subsidiaries ("1988 Stock Plan") (incorporated by reference to Exhibit 28.1 to Amendment No. 1 to the registrant's registration statement on Form S-8, Reg. No. 33-31523). (v) Amendments, dated as of September 7, 1990, to the 1988 Stock Plan (incorporated by reference to Exhibit 19.02 to the registrant's 1990 annual report on Form 10-K). (vi) Amendment, dated as of November 1, 1990, to the 1988 Stock Plan (incorporated by reference to Exhibit 19.04 to the registrant's 1990 annual report on Form 10-K). (vii) Amendment, dated as of December 6, 1991, to the 1988 Stock Plan (incorporated by reference to Exhibit 19.02 to the registrant's 1991 annual report on Form 10-K). (viii) 1986 Stock Plan for Executive Employees of the registrant and its subsidiaries ("1986 Stock Plan") (incorporated by reference to Exhibit 28.2 to Amendment No. 1 to the registrant's registration statement on Form S-8, Reg. No. 33-13720). (ix) Amendment, dated as of November 1, 1990, to the 1986 Stock Plan (incorporated by reference to Exhibit 19.03 to the registrant's 1990 annual report on Form 10-K). (x) Amendment, dated as of December 6, 1991, to the 1986 Stock Plan (incorporated by reference to Exhibit 19.01 to the registrant's 1991 annual report on Form 10-K). (xi) 1991 Performance Unit Plan of the registrant (incorporated by reference to Exhibit 10.48 of the registrant's 1990 annual report on Form 10-K). (xii) Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan (as amended and restated as of March 8, 1993) (incorporated by reference to Exhibit 10.36 to the registrant's 1992 annual report on Form 10- K). (xiii) Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan (as amended and restated as of March 14, 1994). (xiv) Wheelabrator Technologies Inc. Long Term Incentive Plan (as amended and restated as of March 14, 1994). (xv) Retirement Plan for Non-Employee Directors of the registrant (incorporated by reference to Exhibit 10.32 to the registrant's 1988 annual report on Form 10-K). (xvi) Amendment, dated as of September 7, 1990, to the Retirement Plan for Non-Employee Directors of the registrant (incorporated by reference to Exhibit 19.01 to the registrant's 1990 annual report on Form 10- K). (xvii) Amendment, dated June 10, 1991, to the Retirement Plan for Non- Employee Directors of the registrant (incorporated by reference to Exhibit 19.01 to the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1991). 29 (xviii) 1991 Stock Option Plan for Non-Employee Directors ("1991 Directors Plan") of the registrant adopted June 10, 1991 (incorporated by reference to Exhibit 19.04 to the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1991). (xix) Amendment to 1991 Directors Plan dated as of December 22, 1993. (xx) 1992 Stock Option Plan of the registrant (incorporated by reference to Exhibit 10.45 to the registrant's 1991 annual report on Form 10- K). (B) REPORTS ON FORM 8-K The Company did not file any reports on Form 8-K during the fiscal quarter ended December 31, 1993. 30 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Oak Brook, Illinois on the 29th day of March 1994. WHEELABRATOR TECHNOLOGIES INC. By /s/ PHILLIP B. ROONEY --------------------------------------- PHILLIP B. ROONEY, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Name Title Signature Date - --------------------------- ---------------------------- --------------------------- -------------- Phillip B. Rooney Director, Chairman of the /s/ PHILLIP B. ROONEY March 29, 1994 Board and Chief Executive --------------------------- Officer Phillip B. Rooney John D. Sanford Vice President, Treasurer /s/ JOHN D. SANFORD March 29, 1994 and Chief Financial Officer --------------------------- John D. Sanford Richard S. Haak, Jr. Controller and Principal /s/ RICHARD S. HAAK, JR. March 29, 1994 Accounting Officer --------------------------- Richard S. Haak, Jr. Dean L. Buntrock Director /s/ DEAN L. BUNTROCK March 29, 1994 --------------------------- Dean L. Buntrock William M. Daley Director /s/ WILLIAM M. DALEY March 29, 1994 --------------------------- William M. Daley Donald F. Flynn Director /s/ DONALD F. FLYNN March 29, 1994 --------------------------- Donald F. Flynn Paul M. Montrone Director /s/ PAUL M. MONTRONE March 29, 1994 --------------------------- Paul M. Montrone James E. Koenig Director /s/ JAMES E. KOENIG March 29, 1994 --------------------------- James E. Koenig Manuel Sanchez Director /s/ MANUEL SANCHEZ March 29, 1994 --------------------------- Manuel Sanchez Thomas P. Stafford Director /s/ THOMAS P. STAFFORD March 29, 1994 --------------------------- Thomas P. Stafford
31 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULES To the Stockholders and the Board of Directors of Wheelabrator Technologies Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Wheelabrator Technologies Inc.'s annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated March 17, 1994. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the change in the method of accounting for income taxes and postretirement benefits other than pensions as discussed in Note 1 to the financial statements. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14(a)(2) in this Form 10-K are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen & Co. ARTHUR ANDERSEN & CO. New York, New York, March 17, 1994 F-1 SCHEDULE II WHEELABRATOR TECHNOLOGIES INC. AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
BALANCE BALANCE BALANCE DECEMBER 31, AMOUNTS DECEMBER 31, AMOUNTS DECEMBER 31, 1990 ADDITIONS COLLECTED 1991 ADDITIONS COLLECTED 1992 ------------ --------- ----------- ------------ --------- ----------- ------------ Equity Purchase Program Notes (1) Ronald J. Broglio.............. $ 913,462 $ 17,224 $ (930,686) $ -- $ -- $ -- $ -- Harold W. Buirkle.............. 2,099,986 18,822 (2,118,808) -- -- -- -- Salvatore J. Caltagirone....... 96,681 1,353 (98,034) -- -- -- -- Michael D. Dingman............. 8,315,653 121,347 (8,437,000) -- -- -- -- Clifford T. Dirkes............. 680,245 27,895 (360,550) 347,590 556 (348,146) -- Michael J. Farrell............. 361,034 5,426 (366,460) -- -- -- -- Paul J. Feira.................. 798,304 24,492 (483,946) 338,850 1,857 (340,707) -- Rodney C. Gilbert.............. 1,457,644 35,268 (1,492,912) -- -- -- -- Farid G. Habeishi.............. 456,731 2,998 (459,729) -- -- -- -- Edwin M. Hardin................ 146,388 573 (146,961) -- -- -- -- John J. Heeney................. 195,184 3,554 (198,738) -- -- -- -- John M. Kehoe, Jr.............. 1,711,765 79,033 (1,157,280) 633,518 17,363 (650,881) -- William C. Keightley........... 569,938 13,215 (583,153) -- -- -- -- Bruce W. Keough................ 1,141,828 20,967 (1,162,795) -- -- -- -- Arthur Liebowitz............... 101,219 1,377 (102,596) -- -- -- -- Paul M. Meister................ 3,691,701 145,199 (2,007,036) 1,829,864 51,769 (1,881,633) -- Paul M. Montrone............... 5,543,767 92,229 (5,635,996) -- -- -- -- David S. Neel.................. 456,731 1,907 (458,638) -- -- -- -- Ramanlal L. Patel.............. 433,562 27,633 (299,628) 161,567 5,947 (167,514) --
BALANCE AMOUNTS DECEMBER 31, ADDITIONS COLLECTED 1993 --------- ----------- ------------ Equity Purchase Program Notes (1) $ -- $ -- $ -- Ronald J. Broglio.............. -- -- -- Harold W. Buirkle.............. -- -- -- Salvatore J. Caltagirone....... -- -- -- Michael D. Dingman............. -- -- -- Clifford T. Dirkes............. -- -- -- Michael J. Farrell............. -- -- -- Paul J. Feira.................. -- -- -- Rodney C. Gilbert.............. -- -- -- Farid G. Habeishi.............. -- -- -- Edwin M. Hardin................ -- -- -- John J. Heeney................. -- -- -- John M. Kehoe, Jr.............. -- -- -- William C. Keightley........... -- -- -- Bruce W. Keough................ -- -- -- Arthur Liebowitz............... -- -- -- Paul M. Meister................ -- -- -- Paul M. Montrone............... -- -- -- David S. Neel.................. -- -- -- Ramanlal L. Patel.............. -- -- --
(1) Indebtedness indicated was related to purchases of common stock by participants in the Company's Equity Purchase Program. See Note 6 of Notes to Consolidated Financial Statements for a further description of the Equity Puchase Program. Such indebtedness was represented by nonrecourse promissory notes issued to the Company which were secured by shares of Common Stock of the Company purchased under such program as well as shares of the common stock of WMX issued in connection with the 1990 Merger. The Company will not issue additional shares of Common Stock under the Equity Purchase Program. F-2 SCHEDULE II (CONTINUED)
BALANCE BALANCE BALANCE DECEMBER 31, AMOUNTS DECEMBER 31, AMOUNTS DECEMBER 31, 1990 ADDITIONS COLLECTED 1991 ADDITIONS COLLECTED 1992 ----------- --------- ------------- ------------ --------- ------------ ------------ Equity Purchase Program Notes (1) (CONTINUED) William R. Poor........... $ 685,097 $ 2,901 $ (687,998) $ -- $ -- $ -- $ -- John W. Rohrer............ 456,731 14,241 (271,089) 199,883 742 (200,625) -- David S. Rozendale........ 1,141,828 4,851 (1,146,679) -- -- -- -- Richard R. Russell........ 1,187,963 9,626 (1,197,589) -- -- -- -- John D. Sanford........... 685,097 47,266 -- 732,363 20,461 (752,824) -- David L. Schmitt.......... 1,141,828 14,725 (1,156,553) -- -- -- -- Steven G. Shapiro......... 913,462 11,964 (925,426) -- -- -- -- L. Roland Shipp........... 456,731 1,823 (458,554) -- -- -- -- Scott G. Sillars.......... 246,865 6,707 (174,683) 78,889 2,218 (81,107) -- Michael K. Sylvers........ 456,731 15,707 (271,146) 201,292 1,068 (202,360) -- Ronald C. Whitaker........ 569,938 33,342 (603,280) -- -- -- -- James F. Wood............. 131,383 1,738 (133,121) -- -- -- -- Other Notes Donald F. Flynn........... -- -- -- -- -- -- -- Jerome D. Girsch.......... -- -- -- -- 154,871 -- 154,871 ----------- -------- ------------ ---------- ------- ---------- -------- $37,245,477 $805,403 $(33,527,064) $4,523,816 $256,852 $(4,625,797) $154,871 =========== ======== ============ ========== ======== =========== ========
BALANCE AMOUNTS DECEMBER 31, ADDITIONS COLLECTED 1993 --------- ------------ ------------ Equity Purchase Program Notes (1) (CONTINUED) William R. Poor........... $ -- $ -- $ -- John W. Rohrer............ -- -- -- David S. Rozendale........ -- -- -- Richard R. Russell........ -- -- -- John D. Sanford........... -- -- -- David L. Schmitt.......... -- -- -- Steven G. Shapiro......... -- -- -- L. Roland Shipp........... -- -- -- Scott G. Sillars.......... -- -- -- Michael K. Sylvers........ -- -- -- Ronald C. Whitaker........ -- -- -- James F. Wood............. -- -- -- Other Notes Donald F. Flynn........... 176,633 -- 176,633 Jerome D. Girsch.......... -- (154,871) -- -------- --------- -------- $176,633 $(154,871) $176,633 ======== ========= ========
(1) Indebtedness indicated was related to purchases of common stock by participants in the Company's Equity Purchase Program. See Note 6 of Notes to Consolidated Financial Statements for a further description of the Equity Puchase Program. Such indebtedness was represented by nonrecourse promissory notes issued to the Company which were secured by shares of Common Stock of the Company purchased under such program as well as shares of the common stock of WMX issued in connection with the 1990 Merger. The Company will not issue additional shares of Common Stock under the Equity Purchase Program. F-3 SCHEDULE V WHEELABRATOR TECHNOLOGIES INC. PROPERTY, PLANT AND EQUIPMENT (000'S OMITTED)
BALANCE AT NET ASSETS BALANCE BEGINNING ADDITIONS FROM SALES AND OTHER AT END OF PERIOD AT COST ACQUISITIONS RETIREMENTS CHANGES* OF PERIOD ---------- --------- ------------ ------------ ---------- ---------- Year ended December 31, 1991 Land......................... $ 34,119 $ 250 $17,669 $ (197) $ 75 $ 51,916 Land options................. 171,484 -- -- -- -- 171,484 Buildings and improvements... 145,540 5,408 2,411 (12,467) 58,359 199,251 Machinery and equipment...... 507,551 17,172 18,413 (6,823) 221,424 757,737 Construction in progress..... 380,885 107,014 -- -- (284,717) 203,182 ---------- -------- ------- -------- --------- ---------- Total....................... $1,239,579 $129,844 $38,493 $(19,487) $ (4,859) $1,383,570 ========== ======== ======= ======== ========= ========== Year ended December 31, 1992 Land......................... $ 51,916 $ 3,499 $ 467 $ (35) $ (87) $ 55,760 Land options................. 171,484 -- -- -- 114,323 285,807 Buildings and improvements... 199,251 39,510 8,210 (1,851) 7,849 252,969 Machinery and equipment...... 757,737 13,355 21,414 (6,382) 204,700 990,824 Construction in progress..... 203,182 91,661 26,930 -- (210,178) 111,595 ---------- -------- ------- -------- --------- ---------- Total....................... $1,383,570 $148,025 $57,021 $ (8,268) $ 116,607 $1,696,955 ========== ======== ======= ======== ========= ========== Year ended December 31, 1993 Land......................... $ 55,760 $ -- $ 176 $ (192) $ (2,341) $ 53,403 Land options................. 285,807 -- -- -- -- 285,807 Buildings and improvements... 252,969 12,027 6,608 (5,504) (42,637) 223,463 Machinery and equipment...... 990,824 28,162 4,635 (4,686) 57,641 1,076,576 Construction in progress..... 111,595 251,448 -- -- (115,656) 247,387 ---------- -------- ------- -------- --------- ---------- Total......... $1,696,955 $291,637 $11,419 $(10,382) $(102,993) $1,886,636 ========== ======== ======= ======== ========= ========== - --------------------
* Represents the effect of translating foreign balance sheets to U.S. Dollars, finalization of purchase price adjustments, and transfers from construction in progress. In 1992, primarily reflects the impact of the restatement of assets related to business combinations consummated before the adoption of FAS 109 on a gross basis rather than on a net-of-tax basis previously used. In 1993, primarily reflects the impact of the contribution of certain businesses to form, in part, Rust International Inc. See Note 2 of Notes to Consolidated Financial Statements for a further description of the Company's investment in Rust International Inc. F-4 SCHEDULE VI WHEELABRATOR TECHNOLOGIES INC. ACCUMULATED DEPRECIATION (000'S OMITTED)
BALANCE AT BALANCE BEGINNING ADDITIONS SALES AND OTHER AT END OF PERIOD AT COST RETIREMENTS CHANGES* OF PERIOD --------- ---------- ------------ --------- --------- Year ended December 31, 1991 Buildings and improvements... $ 29,737 $ 7,937 $(11,605) $ 6,421 $ 32,490 Machinery and equipment...... 100,976 27,684 (4,367) (7,098) 117,195 -------- ------- -------- -------- -------- Total....................... $130,713 $35,621 $(15,972) $ (677) $149,685 ======== ======= ======== ======== ======== Year ended December 31, 1992 Buildings and improvements... $ 32,490 $15,147 $ (1,101) $ (214) $ 46,322 Machinery and equipment...... 117,195 44,339 (5,284) (858) 155,392 -------- ------- -------- -------- -------- Total....................... $149,685 $59,486 $ (6,385) $ (1,072) $201,714 ======== ======= ======== ======== ======== Year ended December 31, 1993 Buildings and improvements... $ 46,322 $13,487 $ (61) $ (2,133) $ 57,615 Machinery and equipment...... 155,392 49,101 (3,698) (25,694) 175,101 -------- ------- -------- -------- -------- Total....................... $201,714 $62,588 $ (3,759) $(27,827) $232,716 ======== ======= ======== ======== ========
- ------------------- * Represents the effect of translating foreign balance sheets to U.S. Dollars and finalization of purchase price adjustments. In 1993, primarily reflects the impact of the contribution of certain businesses to form, in part, Rust International Inc. See Note 2 of Notes to Consolidated Financial Statements for a further description of the Company's investment in Rust International Inc. F-5 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 1. Inapplicable. 2.01 Agreement and Plan of Merger, dated March 30, 1990 and amended as of July 24, 1990, among the registrant, WMX Technologies, Inc. ("WMX") and WM Sub, Inc. (incorporated by reference to Exhibit 2.01 to the registrant's statement on Form S-4, Reg. No. 33-36118). 2.02 Rust International Inc. Organizational Agreement, dated as of December 31, 1992 ("Organizational Agreement"), by and among the registrant, The Brand Companies, Inc. ("Brand") and Chemical Waste Management, Inc. ("CWM") (incorporated by reference to Exhibit 7 to Amendment No. 6 to Statement on Schedule 13D filed on January 5, 1993 by WMX, the registrant and CWM relating to securities of Brand). 3.01 Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.01 to registrant's 1989 annual report on Form 10-K). 3.02 Certificate of Amendment to the registrant's Restated Certificate of Incorporation dated May 6, 1993 (incorporated by reference to Exhibit 19 to the registrant's report on Form 10-Q for the quarter ended March 31, 1993). 3.03 By-Laws of the registrant as amended through November 1, 1990 (incorporated by reference to Exhibit 3.03 to the registrant's 1990 annual report on Form 10-K). 4. None. 5. Inapplicable. 6. Inapplicable. 7. Inapplicable. 8. Inapplicable. 9. None.
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. **This information appears only on the manually signed original of this report. E-1 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 10.01 Tax Sharing Agreement ("TSA"), dated as of December 15, 1988, between the registrant and Koll Real Estate Group, Inc. ("KREG") (incorporated by reference to Exhibit 10.02 to Amendment No. 3 on Form 8 to KREG's registration statement on Form 10, Commission File No. 0-17189). 10.02 Amendment to the TSA dated February 14, 1994. 10.03 Master Support Agreement, dated as of February 26, 1986, among Allied-Signal Inc. ("Allied Signal"), the registrant and Signal Capital Corporation, as amended and restated as of January 27, 1987, and as further amended and restated as of December 7, 1988, among Allied-Signal, Wheelabrator Technologies Inc. ("Old WTI"), the Guaranteeing Subsidiaries referred to therein, the Non-Company Resco Subsidiaries referred to therein, the registrant and KREG (incorporated by reference to Exhibit 10.22 to Amendment No. 3 on Form 8 to KREG's registration statement on Form 10, Commission File No. 0-17189). 10.04 Assignment, Assumption and Release Agreement, dated as of December 7, 1988, among the registrant, Old WTI, the Old Guaranteeing Subsidiaries (as defined therein) and Allied-Signal (incorporated by reference to Exhibit 10.22B to Amendment No. 3 on Form 8 to KREG's registration statement on Form 10, Commission File No. 0-17189). 10.05 Assignment and Assumption Agreement, dated as of December 7, 1988, among the registrant, Old WTI and KREG (incorporated by reference to Exhibit 10.18B to KREG's 1988 annual report on Form 10-K, Commission File No. 0-17189). 10.06 Land Option Agreement, dated as of August 12, 1988, between Old WTI and Waste Management, Inc. ("WMI") (incorporated by reference to Exhibit 10.15 to the registrant's 1988 annual report on Form 10-K). 10.07 Amendment No. 1 to Land Option Agreement, dated as of June 1, 1992, between Resco Holdings Inc. ("Resco"), as successor by merger to Old WTI, and WMI (incorporated by reference to Exhibit 19.01 to the registrant's 1992 annual report on Form 10-K). 10.08 Second Amended and Restated Airspace Dedication Agreement, dated as of December 13, 1992, between Resco and WMI (incorporated by reference to Exhibit 19.02 to the registrant's 1992 annual report on Form 10-K).
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. ** This information appears only on the manually signed original of this report. E-2 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 10.09 Disposal Agreement, dated as of March 1, 1989, between Waste Management Inc. of Florida and Broward Waste Energy (incorporated by reference to Exhibit 10.17A to the registrant's 1988 annual report on Form 10-K). 10.10 Guaranty, dated August 2, 1988, from WMX to the registrant and Wheelabrator Technologies of North America Inc., formerly known as Wheelabrator Technologies Inc. ("WTNA") (incorporated by reference to Exhibit 10.19 to the registrant's 1988 annual report on Form 10-K). 10.11 Development Agreement, dated as of August 12, 1988, between Old WTI and WMI (incorporated by reference to Exhibit 10.21 to the registrant's 1988 annual report on Form 10-K). 10.12 Amendment No. 1 to Development Agreement, dated as of January 15, 1990, between Old WTI and WMI (incorporated by reference to Exhibit 10.63 to registrant's registration statement on Form 10-K). 10.13 Amendment No. 2 to Development Agreement, dated as of June 1, 1992, between Resco and WMI (incorporated by reference to Exhibit 19.03 to the registrant's 1992 annual report on Form 10-K). 10.14 Restricted Unit Plan for Non-Employee Directors of the registrant, as amended through June 10, 1991 (incorporated by reference to Exhibit 19.03 to the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1991). 10.15 Amendment, dated as of December 6, 1991, to the Restricted Unit Plan for Non-Employee Directors of the registrant (incorporated by reference to Exhibit 19.05 to the registrant's 1991 annual report on Form 10-K). 10.16 Deferred Director's Fee Plan adopted June 10, 1991 (incorporated by reference to Exhibit 19.02 to the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1991). 10.17 Lease Agreement, dated as of September 15, 1987, between The Connecticut Bank and Trust Company, N.A., as Owner Trustee, lessor, and Wheelabrator Millbury Inc., lessee (incorporated by reference to Exhibit 10.51 to the registrant's 1988 annual report on Form 10-K).
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. **This information appears only on the manually signed original of this report. E-3 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 10.18 Lease Agreement, dated as of December 30, 1987, as amended and restated as of April 1, 1988, between The Connecticut Bank and Trust Company, N.A., as Corporate Owner Trustee, and Donald E. Smith, as Individual Owner Trustee, lessor, and Signal Shasta Energy Company Inc., lessee (incorporated by reference to Exhibit 10.52 to the registrant's 1988 annual report on Form 10-K). 10.19 Lease Agreement, dated as of September 15, 1988, between The Connecticut Bank and Trust Company, N.A., lessor, and Baltimore Refuse Energy Systems Company, Limited Partnership, lessee (incorporated by reference to Exhibit 10.40 to registrant's registration statement on Form S-4, Reg. No. 33- 36118). 10.20 Second Amendment and Restatement of Lease Agreement, dated as of May 1, 1988, between the First National Bank of Boston, as Corporate Owner Trustee, James E. Mogavero, as Individual Owner Trustee, lessor, and Bridgeport Resco, lessee (incorporated be reference to Exhibit 10.41 to registrant's registration statement on Form S-4, Reg. No. 33-36118). 10.21 Modification Agreement, dated as of August 24, 1989, among the registrant, Old WTI, WMI, KREG and Resco (incorporated by reference to Exhibit 28.01 to the registrant's Form 8-K dated August 24, 1989). 10.22 Assignment, Assumption and Release Agreement, dated December 18, 1989, among KREG, Henley Holdings, Inc., Henley, Henley Support Co. Two, the registrant and Resco amending the Modification Agreement (incorporated by reference to Exhibit 10.69 to the registrant's registration statement on Form S-4, Reg. No. 33-36118). 10.23 Letter Agreement, dated October 25, 1990, among the registrant, WMI, Resco, Henley and Henley Support Co. Two amending the Modification Agreement (incorporated by reference to Exhibit 10.46 to the registrant's 1990 annual report on Form 10-K). 10.24 Letter Agreement, dated November 8, 1991, among the registrant, Henley, KREG, WMX, WMI, New Henley Holdings Inc. and WTNA, amending the Modification Agreement (incorporated by reference to Exhibit 10.23 to the registrant's 1991 annual report on Form 10-K).
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. **This information appears only on the manually signed original of this report. E-4 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 10.25 1988 Stock Plan for Executive Employees of Old WTI and its subsidiaries ("1988 Stock Plan") (incorporated by reference to Exhibit 28.1 to Amendment No. 1 to the registrant's registration statement on Form S-8, Reg. No. 33-31523). 10.26 Amendments, dated as of September 7, 1990, to the 1988 Stock Plan (incorporated by reference to Exhibit 19.02 to the registrant's 1990 annual report on Form 10-K). 10.27 Amendment, dated as of November 1, 1990, to the 1988 Stock Plan (incorporated by reference to Exhibit 19.04 to the registrant's 1990 annual report on Form 10-K). 10.28 Amendment, dated as of December 6, 1991, to the 1988 Stock Plan (incorporated by reference to Exhibit 19.02 to the registrant's 1991 annual report on Form 10-K). 10.29 1986 Stock Plan for Executive Employees of the registrant and its subsidiaries ("1986 Stock Plan") (incorporated by reference to Exhibit 28.2 to Amendment No. 1 to the registrant's registration statement on Form S-8, Reg. No. 33-31523). 10.30 Amendment, dated as of November 1, 1990, to the 1986 Stock Plan (incorporated by reference to Exhibit 19.03 to the registrant's 1990 annual report on Form 10-K). 10.31 Amendment, dated as of December 6, 1991, to the 1986 Stock Plan (incorporated by reference to Exhibit 19.01 to the registrant's 1991 annual report on Form 10-K). 10.32 Restated Funding Agreement, dated as of September 7, 1990, among Resco, the registrant and WMX (incorporated by reference to Exhibit 10.34 to the registrant's 1990 annual report on Form 10-K). 10.33 Medical Waste Option Agreement, dated as of September 7, 1990, between WMI and the registrant (incorporated by reference to Exhibit 10.36 to the registrant's 1990 annual report on Form 10-K). 10.34 Amendment No. 1 to Medical Waste Option Agreement, dated as of June 1, 1992, between WMI and the registrant (incorporated by reference to Exhibit 19.04 to the registrant's 1992 annual report on Form 10-K).
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. **This information appears only on the manually signed original of this report. E-5 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 10.35 Intellectual Property Licensing Agreement, dated as of September 7, 1990, by and among Waste Management International, Inc. ("WMII"), WMI and the registrant (incorporated by reference to Exhibit 10.37 to the registrant's 1990 annual report on Form 10-K). 10.36 Amended and Restated Master Intercorporate Agreement, dated as of November 1, 1993, by and among WMX, CWM and the registrant. 10.37 Lease and Agreement, dated as of April 1, 1990, between Asset Title Holding, Inc., lessor, and the registrant, lessee (incorporated by reference to Exhibit 10.40 to the registrant's 1990 annual report on Form 10-K). 10.38 Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan (as amended and restated as of March 8, 1993) (incorporated by reference to Exhibit 10.36 to the registrant's 1992 annual report on Form 10-K). 10.39 Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan (as amended and restated as of March 14, 1994). 10.40 Wheelabrator Technologies Inc. Long Term Incentive Plan (as amended and restated as of March 23, 1994). 10.41 1991 Performance Unit Plan of the registrant (incorporated by reference to Exhibit 10.48 of the registrant's 1990 annual report on Form 10-K). 10.42 Retirement Plan for Non-Employee Directors of the registrant (incorporated by reference to Exhibit 10.32 to the registrant's 1988 annual report on Form 10-K). 10.43 Amendment, dated as of September 7, 1990, to the Retirement Plan for Non-Employee Directors of the registrant (incorporated by reference to Exhibit 19.01 to the registrant's 1990 annual report on Form 10-K). 10.44 Amendment, dated June 10, 1991, to the Retirement Plan for Non-Employee Directors of the registrant (incorporated by reference to Exhibit 19.01 to the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1991).
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. **This information appears only on the manually signed original of this report. E-6 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 10.45 1991 Stock Option Plan for Non-Employee Directors of the registrant ("1991 Directors Plan") adopted June 10, 1991 (incorporated by reference to Exhibit 19.04 to the registrant's quarterly report on Form 10-Q for the quarter ended June 30, 1991). 10.46 Amendment to 1991 Directors Plan dated as of December 22, 1993. 10.47 1992 Stock Option Plan of the registrant (incorporated by reference to Exhibit 10.45 to the registrant's 1991 annual report on Form 10-K). 10.48 Rust Intercorporate Services Agreement, dated as of January 1, 1993, by and among the registrant, Rust International Inc. ("Rust"), WMX and CWM (incorporated by reference to Exhibit 10.42 to the registrants's 1992 annual report on Form 10-K). 10.49 Amendment No. 1 to Rust Intercorporate Services Agreement dated as of August 10, 1993 by and among the registrant, Rust, WMX and CWM. 10.50 Organizational Agreement (see Item 2.02 hereof). 10.51 Third Amended and Restated International Development Agreement, dated as of January 1, 1993, among the registrant, WMX, CWM, WMII, Waste Management International B.V. ("WMIBV"), Waste Management International plc ("WM International"), Rust, WTI International Holdings Inc. ("WTI International") and RIH Inc. ("RIH") (incorporated by reference to Exhibit 19.05 to the registrant's 1992 annual report on Form 10-K). 10.52 First Amended and Restated International Business Opportunities Agreement ("IBOA"), dated as of January 1, 1993, by and among the registrant, WMX, CWM, WM International, WMII and Rust (incorporated by reference to Exhibit 28 to the registrant's registration statement on Form S-3, Reg. No. 33- 59606). 10.53 Amendment Agreement, dated as of January 28, 1994, by and among the registrant, WMX, CWM, WM International, WMII and Rust amending the IBOA.
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. **This information appears only on the manually signed original of this report. E-7 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 10.54 Amended and Restated Master Dividend Deed dated, December 30, 1992, by and among the registrant, CWM, WMII, WMX's foreign nominee, WM International, WMIBV, RIH and WTI International (incorporated by reference to Exhibit 19.07 to the registrant's 1992 annual report on Form 10-K). 10.55 Reimbursement Agreement dated March 10, 1993, between WMX and the registrant (incorporated by reference to the registrant's registration statement on Form S-1, Reg. No. 33-47575). 11. None. 12. None. 13.1 Management's Discussion and Analysis of Financial Condition and Results of Operations. 13.2 Consolidated Financial Statements and Supplementary Data. 14. Inapplicable. 15. Inapplicable. 16. None. 17. Inapplicable. 18. None. 19. Inapplicable. 20. Inapplicable. 21. List of subsidiaries of the registrant. 22. None. 23.1 Consent of Arthur Andersen & Co. regarding the registrant.
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. **This information appears only on the manually signed original of this report. E-8 WHEELABRATOR TECHNOLOGIES INC. EXHIBIT INDEX
Sequential Description Page of Exhibit* Number** - ----------- ----------- 23.2 Consent of Arthur Andersen & Co. regarding Rust. 24. None. 25. Inapplicable. 26. Inapplicable. 27. Inapplicable. 28. None. 99.01 Rust's Consolidated Balance Sheets as of December 31, 1992 and 1993, Consolidated Statements of Income, Cash Flows and Changes in Stockholders' Equity for each of the years in the three-year period ended December 31, 1993 and Notes to Consolidated Financial Statements (incorporated by reference to pages F-1 through F-17 of Rust's 1993 annual report on Form 10- K, Commission File No. 1-11896). 99.02 Financial statement schedules of Rust (incorporated by reference to pages F-18 through F-23 of Rust's 1993 annual report on Form 10-K, Commission File No. 1-11896).
- ------------------ * In the case of incorporation by reference to documents filed by the registrant under the Securities Exchange Act of 1934, the registrant's file number under that Act is 0-14246. **This information appears only on the manually signed original of this report. E-9 EX-10.2 2 TAX SHRING AGMT AMENDMT EXHIBIT NO. 10.02 AMENDMENT NO. 1 TO TAX SHARING AGREEMENT This Amendment Agreement ("Amendment Agreement") is made this 14th day of February 1994 by and among Wheelabrator Technologies Inc. ("WTI"), Koll Real Estate Group, Inc. ("Koll") and Abex, Inc. ("Abex") to amend certain provisions of the Tax Sharing Agreement dated December 15, 1988 (the "Agreement") between WTI (then known as The Wheelabrator Group Inc.) and Koll (then known as Henley Newco Inc. and subsequently known at various time as The Henley Group, Inc., Henley Properties Inc. and The Bolsa Chica Company). RECITALS A. In connection with the formation of Koll, WTI transferred certain assets, liabilities and businesses to Koll in December 1988; B. In consideration of such transfer to Koll and to ensure that WTI had minimum total equity, Koll agreed to pay to WTI the amount by which WTI's net liabilities for certain federal, state or local taxes and related interest and penalties exceeded $50 million; C. The Agreement sets forth the respective rights and responsibilities of WTI and Koll with respect to such tax indemnifications; D. In consideration of Koll's contribution of certain assets, liabilities and businesses to The Henley Group, Inc. ("HGI") in December 1989, HGI assumed certain of Koll's obligations under the Agreement; E. In consideration of HGI's contribution of certain assets, liabilities and businesses to Abex in July 1992, Abex assumed certain of HGI's obligations under the Agreement; F. As a result of the various transactions referred to above, Abex is now charged with responsibility to administer the Agreement; G. At the request of Abex, Koll made a payment totaling $7,646,802 to WTI in January 1993 to enable WTI to proceed with a partial settlement of liabilities relating to an examination of the 1986-1988 federal income tax returns of WTI and its consolidated subsidiaries; and H. Certain issues have arisen among the parties as to the proper interpretation of certain provisions of the Agreement and the parties desire to amend and clarify the Agreement so as to resolve such issues. AGREEMENT NOW THEREFORE, in consideration of the premises and other good and valuable consideration in hand paid, the parties agree as follows: 1. The definition of "Old Henley Increase" included in the Agreement shall be modified as follows: a. The word "or" immediately prior to "(iv)" shall be stricken. b. The following shall be added immediately after the word "Agreement," and before the word "net" in the definition: "; or (v) any interest, penalties or additions to tax (and all reasonable out-of-pocket costs incurred in connection with the assessment or collection thereof) incurred in connection with payments that are "Old Henley Increases" pursuant to this paragraph, in each case . . . " 2. The definition of "Old Henley Limitation" included in the Agreement shall be modified in its entirety to read as follows: " 'Old Henley Limitation' means $51 million. " 3. Section 3.01(c) of the Agreement shall be modified in its entirety to read as follows: "(c) Determination of the Amount of any Old Henley Increase. For purposes of determining the amount of any Old Henley Increase described in clause (i) of the definition of "Old Henley Increase" provided in Article I, any Final Determination which results in a net increase in the Tax Detriments or a net decrease in the Tax Benefits of any member of the Old Henley Affiliated Group or of any Old Henley State or Local Affiliated Group or of any Old Henley Company filing a Stand alone state or local income or franchise tax return for any tax period ending before or including the Disaffiliation Date (ignoring, for this purpose, (1) any adjustment to a Tax Item of, the Tax Basis of, or any excess loss account maintained with respect to, a WESI Company or a WTI Business, or (2) the disallowance or reduction of any carryback from a tax period beginning after the Disaffiliation Date), shall be deemed to result in an Old Henley Increase in an amount equal to (i) in the case of Old Henley Increases resulting from net increases in income and gains, or net decreases in deductions, losses or carryforwards of deductions or losses, the amount of such net increase or net decrease multiplied (x) in the case of adjustments affecting federal income tax items, by the highest marginal rate of federal income tax in the year to which such Final Determination relates (or the average of the highest marginal rates in the event of an adjustment to rates during such year) applicable to the particular category (such as long-term capital gains) of corporate income for the year to which such Final Determination relates and (y) in the case of adjustments affecting state, local or income tax items, the actual effective state or local tax rate, and (ii) in the case of Old Henley Increases resulting from net decreases in credits or carry forwards of credits or net increases in recapture of credits, the amount of such net increase or net decrease. The amount of any Old Henley Increase shall be increased by any interest, penalties or additions to tax (and all reasonable out-of-pocket costs incurred in connection with the assessment or collection thereof) which are actually paid by any Old Henley Company to any government or taxing authority as a result of the Final Determination giving rise to such Old Henley Increase, and shall be reduced by (1) the amount of any reduction in Taxes payable by any Old Henley Company (computed as described in clauses (i) and (ii) of this Section 3.01(c)) as a result of the payment of Taxes, interest, penalties or addition to tax (and all reasonable out-of-pocket costs incurred in connection with the assessment or collection thereof) resulting from the Final Determination giving rise to such Old Henley Increase and (m) any amount received by Old Henley from HMC or Fisher pursuant to Section 2.02(b), Section 5.03 or Section 5.04 of the Old Henley/HMC Tax Sharing Agreement or Section 3.01(c) of the Old Henley/Fisher Tax Sharing Agreement as a result of the Final Determination giving rise to such Old Henley Increase. On or before December 31 of each year, WTI shall provide the effective state and local tax rate to be used in the following year. This effective rate shall be based upon WTI's actual tax rate for returns filed each year." 4. In interpreting the Agreement as amended hereby, the parties agree that: a. The adjustment to 1987 taxable income related to the Master Support Agreement As Amended and Restated as of December 7, 1988 among, inter alia, Allied-Signal Inc. and Resco Holdings Inc. (a subsidiary of WTI) in the amount of $64,185,000, together with the amortization allowed in 1987 and 1988 of $14,263,334 and all future amortization in respect thereof, is a Tax Item of a WTI Business. b. It is understood and agreed among the parties that Old Henley's actual effective state tax rate, net of federal benefit, for years through 1992 is 2% and such rate shall be used in calculations through December 31, 1993. c. An analysis of the Old Henley Limitation will be prepared and provided to the parties no less often than quarterly and will reflect the Old Henley Increases charged to the limitation. 5. Except as specifically amended by this Amendment Agreement, the Agreement shall continue in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to be executed by their duly authorized officers on the date first above written. KOLL REAL ESTATE GROUP, INC. By: /s/ R. J. Pacini ----------------------------------------- Its Chief Financial Officer WHEELABRATOR TECHNOLOGIES INC. By: /s/ Vaughn Hooks ------------------------------------ Its Assistant Treasurer ABEX INC. By: /s/ Clifford T. Dirkes -------------------------------------- Its Vice President - Taxes /wti\docs\taxamend.agr/ EX-10.36 3 INTERCORPORATE AGMT EXHIBIT 10.36 AMENDED AND RESTATED MASTER INTERCORPORATE AGREEMENT ---------------------------------------------------- This Amended and Restated Master Intercorporate Agreement (the "Agreement") is made as of the 1st day of November 1993 by and among WMX Technologies, Inc.(formerly named "Waste Management, Inc."), a Delaware corporation ("WMX"), Chemical Waste Management, Inc., a Delaware corporation and majority-owned subsidiary of WMX ("CWM"), and Wheelabrator Technologies Inc., a Delaware corporation and majority-owned subsidiary of WTI ("WTI"). WHEREAS, WMX, CWM and WTI entered into a Master Intercorporate Agreement (the "Original Agreement") dated as of September 7, 1990 in connection with the merger of WM Sub, Inc., formerly a wholly owned subsidiary of WMX, into WTI, with WTI being the surviving corporation (the "Merger"), pursuant to an Agreement and Plan of Merger dated March 30, 1990, as amended as of July 24, 1990 (the "Merger Agreement"); WHEREAS, the Original Agreement was amended in part by the International Business Opportunities Agreement dated as of March 18, 1992 by and among WMX, CWM, WTI, Waste Management International, Inc. and Waste Management International plc (the "Original IBOA") (the Original Agreement, as amended by the Original IBOA, being referred to herein as the "Amended Original Agreement"). The Original IBOA has been amended and restated by the First Amended and Restated International Business Opportunities Agreement (the "Amended and Restated IBOA") dated as of January 1, 1993 by and among the parties to the Original IBOA and Rust International Inc. ("Rust"). WHEREAS, the parties hereto wish hereby to amend and restate the Amended Original Agreement in its entirety to reflect the modifications made pursuant to the Amended and Restated IBOA and to provide for certain new matters. NOW, THEREFORE, for and in consideration of the recitals set forth above, and in consideration of the agreements, rights, obligations and covenants contained herein, WMX, CWM and WTI hereby agree as follows: ARTICLE I DEFINITIONS ----------- 1.1 Particular Terms. As used in this Agreement the following terms shall have the meaning ascribed to them below: 1.1.1 "Business Day" shall mean each Monday through Friday, other than any such day on which banks in either New York City or Pittsburgh, Pennsylvania are authorized not to be open for business generally. 1.1.2 "Effective Date" shall mean November 1, 1993. 1.1.3 "Event of Default" shall have the meaning set forth in Section 9.2 hereof. 1.1.4 "Excess Cash" shall mean at any time funds of WTI or its Subsidiaries from operations, the maturation of investments or otherwise which WTI reasonably determines and advises WMX will not be required for the conduct of its business and operations for the succeeding 30 days. 1.1.5 "Funding Agreement" shall have the meaning specified in Section 13.9 hereof. 1.1.6 "Indebtedness" of a specified Person or Persons shall mean all amounts owing by such Person or Persons to another specified Person or Persons, including, without limitation, amounts owing with respect to loans made on open account or otherwise, whether before, on or after the date hereof, including, without limitation, principal thereof and premium, if any, and interest thereon, and all amounts properly charged to an intercompany account of such first specified Person or Persons. 1.1.7 "Insurance Subsidiary" shall mean National Guaranty Insurance Company and Mountain Indemnity Insurance Company, each a Subsidiary of WMX, and any future Subsidiary of WMX engaged in substantially the same business as such Subsidiaries. 1.1.8 "International Development Agreement" shall mean that certain Third Amended and Restated International Development Agreement dated January 1, 1993 by and among WMX, WTI, CWM, WMII, Waste Management International, Waste Management Europe N.V., Rust, WTI International Holdings Inc. and RIH Inc. 1.1.9 "North America" shall mean Canada, Mexico and the United States of America and its territories and possessions (including the District of Columbia and the Commonwealth of Puerto Rico). 2 1.1.10 "Open Account Indebtedness" shall mean with respect to WTI and its Subsidiaries all Indebtedness of WTI and its Subsidiaries incurred on or prior to the Effective Date on open account to WMX or any one or more Subsidiaries of WMX, all Indebtedness of WTI and its Subsidiaries to WMX or any one or more Subsidiaries of WMX incurred after the Effective Date pursuant to Section 3.2.2 hereof and all other amounts now or at any time hereafter owing by WTI and its Subsidiaries to WMX or any one or more of its Subsidiaries (other than term loans). 1.1.11 "Person" shall mean any individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. 1.1.12 "Promissory Note" shall mean a promissory note executed by a party hereto pursuant to Section 3.5 hereof. 1.1.13 "Securities Act" shall mean the Securities Act of 1933, as amended. 1.1.14 "Subsidiary" shall mean for any Person, another Person directly or indirectly controlled by such Person; provided, however, that for purposes of this Agreement, (i) neither WTI nor any Person controlled by it shall be deemed to be a Subsidiary of WMX or any Person controlled by WMX and (ii) notwithstanding the foregoing, each Person controlled by WTI shall be deemed to be a Subsidiary of WTI and each Person controlled by a Subsidiary of WTI shall be deemed to be a Subsidiary of such Subsidiary of WTI. 1.1.15 "Waste Management International" shall mean Waste Management International plc, a majority-owned subsidiary of WMX. 1.1.16 "WMX Controlled Subsidiary" shall mean a Subsidiary of WMX that is under the control of WMX. 1.1.17 "WMII" shall mean Waste Management International, Inc., a Delaware corporation and wholly owned subsidiary of WMX. 1.1.18 "WMI" shall mean Waste Management, Inc., an Illinois corporation and wholly owned subsidiary of WMX (formerly known as "Waste Management of North America, Inc."). 1.2 Other Terms. Other capitalized terms shall have the meanings ascribed to them in particular provisions of this Agreement. 3 ARTICLE II THIS ARTICLE IS INTENTIONALLY LEFT BLANK.ARTICLE III CASH MANAGEMENT, WORKING CAPITAL AND TREASURY SERVICES ------------------------------------------------------ 3.1 Generally. WTI desires WMX to implement, as provided herein, a cash management and working capital program with the objective of allowing WTI to (a) obtain a return from WMX on investments of Excess Cash that will, over time, exceed the returns WTI could reasonably expect to obtain from investing such funds itself, and (b) obtain working capital financing at rates superior to those otherwise available to WTI. WMX and WTI agree to use their reasonable good faith efforts to implement, as provided herein, such a cash management and working capital program and they further agree to review and renegotiate this program from time to time as necessary to ensure that neither bears undue risks or losses. 3.2. Indebtedness and Cash Requirements. 3.2.1 Commitment. Until the date of termination of this Agreement pursuant to Article XII or otherwise pursuant to this Agreement, (the "Termination Date"), and subject to Article XIII hereof, WMX agrees on the terms and in the manner provided in this Article III to loan to WTI funds in such amount as WTI may from time to time request, subject to a maximum aggregate amount of Indebtedness of WTI and its Subsidiaries to WMX and its Subsidiaries outstanding at any time equal to the sum of (i) the aggregate principal amount of all Indebtedness of WMX and its Subsidiaries to WTI, if any, and its Subsidiaries outstanding at the time (the "Compensating Balance Facility") plus (ii) until September 7, 1995 $100 million (the "$100 Million Facility"). For purposes of this Section 3.2.1, the Indebtedness of WTI and its Subsidiaries to WMX and its Subsidiaries shall include, without limitation, (a) all Indebtedness of WTI and its Subsidiaries to WMX and its Subsidiaries, whether incurred before, on or after the date hereof, whether as intercompany advances, term loans or otherwise, (b) all Indebtedness of WTI and its Subsidiaries guaranteed by WMX or any of its Subsidiaries, whether before, on or after the Effective Date and (c) all unpaid amounts properly charged by WMX or any of its Subsidiaries to any intercompany account maintained with WTI or any of its Subsidiaries, whether before, on or after the date hereof. 3.2.2 Open Account Indebtedness. WMX shall, at WTI's request, advance funds to WTI on open account, subject to the limits specified in Section 3.2.1 above and 4 subject to Articles IX and XIII hereof, whereupon the amount of such advance shall constitute Open Account Indebtedness of WTI and its Subsidiaries. Subject to Section 3.6 hereof, all Open Account Indebtedness of WTI shall be due and payable on demand made at any time on or after the Termination Date; provided, however, that if at any time prior to the Termination Date the outstanding balance of Open Account Indebtedness of WTI and its Subsidiaries, together with the outstanding aggregate balance of all other Indebtedness of WTI and its Subsidiaries to WMX and its Subsidiaries (other than Open Account Indebtedness represented by invoices issued by WMX or its Subsidiaries for goods sold or services rendered to the extent such invoices are not yet due and payable by their terms), exceeds the limit set forth in Section 3.2.1 hereof, then the lesser of the amount of such excess or the entire balance of such Open Account Indebtedness shall be due and payable on demand by WMX. WTI shall be entitled to pay any or all Open Account Indebtedness at any time prior to its maturity without payment of any premium or penalty. 3.2.3 Interest on Open Account Indebtedness. Interest shall accrue on each day's balance of Open Account Indebtedness of WTI or its Subsidiaries to WMX or its Subsidiaries at the effective rate per annum that would be payable by WMX (inclusive of underwriters', dealers' or agents' commissions, fees or charges) with respect to 30-day commercial paper issued by WMX on the first business day of each month in which any Open Account Indebtedness of WTI or its Subsidiaries is outstanding, plus such number of basis points as is necessary and appropriate to effectively reimburse WMX for any expense (other than WMX's effective rate for borrowing funds) of obtaining funds incurred by it, including without limitation, WMX's cost of procuring or maintaining back-up credit lines sufficient to enable WMX to reclassify such Open Account Indebtedness from short-term to long-term ("Back-up Lines"). If on any day the net advance account balance between WTI and its Subsidiaries on the one hand and WMX and its Subsidiaries on the other hand, shows a credit due to WTI and its Subsidiaries, WTI shall be entitled to interest on such balance for such day at a rate per annum equal to (A) the effective rate (inclusive of underwriters', dealers' or agents' commissions, charges or fees) that would be payable by WMX with respect to 30-day commercial paper issued by WMX on the first business day of each month in which such net balance due to WTI and its Subsidiaries occurs, minus (B) such number of basis points as WMX and WTI agree as represents one-half of the spread between (1) the rate determined pursuant to clause (A) above, and (2) the effective interest 5 rate per annum which would normally be receivable by WTI in investments in commercial paper on the date and of the type specified in clause (A) above. To the extent WTI can demonstrate the availability to it of lower comparable short- term borrowing rates or higher rates of return on short-term investments of comparable risk, maturity and amount, as the case may be, it shall be entitled to such rates from WMX. Interest on Open Account Indebtedness of WTI and its Subsidiaries, or on the net credit advance account balance to WTI and its Subsidiaries, as the case may be, shall be due and payable on the first day of each month and at the maturity of all Open Account Indebtedness, whether by acceleration or otherwise, at such place or places as WMX or WTI, as the case may be, may from time to time designate. 3.3 WMX Term Loans to WTI. In the event that prior to the Termination Date WTI requires funds for the conduct of its business and operations which it does not wish to procure as Open Account Indebtedness then (i) if at the time there are outstanding term loan borrowings by WMX from WTI pursuant to Section 3.4 below, WTI may borrow from WMX under the Compensating Balance Facility, and WMX shall lend to WTI under the Compensating Balance Facility, subject to the limit specified in Section 3.2.1(i) above, funds on a term loan basis pursuant to the provisions of Section 3.5 hereof in such amount as WTI may request, and (ii) WTI may borrow from WMX under the $100 Million Facility, and WMX shall lend to WTI under the $100 Million Facility, subject to the limits specified in Section 3.2.1(ii) above, funds on a term loan basis pursuant to the provisions of Section 3.5 hereof in such amount as WTI may request. WTI may make term loan borrowings pursuant to this Section 3.3 no more often than once per calendar quarter. 3.4 WTI Term Loans to WMX. In the event that prior to the Termination Date WTI has Excess Cash which it does not wish to apply toward reduction of the debit balance, if any, of its Open Account Indebtedness to WMX or, if such balance is then zero, to lend to WMX on open account, then no more often than once per calendar quarter it shall lend such Excess Cash to WMX, and WMX shall borrow such funds, pursuant to the provisions of Section 3.5 hereof; provided, however, that WTI shall not be obligated to loan Excess Cash to WMX if doing so would be a material factor in affecting WTI's ability to obtain or maintain a Minimum Rating with respect to Qualified Outstanding Debt or if there be none, a Hypothetical Debt Issuance (as such capitalized terms are defined in the Funding Agreement). 6 3.5 Term Loans. 3.5.1 Promissory Note and Maturity. At the time of WTI's or WMX's, as the case may be, first borrowing of funds from WMX or WTI, as the case may be, pursuant to Section 3.3 or 3.4 above, the borrowing party shall execute and deliver to the lending party a Promissory Note substantially in the form of Exhibit A attached hereto. Unless the parties to the loan otherwise agree in writing at the time of the making of the loan, and subject to Section 3.6 hereof, each loan represented by such a Promissory Note shall be due on such date, not to exceed ten (10) years from the date of the making of the loan for borrowings by WTI under the Compensating Balance Facility and borrowings by WMX from WTI and 270 days from the date of the making of the loan for borrowings by WTI under the $100 Million Facility, as WTI and WMX shall agree at the time of the making of the loan, provided that the maturity dates of any Compensating Balance Facility term loan borrowings by WTI pursuant to Section 3.3 above shall be coordinated with the maturity dates of WMX's term loan borrowings from WTI pursuant to Section 3.4 above so that (i) for each Compensating Balance Facility term loan borrowing principal amount, there is an equal or greater amount of WMX term loan indebtedness to WTI which matures at the same time as or later than such WTI borrowings and (ii) at no point in time may any principal amount of the Compensating Balance Facility borrowing by WTI be outstanding in excess of the outstanding balance of WMX term loan borrowings from WTI pursuant to Section 3.4 above. Each such loan shall, as WTI may choose at the time of the making of the loan, either bear a stated rate of interest determined as provided in Section 3.5.2 or 3.5.3 below, as the case may be, or be made on a floating interest rate basis, determined as provided in Section 3.5.4 below. 3.5.2 WTI Term Indebtedness. WTI shall pay interest to WMX on each borrowing by WTI pursuant to Section 3.3 above (other than any borrowing which is to bear a floating rate of interest) at such rate per annum as WTI and WMX agree equals (a) the then current effective rate (inclusive of underwriters' or dealers' commissions, charges or fees or similar charges) which would be payable by WMX on commercial paper (in the case of a borrowing by WTI having a maturity date of 270 or fewer days from the date of the making of the loan), or on medium-term notes (in the case of a borrowing by the Company having a maturity date more than 270 days from the date of the making of the loan) sold to an unaffiliated purchaser through underwriters or agents and having a maturity date 7 corresponding to the maturity date of such borrowing by WTI plus (b) such number of basis points as is necessary and appropriate to effectively reimburse WMX for any expense (other than WMX's effective rate for borrowing funds) of obtaining funds incurred by it, including, without limitation, WMX's cost of procuring or maintaining Back-Up Lines, provided, that if WTI can demonstrate the availability of a lower borrowing rate for comparable borrowings at the time of such borrowing, it shall be entitled to pay such lower rate. 3.5.3 WMX Term Indebtedness. Each loan from WTI to WMX pursuant to Section 3.4 above shall bear a rate of interest per annum equal to (a) the effective interest rate which WMX would be required to pay (inclusive of underwriters', dealers' or agents' commissions, charges or fees or similar charges) in the issuance to an unaffiliated purchaser of WMX commercial paper or medium-term notes, as the case may be, of equal amount and maturity date, minus (b) such number of basis points as WMX and WTI agree at the time of the making of the loan as representing one-half of the spread between (i) the rate determined pursuant to clause (a) of this Section 3.5.3 and (ii) the stated interest rate which would normally be receivable by WTI in an investment in commercial paper or medium-term notes issued by an unaffiliated party, as the case may be, of amount, maturity and risk equal to the same instruments issued by WMX. To the extent that WTI can demonstrate the availability to it at the time of the making of a loan to WMX of higher rates of return on investments of equal amount, risk and maturity, it shall be entitled to receive such rates from WMX with respect to such loan. 3.5.4 Floating Interest Rate. The parties may agree at the time of making any loan that the loan shall bear a floating interest rate determined on the basis of such reference interest rate per annum or other basis, either with or without any increase thereto or decrease therefrom, as the parties may at the time agree, in which event the interest rate on such loan shall automatically adjust as such reference rate or other basis adjusts. With respect to any borrowing by WTI on a floating rate basis hereunder, the reference interest rate or other basis to be agreed upon by the parties, together with the amount of any increase thereto or decrease therefrom, shall not exceed that which would be charged WTI for a comparable loan by an unaffiliated Person lending on an arms- length basis. 3.5.5 Interest Payment Dates. If the maturity date of a loan pursuant to Section 3.3 or 3.4 above is less than or equal to three months from the date of the making of the loan, interest shall be due and payable in arrears at the maturity date of the loan. 8 If the maturity date of such loan is later than three months from the date of the making of the loan, interest shall be due and payable in arrears at the end of each calendar quarter following the date of the making of such loan (or where a floating rate loan uses a basis involving other payment dates, on such other payment dates), with a final payment on the date payment of such loan is due, whether by acceleration or otherwise. Interest shall be based on the actual number of days elapsed based on a 360 day year. 3.5.6 Manner of Payment. All payments of Indebtedness of WTI or WMX, as the case may be, shall be made when and as due at such place as the receiving party may from time to time designate. 3.6 Set-Off. In the event that either WTI or WMX fails to pay to the other when due any payment of principal or interest with respect to a loan made pursuant to Section 3.2, 3.3 or 3.4 above, the party entitled to receive such payment may upon written notice to the other party set-off the amount of such payment against any or all sums owed by it to the other party. 3.7 Securities Representations. Each of WMX and WTI (a) represents to the other that the note to be acquired by it pursuant to Section 3.5 above will be acquired for investment purposes only and not with a view toward any public distribution and (b) agrees not to sell or otherwise dispose of such note except in accordance with the Securities Act and all applicable state securities laws. 3.8 Waiver. Each of WTI, as to all Indebtedness of WTI to WMX incurred pursuant to this Article III, and WMX, as to all Indebtedness of WMX to WTI incurred pursuant to this Article III, hereby waives presentment, demand, protest, notice of dishonor and any and all other notices, except as expressly set forth in this Agreement. 3.9 Treasury Services. At WTI's request, WMX shall from time to time consult with and advise WTI on such cash management, banking, letter of credit, financing, strategic planning and other financial and treasury matters as are within WMX's knowledge and experience. ARTICLE IV RISK MANAGEMENT AND SURETY BOND SERVICES ---------------------------------------- 4.1 Risk Management Assistance. WMX will make available to WTI the services of WMX's corporate risk management department for purposes of assisting WTI in 9 negotiating the purchase of WTI's insurance and risk management services requirements. All costs incurred by WMX or any of its Subsidiaries to unaffiliated third parties for insurance (including, without limitation, allocations from WMX as provided below) provided or procured by WMX or its Subsidiaries on behalf of WTI or its Subsidiaries shall be paid by WTI. The cost of insurance coverage which benefits both WTI or its Subsidiaries, on the one hand, and WMX or its Subsidiaries, on the other, including, without limitation, retrospective premiums and self-insurance cost allocations, shall be allocated so as to apportion such costs fairly between WTI and its Subsidiaries, on the one hand, and WMX and its Subsidiaries, on the other, on the basis of relative loss experience, total insurance costs, relative extent of coverage, relative loss exposure and other appropriate factors, and will be allocated to WTI and its Subsidiaries on a basis no less favorable to them than that generally accorded WMX's less than wholly owned Subsidiaries. In the event of any refund of any insurance premium to WMX with respect to any insurance coverage applicable to WTI or its Subsidiaries, WMX shall pay, or credit against other amounts due to WMX from WTI or its Subsidiaries, such portion of such refund as is reasonably allocable to WTI and its Subsidiaries. 4.2 Surety Bonds. Subject to the limits of Section 4.4 below, WMX shall use its reasonable good faith efforts to (a) procure surety bonds for or on behalf of WTI and (b) issue guarantees or procure letters of credit for the purpose of facilitating WTI's obtaining surety bonds on substantially the same terms and conditions that are available from time to time for similar bonds procured by WMX on behalf of its Subsidiaries, provided that the risk of loss with respect to bonds procured for or on behalf of WTI or guarantees or letters of credit issued or procured by WMX with respect to WTI bonds is comparable to the risk of loss with respect to such bonds procured from time to time by WMX on behalf of WMX's Subsidiaries. WTI shall compensate WMX for the procurement or provision of surety bonds for or on behalf of WTI and its Subsidiaries on such basis (including, without limitation, an allocation of all costs incurred by WMX or any of its Subsidiaries to unaffiliated third parties in procuring or providing surety bonds for or on behalf of all Persons controlled by it) as WMX may from time to time reasonably determine, provided, that in any calendar year the aggregate amount of such compensation for all surety bonds procured or provided by WMX or its Subsidiaries for WTI and its Subsidiaries in such year shall not exceed the 10 aggregate annual cost which WTI would have incurred in procuring surety bonds of the same type and amount from unaffiliated third parties during such year. 4.3 Captive Insurance Company. 4.3.1 WMX shall, subject to the requirements of all applicable laws and regulations and subject to the limits of Section 4.4 below, cause its Insurance Subsidiaries to offer WTI insurance and surety bond products and services at prices and on terms substantially the same as those offered from time to time to WMX's Subsidiaries; provided, that, subject to the requirements of all applicable laws and regulations, the prices for any product or service or related group of products or services which WTI has requested shall not exceed the prices then currently available from non-affiliated providers of substantially the same products and services or related group of products or services; and provided further that if the risk of loss to an Insurance Subsidiary from making products and services available to WTI is not comparable to the risk of loss with respect to WMX's Subsidiaries, the prices and terms of any such product or service which is offered to WTI may, in WMX's sole discretion, reflect such different risk of loss. WMX will use its reasonable good faith efforts to cause such products and services to be priced at a discount to comparable products offered by independent third parties. 4.3.2 WTI hereby acknowledges that Insurance Subsidiaries issue bonds and insurance policies in favor of third parties on behalf of Subsidiaries of WMX subject to the requirement that such Subsidiaries reimburse the Insurance Subsidiaries for all payments by the Insurance Subsidiaries to third parties pursuant to such bonds or policies. 4.4 Limits. In no event shall WMX be obligated to provide, or cause any Insurance Subsidiary or any of WMX's other Subsidiaries to provide, any agreement, product or service contemplated under this Article IV, if doing so would cause the Aggregate WMX Exposure (as defined below) to exceed an amount equal to 30% of WTI's stockholders' equity, as shown on WTI's most recently available annual or quarterly balance sheet prepared in accordance with generally accepted accounting principles. As used herein, the term "Aggregate WMX Exposure" shall mean the sum of: (i) the aggregate penal sum of all outstanding surety bonds procured by WMX (including those procured from an Insurance Subsidiary) for or on behalf of WTI; 11 (ii) the aggregate face amount of all guarantees issued by WMX for or on behalf of WTI for the purpose of facilitating WTI's obtaining surety bonds; (iii) the aggregate face amount of all letters of credit procured by WMX for or on behalf of WTI for the purpose of facilitating WTI's obtaining surety bonds; and (iv) the aggregate amount of the policy limits under insurance policies issued by an Insurance Subsidiary for the benefit of WTI. Notwithstanding anything in this Agreement to the contrary, "Aggregate WMX Exposure" shall not include any payment obligation of WMX under the Funding Agreement or any Funding Action (as defined therein) undertaken by WMX pursuant thereto. ARTICLE V ENVIRONMENTAL AUDIT SERVICES ---------------------------- 5.1 Services. WMX shall make available to WTI such services of the types generally provided by WMX's Environmental Audit Department to WMX's Affiliates as WTI may from time to time reasonably request. Such services shall include, but shall not be limited to, assisting WTI in developing and implementing audit procedures relating to compliance by WTI's facilities with all applicable requirements of environmental laws, regulations, permits and licenses. ARTICLE VI FEDERAL AND STATE GOVERNMENT AFFAIRS ------------------------------------ 6.1 Services. WMX shall make available to WTI such legislative, regulatory and governmental evaluation, consultation and advisory services of the types generally provided by WMX to its other Affiliates as WTI may from time to time reasonably request, provided that the scope of such services shall be limited to matters normally addressed by WMX's governmental affairs personnel and shall include furnishing the same types of information relating to legislative, regulatory and governmental affairs that WMX furnishes to its Affiliates. Such services shall be provided through WMX's senior federal governmental affairs personnel located in Washington, D.C.; WMX's senior state governmental affairs personnel located in Oak Brook, Illinois; WMX's state governmental affairs personnel 12 located in WMX's regional offices; and WMX's network of outside federal and state legislative, regulatory and governmental affairs consultants. ARTICLE VII MARKETING SUPPORT SERVICES -------------------------- 7.1 Marketing of WTI Services and Products. Subject to the provisions of the International Development Agreement and the Amended and Restated IBOA, WMX and CWM shall use their reasonable good faith efforts to assist WTI in marketing WTI's environmental services and products. Without limitation, WMX will (a) incorporate into its marketing programs, promotional materials and promotional events, information about WTI and its services and products; (b) develop marketing programs and related promotional materials which feature WTI services and products as an important part of the package of comprehensive environmental products and services provided by WMX; and (c) encourage its and CWM's sales, marketing and environmental facilities development personnel and managers of its local operations to (i) identify and refer to WTI information regarding opportunities to sell WTI services and products to WMX customers, and (ii) use their business relationships to provide reasonable assistance to WTI in selling its services and products. 7.2 Marketing of WMX and CWM Services and Products. WTI shall use its reasonable good faith efforts to assist WMX and CWM in marketing WMX's and CWM's respective environmental services and products. In particular, WTI will (a) incorporate into its marketing programs, promotional materials and promotional events, information about WMX and its services and products; (b) develop marketing program and related promotional materials which feature WMX services and products as an important part of the package of environmental products and services provided by WTI; and (c) encourage its sales, marketing and environmental facilities development personnel and managers of its local operations to (i) identify and refer to WMX or CWM, as appropriate, information regarding opportunities to sell WMX and CWM services and products to WTI customers, and (ii) use their business relationships to provide reasonable assistance to WMX and CWM in selling their respective services and products. 7.3 Integration with Existing Programs. The parties' respective obligations under this Article VII shall not require the termination or modification of existing marketing programs 13 or promotional materials or events; rather, as the parties renew or modify their existing programs, materials or events, they shall incorporate information about the services and products of the others, as provided above. ARTICLE VIII PREFERRED VENDOR RELATIONSHIP ----------------------------- 8.1 Designation of Preferred Vendor. WMX and CWM agree that WTI shall be the Preferred Vendor (as defined below) to WMX and CWM for the following services and products, as WMX or CWM may from time to time require from unaffiliated third party vendors: (a) all design and engineering services and equipment for air pollution control facilities, systems and devices used or required with respect to facilities located in North America, which services or equipment are of the types then provided by WTI (the "APC Services and Products"); and (b) all engineered products of the types then manufactured or assembled by WTI ("WTI Products"). 8.2 Definition of "Preferred Vendor". As used herein, the term "Preferred Vendor" means that, (a) with respect to purchases of APC Services and Products or WTI Products, in a single order or any series of related orders, reasonably expected by WMX or CWM, as the case may be, to cost $2 million dollars or more or, (b) with respect to a combination of APC Services and Products and WTI Products to be purchased by WMX or CWM with respect to a particular project which WMX or CWM, as the case may be, reasonably expects to generate aggregate expenditures by WMX or CWM, as the case may be, of $2 million or more for APC Services and Products and WTI Products in connection with such project, neither WMX nor CWM shall purchase such APC Services and Products or WTI Products from any unaffiliated third party unless WMX or CWM, as the case may be, has reasonably determined in good faith that the overall value, in terms of price, terms and conditions, 14 quality, documentation, service and other matters, of APC Services and Products or WTI Products available from parties other than WTI significantly exceeds the value of such APC Services and Products or WTI Products available from WTI, provided that WMX or CWM, as the case may be, shall be excused from the foregoing obligation if (i) WTI has failed to respond within a reasonable period of time to a request by WMX or CWM, as the case may be, for a price quotation or other terms or information with respect to APC Services and Products or WTI Products or has failed to commit to deliver APC Services and Products or WTI Products within the time period in which WMX or CWM, as the case may be, shall have required such APC Services and Products or WTI Products to be delivered, which time period, in either case, shall not be substantially shorter than the time period that WMX or CWM would have required from or allowed to an unaffiliated third party or, if WTI shall have made no such commitment, within a reasonable period of time after WMX or CWM has ordered them; or (ii) in WMX's or CWM's, as the case may be, reasonable, good faith judgment, the particular project or product is not appropriate for WTI in light of the nature of WTI's expertise and experience with similar projects. ARTICLE IX DEFAULT ------- 9.1. Right on Default. Upon the occurrence of an Event of Default (as defined below), WMX may in its sole and exclusive discretion suspend or terminate any or all of its obligations hereunder or may declare all Open Account Indebtedness to be, and such Open Account Indebtedness shall, subject to Section 3.6 hereof, thereupon become, immediately due and payable without presentment, demand, protest, notice of dishonor or notice of any kind, all of which are hereby waived by WTI. WMX's exercise of any particular right or remedy shall not be deemed a waiver of any other right or remedy or to preclude the exercise of any other right or remedy. No failure or delay by WMX in exercising any right or remedy shall constitute a waiver of such right or remedy or any other right or remedy. WTI shall give written notice to WMX of the occurrence of any Event of Default within five Business Days of such occurrence. 9.2 Events of Default. For purposes hereof, each of the following shall constitute an Event of Default: 15 9.2.1 WTI fails to make when and as due any payment of any sums required by the terms of this Agreement or any Promissory Note if either the right of WTI to borrow funds pursuant to Article III hereof shall have been terminated or suspended in accordance with this Agreement or the amount of such payment when added to all other outstanding Indebtedness of WTI to WMX and its Subsidiaries would exceed the limit set forth in Article III above as to all Indebtedness of WTI to WMX, provided, however, that no such failure shall constitute an Event of Default unless WTI or its Subsidiary (i) shall have failed to cure such failure within five Business Days of the date the payment was due or (ii) shall have failed to pay interest at the rate provided below on the amount of the required payment from the date when due to the date of payment and such failure continues for five Business Days from the date of WMX's written demand for payment of such interest; 9.2.2 WTI or any of its Subsidiaries fails to make when and as due any payment of principal or interest in respect of any indebtedness of WTI or any of its Subsidiaries for borrowed money, the outstanding principal balance of which plus accrued and unpaid interest exceeds an amount equal to five percent of the total stockholders' equity of WTI and its Subsidiaries determined as of the end of WTI's then most recently completed fiscal year on a consolidated basis in accordance with generally accepted accounting principles (or its equivalent in other currency in which such indebtedness is denominated), whether such indebtedness is now existing or hereafter arising; 9.2.3 Any event or condition shall occur which (A) results in the acceleration of the maturity of any indebtedness of WTI or any of its Subsidiaries for borrowed money, the outstanding principal balance of which plus accrued and unpaid interest exceeds an amount equal to five percent of the total stockholders' equity of WTI and its Subsidiaries determined as of the end of WTI's then most recently completed fiscal year on a consolidated basis in accordance with generally accepted accounting principles (or its equivalent in other currency in which such indebtedness is denominated), whether such indebtedness is now existing or arises hereafter, or (B) enables (or with the giving of notice or the passage of time or both would enable) the holder of such indebtedness to accelerate the maturity thereof (except, for purposes of this clause (B), any such indebtedness as to 16 which WTI or its relevant Subsidiary shall have a right to cure the event or condition in question and shall be practically able to effect a cure); 9.2.4 WTI or any of its Subsidiaries shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; 9.2.5 An involuntary case or other proceeding shall be commenced against WTI or any of its Subsidiaries seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days, or an order for relief shall be entered against WTI or any of its Subsidiaries under any applicable bankruptcy laws or similar laws as now or hereafter in effect; 9.2.6 Any material obligation of WTI under Article III or XIII of this Agreement fails for any reason to be in full force and effect and fully enforceable against WTI; or 9.2.7 WTI shall fail in any material respect to perform each and every material obligation of it hereunder in timely fashion and such failure shall continue unremedied for a period of ten days from and after WMX's giving of written notice of such failure. 9.3 Default Interest. All payments due from WTI shall, if not paid when due and if such failure to pay constitutes an Event of Default, bear interest at a floating rate equal to the rate per annum publicly announced by Mellon Bank, Pittsburgh, Pennsylvania, as its prime rate, which rate shall change as such rate changes. Such interest shall be due on demand and shall not duplicate any interest charged pursuant to any Promissory Note. 17 ARTICLE X OPTION TO ACQUIRE WTI STOCK --------------------------- 10.1 Consolidation Option. If, at any time or from time to time after the date hereof, WTI shall propose to issue or shall have issued additional shares of WTI voting capital stock ("WTI Stock") with the result that WMX and its Affiliates will or would no longer beneficially own at least a majority of the shares of WTI Stock on a primary basis at the time issued and outstanding, WMX shall have the option (the "Consolidation Option") to purchase from WTI such number of shares of WTI Stock as may be necessary to cause WMX and its Affiliates to remain collectively the beneficial owners of a majority of the shares of WTI Stock at the time issued and outstanding after giving effect thereto. WTI shall notify WMX in advance of any WTI Stock issuance. 10.2 Duration of Option. The Consolidation Option shall be exercisable at any time and from time to time upon the occurrence of each event entitling WMX to purchase shares of WTI Stock pursuant to the Consolidation Option (a "Triggering Event"), provided that the Consolidation Option shall terminate and be of no further force or effect if it is not exercised prior to April 30th of the calendar year next following the calendar year during which there occurred a Triggering Event, unless prior to such April 30th other events shall occur which cause, without the exercise of the Consolidation Option, WMX to beneficially own a majority of the shares of WTI Stock issued and outstanding. 10.3 Purchase Price. The purchase price payable upon the exercise of the Consolidation Option shall be an amount equal to the Fair Market Value of the shares of WTI Stock to be purchased. For purposes of this Agreement, "Fair Market Value" shall be the average of the closing sale prices of WTI Stock on the New York Stock Exchange Composite Transactions Tape, as reported in The Wall Street Journal (Midwest Edition), for the shares of WTI Stock to be valued on the five consecutive trading days ending five trading days prior to the closing date specific by WMX as provided in Section 10.4 below, or if the WTI Stock is not then listed on the New York Stock Exchange, the closing sale prices for WTI Stock for such days on the principal stock exchange on which the WTI Stock is then listed or admitted to trading, or if the WTI Stock is not then listed or admitted on any stock exchange, the price as determined in the manner provided in the International Development Agreement for the purchase of WMII stock by WTI. 18 10.4 Manner of Exercise and Purchase. The Consolidation Option shall be exercisable at any time and from time to time prior to its expiration by WMX's giving written notice to WTI of such exercise and the date selected by WMX as the closing date for the purchase of shares of WTI Stock, which date shall not be less than 11 or more than 30 trading days from the date of such notice. On the closing date so designated, WTI shall transfer to WMX the shares of WTI Stock issuable pursuant to the Consolidation Option against payment in immediately available funds of the purchase price determined as provided in Section 10.3 hereof. 10.5 Reservation of Shares: Representations and Warranties. WTI shall reserve for issuance at all times during the period the Consolidation Option is exercisable a number of shares of WTI Stock equal to the number of shares of WTI Stock issuable upon exercise of the Consolidation Option and upon exercise of the Consolidation Option will transfer to WMX the requisite number of shares of WTI Stock, free and clear of any claim, lien, charge or other encumbrance, with such representations and warranties as are customary and appropriate. 10.6 Changes in Shares. In case WTI shall make or effect any reclassification of WTI Stock into other shares of capital stock or securities, the record or effective time for which shall occur between the date of this Agreement and termination of the Consolidation Option, appropriate adjustment shall be made to the number and character of the securities subject to the Consolidation Option. ln the event of any merger, consolidation or reorganization of WTI with or into any other person or persons, there shall be substituted, on an equitable basis, for each share of WTI Stock subject to the Consolidation Option, the number and kind of shares of stock or other securities or property to which the holders of a share of WTI Stock will be entitled pursuant to such transaction. 10.7 Registration Rights. WTI acknowledges and agrees that the shares of WTI Stock to be issued upon exercise of the Consolidation Option shall be subject to the registration rights set forth in the Modification Agreement described in Section 2.1 hereof ARTICLE XI PAYMENT OF COSTS AND EXPENSES ----------------------------- 11.1 Services. In consideration of WMX's or its Subsidiaries' provision of services to WTI or its Subsidiaries pursuant to this Agreement, WMX and each of its Subsidiaries 19 shall be entitled to reimbursement for its fully allocated costs of providing services, in addition to all other payments to which it or its Subsidiaries are entitled pursuant to this Agreement, upon the presentation of invoices supported by (a) time records (or other evidence reasonably satisfactory to WTI) reasonably identifying the nature of the service performed, the period of performance and the identity of the personnel involved or (b) reasonably satisfactory evidence of designation of any employee whose services are dedicated in whole or in substantial part to serving WTI or its Subsidiaries and the portion of such employee's efforts dedicated to the provision of services to WTI or its Subsidiaries. Such fully allocated cost to WMX or its Subsidiaries in providing services shall include, without limitation, the salaries, incentive compensation, employment taxes, benefits and overhead associated with employees of WMX or its Subsidiaries for their time spent providing services to WTI or its Subsidiaries. WMX and its Subsidiaries shall also be entitled to receive reimbursement for such disbursements and out-of-pocket expenses as may be reasonably incurred by WMX or its Subsidiaries in providing such services, as specified in an invoice from WMX or its Subsidiaries. WMX and each of its Subsidiaries may, if it is not reasonably capable of providing the requested services or if such provision would unreasonably disrupt any of its respective activities, obtain such services from unaffiliated providers, and the fees and expenses therein incurred by WMX or its Subsidiaries shall be reimbursable as provided above. Subject to Section 11.3 hereof, each payment obligation of WTI pursuant to this Section 11.1 shall be due and payable 30 days after the date of invoice at such place or places as WMX may from time to time designate. 11.2 Marketing Expenses. Notwithstanding Section 11.1 above, the parties hereto shall not charge each other for the costs of providing marketing support services as provided in Article VII hereof, except for out-of-pocket expenses that would not have been incurred by a party but for such party's obligations pursuant to Article VII above. Without limitation, WMX and CWM shall not charge WTI, and WTI shall not charge WMX or CWM, for allocation of costs of producing promotional materials for the marketing of the party's own products or services that include references to another's products or services. Subject to the foregoing, WMX and CWM will reimburse WTI for its reasonable expenses, as provided in Section 11.1 above for expenses of WMX, in providing marketing services to WMX and CWM. 20 11.3 Payment Through Open Account. In the interests of administrative convenience, WMX may, from time to time during the term of this Agreement, utilize the WMX intercorporate advance account payment system (in accordance with WMX's procedures for such system as they may exist from time to time) to charge any amount owed pursuant to this Agreement by WTI or any of its Subsidiaries, as well as any other amount otherwise owed to WMX or any of its Subsidiaries by WTI or any of its Subsidiaries, to an account maintained by WMX or such Subsidiary for such purpose, and upon each such amount's being so charged it shall constitute Open Account Indebtedness for purposes of this Agreement. WMX may likewise credit such an account for any amount due to WTI or its Subsidiaries from WMX or its Subsidiaries. To the extent that, and for such period of time as, any such account reflects a credit balance in favor of WTI or any of its Subsidiaries, such account shall accrue interest at the rates and in the manner specified in Section 3.2.3 hereof for Open Account Indebtedness of WTI to WMX, and the balance of such account shall be due and payable on demand by WTI. WMX or its Subsidiaries shall from time to time be entitled to pay all or any portion of the balance of any such account to WTI or any of its Subsidiaries at any time prior to its maturity without payment of any premium or penalty. ARTICLE XII TERM AND TERMINATION -------------------- 12.1 Term. Except to the extent otherwise provided in this Agreement, this Agreement shall remain in full force and effect for so long as the Consolidation Option shall be exercisable as provided in Section 10.2 above; provided, that this Agreement shall terminate as to CWM at such time as CWM ceases to be a Subsidiary of WMX; and provided further, that in order to allow WTI to make alternative provisions for obtaining risk management and surety bond services of the type to be provided by WMX pursuant to Article IV above, WMX shall continue to provide such services and coverage to WTI for a period of 120 days following termination of this Agreement. 12.2 Effect of Termination. If this Agreement is terminated as to a party for any reason, all rights and obligations of such party shall thereupon terminate, except as provided in Section 12.1 above and except for Article XI above and Articles XIII and XIV below. 21 ARTICLE XIII INDEMNIFICATION --------------- 13.1. Indemnification of WMX. WTI agrees to indemnify and hold harmless WMX, each of its Subsidiaries and each of their respective directors, officers, employees, agents, attorneys and representatives (the "Indemnified WMX Parties") from and against any and all liabilities, claims, damages, obligations, costs and expenses (including, without limitation, reasonable attorneys' fees and court costs) asserted or made against any one or more Indemnified WMX Parties by Persons other than one or more Indemnified WMX Parties and arising from or relating to: (a) WMX's, any Insurance Subsidiary's or any other WMX Subsidiary's (A) having extended or procured coverage under any WMX insurance policy to WTI, any of its Subsidiaries or their respective businesses or properties, or having caused such coverage to be so extended, if either an Insurance Subsidiary is the issuer of such policy or WMX or any of its Subsidiaries is obligated to reimburse the issuer of such policy for payments made under such policy, (B) having procured any surety bond or letter of credit for or on behalf of WTI or any of its Subsidiaries or (C) having guaranteed or otherwise assured the performance or payment of any obligation of WTI or any of its Subsidiaries, whether before, on or after the date hereof; or (b) the failure of WTI or any of its Subsidiaries to pay when and as due any Indebtedness and other obligations of WTI or any of its Subsidiaries to WMX or any of its Subsidiaries. 13.2 Invoices by WMX. WMX shall furnish an invoice to WTI for the amount of each payment requested pursuant to this Article XIII, and WTI shall pay each such invoice within 30 days after receiving it, except to the extent that such invoice includes any amount as to which WMX is not entitled to payment by the terms of this Article XIII. WTI may at its option offset any or all of the amount of such invoice against any indebtedness owed by WMX or any of its Subsidiaries to WTI or its Subsidiaries. 13.3 Defense. WTI may at its option assume and control the defense, compromise, settlement and discharge of each matter as to which any Person is or becomes entitled to indemnification pursuant to this Article XIII. WMX agrees not to compromise, settle or dis- 22 charge any such matter without WTI's written consent unless an Event of Default shall have occurred (which consent shall not be unreasonably withheld or delayed). WTI agrees not to compromise, settle or discharge any such matter without WMX's written consent (which consent shall not be unreasonably withheld or delayed) if any claim shall have been made or threatened against any Person entitled to indemnification under this Article XIII in connection with any such matter unless such compromise, settlement or discharge includes a valid, enforceable and unconditional written release of each such Person. This Article XIII shall survive any and all terminations of this Agreement. ARTICLE XIV MISCELLANEOUS ------------- 14.1 Consequential Damages. In no event shall any party hereto be liable to any other for any consequential damages arising from, in connection with or relating to any matter provided for in this Agreement. 14.2 No Agency. In connection with the parties' performance of services hereunder, the relationship of the parties shall be solely that of independent contractors and none of the parties shall be or hold itself out as the agent of the other. 14.3 Limitation on Services. In the event that WTI requests a level of services pursuant hereto that WMX is unable to provide without material disruption of or adverse impact upon the conduct of WMX's business or operations, WMX shall be entitled to reduce the volume of services provided to WTI to such level as will not have such effects. In such event WMX will use its reasonable good faith efforts to overcome such effects so as to be able to provide the services desired by WTI. 14.4 Mutual Cooperation. 14.4.1 WMX agrees that from time to time at the request of WTI it will discuss with WTI the types of services other than those provided for herein which WMX would be able to provide to WTI. If WTI desires to obtain those services, WMX and WTI will negotiate and agree upon the terms under which WMX will provide such services including, without limitation, the payment of compensation and expenses to WMX on substantially the terms specified in Article XI hereof. 14.4.2 Each party agrees to furnish to each of the other parties such reports, statements, documents and information as are within its possession from time to time and 23 as reasonably requested by any such party for any lawful purpose of such other party relating to this Agreement, the transaction contemplated hereby, or WMX's ownership of WTI Stock including, without limitation, preparation of financial statements and tax returns and defense of lawsuits and claims, provided that the possessing party may require the requesting party to enter into an agreement obligating the requesting party to maintain the confidentiality of any confidential report, statement, document or information of the possessing party and not to use the same to the detriment of the possessing party. 14.5 Services Optional. Except as provided in Section 3.4 hereof, WTI shall not be obligated to use any services of WMX hereunder and may provide such services by itself or obtain them from any other Person. 14.6 Modification and Waiver. This Agreement may be modified in any manner and at any time, but only by written instrument executed by the parties hereto. Any of the terms, covenants and conditions of this Agreement may be waived at any time by the party entitled to the benefit of such term, covenant or condition, however, such waiver must be in writing and executed by the party against whom such waiver is asserted. No such modification or waiver executed by WTI shall be effective against WTI until approved or verified by a majority of the WTI Independent Directors (as defined in the International Development Agreement). No course of dealing will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any party under or by reason of this Agreement. 14.7 Notices. All notices, consents, requests, demands and other communications hereunder shall be in writing and shall be deemed given and effective five business days after being mailed first class, certified or registered mail, postage prepaid, return receipt requested, addressed as set forth below, or two business days after being sent by overnight courier, telex or telecopy (by a machine that indicates the telex or telecopy number of the machine to which such communication is sent and the receipt by such machine of such communication) to the address or telecopy number set forth below, (i) If to WMX: 3003 Butterfield Road Oak Brook, Illinois 60521 Attention: General Counsel Telecopier: (708) 218-1553 24 (ii) If to CWM: 3001 Butterfield Road Oak Brook, Illinois 60521 Attention: General Counsel Telecopier: (708) 218-1553 (iii) If to WTI: 3003 Butterfield Road Oak Brook, Illinois 60521 Attention: Secretary Telecopier: (708) 218-1553 or, in each case, at such other address or to such other person as may be specified in writing. 14.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14.9 Entire Agreement. This Agreement is one of the Ancillary Agreements contemplated by the Merger Agreement and embodies the entire agreement and understanding and supersedes all prior agreements and understandings of the parties (including without limitation the matters set forth in Schedule II of the Merger Agreement) with respect to the matters contemplated hereby, other than as reflected in, the International Development Agreement, the Medical Waste Option Agreement dated September 7, 1990 by and between WMI and WTI, the Intellectual Property Licensing Agreement dated September 7, 1990 by and between WMX, WMI and WTI and the Restated Funding Agreement dated September 7, 1990 of even date herewith by and between WMX and WTI and Resco Holdings Inc. (the "Funding Agreement"). 14.10 Subsidiaries. The parties hereto acknowledge that they often conduct their business operations through controlled Subsidiaries. The parties hereto therefore agree that they will cause their respective direct and indirect controlled Subsidiaries to abide by the terms of this Agreement as if they were parties hereto to the extent necessary to carry out 25 the purposes of this Agreement. Further, each party shall be entitled to cause its obligation hereunder to be satisfied, and to cause its benefits hereunder to be received, by its Subsidiaries. 14.11 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. 14.12 Choice of Law. This Agreement shall be interpreted and construed in accordance with the internal laws (and not the conflicts of laws rules) of the State of Illinois applicable to contracts made and to be performed in the State of Illinois. 14.13 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns, but, subject to Section 14.10 above, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party without the prior written consent of the other party hereto. 14.14 Severability. If any provision of this Agreement is prohibited by or held to be invalid under applicable law, such provision will be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Agreement. IN WITNESS WHEREOF, the parties have signed this Agreement on the date first above written. WMX TECHNOLOGIES, INC. CHEMICAL WASTE MANAGEMENT, INC. By /s/ James E. Koenig By /s/ Jerome D. Girsch -------------------------------- ----------------------------------- James E. Koenig Jerome D. Girsch Its Senior Vice President, Chief Its Executive Vice President, Chief Financial Officer and Treasurer Financial Officer, Controller and Treasurer WHEELABRATOR TECHNOLOGIES INC. By /s/ John D. Sanford -------------------------------- John D. Sanford Its Vice President, Chief Financial Officer and Treasurer 26 EXHIBIT A THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD BY THE HOLDER HEREOF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE ACT. BY ITS ACCEPTANCE OF THIS PROMISSORY NOTE, THE HOLDER HEREOF REPRESENTS THAT THIS PROMISSORY NOTE IS BEING ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY PUBLIC DISTRIBUTION HEREOF AND THAT ANY RESALE OF THIS PROMISSORY NOTE WILL BE MADE ONLY PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE ACT. [WMX TECHNOLOGIES, INC.] [WHEELABRATOR TECHNOLOGIES INC.] PROMISSORY NOTE _______________________, 199___ Oak Brook, Illinois FOR VALUE RECEIVED, the undersigned [WHEELABRATOR TECHNOLOGIES INC.] [WMX TECHNOLOGIES, INC.] ("Payor") promises to pay to the order of [WMX TECHNOLOGIES, INC.] [WHEELABRATOR TECHNOLOGIES INC.] ("Payee") a sum equal to the amount of each loan by Payee pursuant to Article III of the Amended and Restated Master Intercorporate Agreement dated as of November 1, 1993 by and between Payor, Payee and Chemical Waste Management, Inc. (the "Agreement") plus interest on the outstanding principal balance of the loan at the rate determined pursuant to Article III of the Agreement for the actual number of days elapsed from and inclusive of the date of the making of the loan to, but exclusive of, the date of payment of the amount due at maturity of such loan, based on a 360 day year. Contempo-raneously with the making of each loan by Payee to Payor pursuant to Article III of the Agreement, Payor shall issue to Payee a written confirmation. Each confirmation shall state the amount of funds loaned, the amount due at maturity (if different from the amount of funds loaned), the maturity date of the loan and the rate of interest or basis for determining interest, if any, applicable to such loan, all determined as provided in Article III of the Agreement. The issuance of a confirmation shall not be conclusive as to the accuracy of the information contained therein, and failure of Payor to issue such confirmation shall not affect Payor's obligations hereunder. Payee shall inform Payor with reasonable promptness of any inaccuracy therein, but neither Payee's failure to do so nor making any errors in so informing Payor shall affect Payor's obligations hereunder. 1. All payments of principal and interest shall be due on the dates determined pursuant to Article III of the Agreement and shall be made in immediately available funds, at the principal office of _______________________ Bank in ______________________ or such other place, or in such other manner, as Payee may from time to time designate by advance written notice to Payor. All required payments of principal, interest or other amounts shall, if not paid when due, bear interest at a floating rate equal to the rate per annum publicly announced by Mellon Bank, Pittsburgh, Pennsylvania as its prime rate, which rate shall change as such 1 prime rate changes and shall not duplicate any interest charged under this Promissory Note. Such interest shall be payable on demand. 2. The Payor represents and warrants as follows, which representations and warranties shall survive the execution and delivery of this Promissory Note and each loan of funds to Payor pursuant hereto and shall be deemed made as of the date hereof and as of the date of each borrowing by Payor pursuant to the Agreement. (a) Payor is a corporation duly organized and validly existing under the laws of the State of Delaware, has full power and authority to execute, deliver and perform its obligations under this Promissory Note and has taken all actions required for the due execution and delivery of, and performance of its obligations under, this Promissory Note. (b) This Promissory Note is the valid and legally binding obligation of Payor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency and other similar laws affecting creditors' rights generally and to general equitable principles. (c) The execution and delivery of, and performance of its obligations under, this Promissory Note will not constitute a violation or breach of or default under Payor's certificate of incorporation or bylaws or any applicable law, regulation or rule or any agreement or instrument to which Payor or any of its Subsidiaries (as defined in the Agreement) is a party or by which it or any of its property is bound. (d) Payor has obtained all consents, approvals and authorizations and effected all declarations, filings and registrations required to be obtained or made by Payor in connection with the execution and delivery of, or performance of its obligations under, this Promissory Note. 3. Upon the occurrence of an Event of Default (as defined below), Payee may by written notice to Payor declare the principal amount of this Promissory Note (together with accrued interest thereon) to be, and such principal amount (together with such interest) shall thereupon become, immediately due and payable without presentment, demand, protest, notice of dishonor or other notice of any kind, all of which are hereby waived by Payor except as expressly set forth herein. Payee's exercise of any right or remedy shall not be deemed a waiver of any other right or remedy or to preclude the exercise of any right or remedy. No failure or delay by Payee in exercising any right or remedy shall constitute a waiver of such rights or remedy or any other right or remedy. Payor shall give written notice to Payee of the occurrence of any Event of Default within five Business Days (as defined in the Agreement) of such occurrence. 4. For purposes hereof, each of the following shall constitute an Event of Default: (a) Payor fails to make when and as due any payment of principal, interest or other amount required by the terms of this Promissory Note, by the terms of any other Promissory Note (as defined in the Agreement) or by the terms of Article III of the Agreement to be paid (a "Required Payment"), provided, however, that no such failure shall constitute an Event of Default unless Payor shall have failed (i) to cure such failure within five Business Days of the date the Required Payment was due or (ii) to pay interest on the amount of the Required Payment from the date when due to the date of payment of the Required Payment and such failure continues uncured for five Business Days from the date of Payee's written demand for payment of such interest; 2 (b) Payor or any Subsidiary of Payor shall fail to make when and as due any payment of principal or interest in respect of any indebtedness of Payor or any of its Subsidiaries for borrowed money, the outstanding principal balance of which exceeds, together with accrued interest thereon, an amount equal to five percent of the total stockholders' equity of the Payor and its Subsidiaries determined as of the end of the Payor's then most recently completed fiscal year on a consolidated basis in accordance with generally accepted accounting principles (or its equivalent in other currency in which such indebtedness is denominated), whether such indebtedness is now existing or arises hereafter; (c) any event or condition shall occur which (i) results in the acceleration of the maturity of any indebtedness of Payor or any of its Subsidiaries for borrowed money, the outstanding principal balance of which, plus accrued and unpaid interest, exceeds an amount equal to five percent of the total stockholders' equity of the Payor and its Subsidiaries determined as of the end of the Payor's then most recently completed fiscal year on a consolidated basis in accordance with generally accepted accounting principles (or its equivalent in other currency in which such indebtedness is denominated), whether such indebtedness is now existing or arises hereafter, or (ii) enables (or with the giving of notice or the passage of time or both, would enable) the holder of such indebtedness to accelerate the maturity thereof (except, for purposes of this clause (ii), any such indebtedness as to which Payor or its Subsidiaries shall have a right to cure the event or condition in question and shall be practically able to effect a cure); (d) Payor or any of its Subsidiaries shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing. (e) an involuntary case or other proceeding shall be commenced against the Payor or any of its Subsidiaries seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against Payor or any of its Subsidiaries under any applicable bankruptcy laws or similar laws as now or hereafter in effect. (f) any representation, warranty, certification of statement made by Payor hereunder shall prove to have been incorrect in any material respect when made or deemed made; or (g) this Promissory Note shall for any reason fail to be in full force and effect and fully enforceable against Payor or Payor shall so assert. 5. All payments made pursuant to this Promissory Note shall be made without deduction for any present or future taxes, withholdings, deductions or any other charges ("Taxes") imposed or required by any governmental authority, it being understood that the net amount to be received by the Payee after payment of the Taxes shall not be less than the payment provided for herein. Payor covenants to make all payments necessary to ensure that Payee receives such net amount. If Payor makes any such deduction and payment in respect of Taxes and if Payee or any of its Subsidiaries, as the case may be, determines in good faith that it has 3 been granted by any relevant tax authority a credit against Taxes due or a refund of Taxes paid, to the extent that it may do so without prejudice to the retention of the amount of that credit or refund, Payee or its relevant Subsidiary shall reimburse Payor or its relevant Subsidiary, as the case may be, for such amount (if any) as Payee shall in good faith determine to be the proportion of that credit or refund which is attributable (or, where Payee is entitled to more than one credit or refund, which is reasonably allocable) to the said deduction and payment. 6. The outstanding principal amount hereof may be prepaid by the Payor in whole or in part, provided, that at the time of making any pre-payment, Payor shall also pay to Payee all accrued interest to such time and all reasonable losses, costs and expenses incurred by Payee in the re-deployment by Payee of the amount of such pre-payment. 7. Whenever any payment required to be made under this Promissory Note shall be due on a day other than a Business Day, such payment may be made on the next succeeding Business Day, and such extensions of time shall in such case be included in the computation of interest. 8. Payor waives presentment, demand, protest, notice of dishonor and any and all other notices in connection with this Promissory Note except as set forth herein. 9. Payment of principal and interest due from Payor pursuant hereto shall be subject to offset by Payor of any payment of principal or interest due and payable to Payor or any of its Subsidiaries from Payee pursuant to, or as otherwise contemplated by, Article III of the Agreement. 10. All notices, consents, requests, demands and other communications hereunder shall be in writing and shall be deemed given and effective five Business Days after being mailed first class, certified or registered mail, postage prepaid, return receipt requested, addressed as set forth below, or two business days after being sent by overnight courier, telex or telecopy (by a machine that indicates the telex or telecopy number of the machine to which such communication is sent and the receipt by such machine of such communication) to the address or telecopy number set forth below. If to Payee: ___________________ ___________________ ___________________ If to Payor: ___________________ ___________________ ___________________ or, in each case, at such other address or to such other person as may be specified in writing. 11. This Promissory Note shall be interpreted and construed in accordance with the internal laws (and not the conflicts of laws rules) of the State of Illinois applicable to contracts made and to be performed in the State of Illinois. 4 12. If any provision of this Promissory Note is prohibited by or held to be invalid under applicable law, such provision will be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Promissory Note. [WHEELABRATOR TECHNOLOGIES INC.] [WMX TECHNOLOGIES, INC.] By: ________________________________ Its: _______________________________ 5 EX-10.39 4 CORP.INCNTV BONUS PLAN EXHIBIT NO. 10.39 WHEELABRATOR TECHNOLOGIES INC. CORPORATE INCENTIVE BONUS PLAN (AS AMENDED AND RESTATED AS OF MARCH 14, 1994) 1. PURPOSE. The purpose of the Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan (the "Plan") is to advance the interests of Wheelabrator Technologies Inc. (the "Company") by providing for annual bonuses for officers and other key employees of the Company, its direct and indirect subsidiaries and its direct or indirect parent companies (collectively, the "Affiliates"), so as to attract and retain such officers and key employees, make their compensation competitive with other opportunities, and to the extent provided herein provide them with an incentive to strive to increase the Company's earnings by focusing on the Expanded Management System ("EMS"). 2. ADMINISTRATION. With respect to participation in the Plan by individuals who are either officers of the Company or the chief operating officer of one of the Company's principal operating groups (the "Operating Group Officers"), the Plan shall be administered by the Compensation and Stock Option Committee (the "Committee") of the Board of Directors of the Company (the "Board"). The Board may in its discretion designate the Board or a committee other than the Committee to administer the Plan, in which event the Board or such other committee shall be deemed the "Committee" hereunder. Notwithstanding the foregoing, with respect to participation in the Plan by key employees who are not described in the first sentence of this Section 2, the Plan shall be administered by a management committee composed of the Company's Chairman of the Board, President and Chief Operating Officer, and Chief Financial Officer (or one or more persons designated by them), and all references herein to the "Committee" shall be deemed to mean such committee as to matters involving the participation of such key employees in the Plan. 3. PARTICIPANTS; TERMINATION OF EMPLOYMENT. (a) Participants in the Plan shall be selected by the Committee on an annual basis. Participation shall be limited to officers or other key employees of the Company or any of its Affiliates. (b) Officers or other key employees who become eligible to participate in the Plan after the beginning of a calendar year (a "Plan Year") shall, subject to selection and approval by the Committee, be entitled to a bonus prorated to reflect such participant's actual number of full months of participation during the Plan Year. (c) If, during the Plan Year, a participant's job assignment is modified such that the participant's target bonus (as described below) is no longer representative of the participant's position, the participant's target bonus shall be adjusted, subject to Committee approval, as of the first day of the month following the change in position to a target bonus commensurate with the participant's new position. Thereafter, the participant shall be entitled to a performance award under the Plan prorated between the target bonus categories to reflect the number of months during the Plan Year during which the participant participated under each such category. (d) A participant whose employment with the Company or its Affiliates terminates during the Plan Year shall not be entitled to the payment of a bonus under the Plan, except as the Committee may otherwise determine in its sole discretion. Nothing contained in the Plan shall confer upon any participant any right to be continued in the employ of the Company or any of its Affiliates or interfere in any way with the right of the Company or any of its Affiliates to terminate a participant's employment at any time. 4. BONUSES. (A) DEFINITIONS As used in this Plan: (i) "Targeted Attainment Percentage" shall mean the Core Business Targeted Attainment Percentage and the Business Unit Targeted Attainment Percentage, as the context shall require. (ii) "Core Business Targeted Attainment Percentage" shall mean a percentage of the budgeted pre-tax earnings of the Company, specifically excluding equity income from investments, as designated by the Committee. (iii) "Business Unit Targeted Attainment Percentage" shall mean a percentage of the budgeted pre-tax earnings of a particular business unit of the Company, as designated by the Committee. (B) PERFORMANCE CRITERIA AND TARGET BONUS (i) Each participant in the Plan shall be eligible to receive such bonus, if any, for each Plan Year as may be payable pursuant to the applicable performance criteria described below. The Committee shall, on an annual basis, establish a "target bonus" for each participant equal to a percentage of base salary of such participant paid for such Plan Year. (ii) Participants in the Plan shall have their bonuses, if any, for a Plan Year determined on the basis of: (A) the Core Business Targeted Attainment Percentage achieved for the Plan Year; (B) the Business Unit Targeted Attainment Percentage applicable to a Business Unit of the Company for which such participant has substantial management responsibility achieved for the Plan Year; or (C) a weighted average of (A) and (B) above. The Committee shall for each Plan Year establish (x) the criteria from (A) through (C) above to apply to each participant, (y) as to participants to whom the criteria specified in (A) or (B) above are applicable (but not (C)), the percentage of target bonus earned at various levels of the relevant Targeted Attainment Percentage, including the minimum relevant Targeted Attainment Percentage below which no portion of target bonus shall be earned and (z) in the case of the criterion specified in (C) above, the portion of the participant's target bonus which is to be determined by reference to each of the relevant Targeted Attainment Percentages listed in clauses (A) and (B) above, and the percentages of target bonus earned at various levels of the relevant Targeted Attainment Percentages listed in (A) and (B) above, including the minimum relevant Targeted Attainment Percentage below which no portion of target bonus shall be earned as to such Targeted Attainment Percentage. (iii) Notwithstanding the foregoing, no bonus shall be payable to the Chief Executive Officer of the Company if the Committee shall have determined that he has not established programs and systems which are adequate to further the implementation of each of the Principles in the Rust International Inc. Environmental Policy. (c) ACCOUNTING In the event that there are recorded special items in income or expense, or changes in generally accepted accounting principles or accounting methods are implemented which render the pre-tax earnings data not comparable between years or the targeted objectives specified above incompatible with the purpose and intent of the Plan, the Committee may in its sole discretion make appropriate adjustments to the pre-tax earnings data or such objectives. 5. PAYMENT. Payment of bonuses for any Plan Year shall be in cash and made as promptly as practicable following completion of the Company's consolidated financial statements for such Plan Year. 6. ADJUSTMENTS FOR CHANGES IN STOCK; MERGERS; ETC. In the event of a Change in Control (as such term is defined in the Wheelabrator Technologies Inc. 1992 Stock Option Plan, as amended from time to time) of the Company (i) the Plan Year shall end as of the end of the calendar quarter coincident with or next following the date of such Change in Control (or such other date as established by the Committee), (ii) the Committee shall 3 cause the bonuses payable to participants to be promptly calculated and (iii) the Company shall pay such bonuses to participants as promptly as practicable following the Committee's determination, notwithstanding any Plan provision to the contrary. In calculating the bonuses payable to participants in connection with a Change in Control, the Committee is authorized to take into consideration such factors as the shortened Plan Year, and any other equitable adjustments to the formulae established by the Committee pursuant to Section 4 as it deems appropriate. 7. PARTICIPANT'S INTERESTS. A participant's benefits hereunder shall at all times be reflected on the Company's books as a general unsecured and unfunded obligation of the Company and the Plan shall not give any person any right or security interest in any asset of the Company nor shall it imply any trust or segregation of assets by the Company. 8. NON-ALIENATION OF BENEFITS. All rights and benefits under the Plan are personal to the participant and neither the Plan nor any right or interest of a participant or any person arising under the Plan is subject to voluntary or involuntary alienation, sale, transfer, or assignment without the Company's consent. 9. WITHHOLDING FOR TAXES. Notwithstanding any other provisions of this Plan, the Company may withhold from any payment made by it under the Plan such amount or amounts as may be required for purposes of complying with the tax withholding or other provisions of the Internal Revenue Code or the Social Security Act or any state's income tax act or for purposes of paying any estate, inheritance or other tax attributable to any amounts payable hereunder. 10. NO EMPLOYMENT RIGHTS. The Plan is not a contract of employment and participation in the Plan will not cause any participant to have any rights to continue as an employee of the Company or any of its Affiliates, or any right or claim to any benefit under the Plan except as specifically provided herein. 11. GENDER AND NUMBER. Where the context admits, words denoting men include women, the plural includes the singular, and the singular includes the plural. 12. COMMITTEE OR COMPANY DETERMINATIONS FINAL. Each determination provided for in the Plan shall be made by the Committee or the Company, as the case may be, under such procedures as may from time to time be prescribed by the Committee or the Company and shall be made in the sole discretion of the Committee or the Company as the case may be. Any such determination shall be conclusive. 13. AMENDMENT OR TERMINATION. The Committee may in its sole discretion terminate or amend the Plan from time to time. No such termination or amendment shall alter a participant's right to receive a distribution as previously awarded to such participant. 4 14. SUCCESSORS. The Plan is binding on and will inure to the benefit of any successor to the Company, whether by way of merger, consolidation, purchase or otherwise. 15. CONTROLLING LAW. The Plan shall be construed in accordance with the internal laws of the State of Illinois. * * * The foregoing is the true and complete text of the amended and restated Wheelabrator Technologies Inc. Corporate Incentive Bonus Plan as amended and restated by the Compensation and Stock Option Committee of the Board of Directors of Wheelabrator Technologies Inc. as of March 14, 1994. /s/ Stephen P. Stanczak -------------------------------- Stephen P. Stanczak, Secretary 5 EX-10.40 5 LONG TERM INCENTIVE PLAN EXHIBIT NO. 10.40 WHEELABRATOR TECHNOLOGIES INC. LONG TERM INCENTIVE PLAN (AS AMENDED AND RESTATED AS OF MARCH 23, 1994) 1. PURPOSE. The purpose of the Wheelabrator Technologies Inc. Long Term Incentive Plan (the "Plan") is to advance the interests of Wheelabrator Technologies Inc. (the "Company") by providing for long-term performance awards for officers of the Company so as to attract and retain such officers, make their compensation competitive with other opportunities, and cause them to strive to increase the Company's cumulative returns to its stockholders. 2. ADMINISTRATION. The Plan shall be administered by the Compensation and Stock Option Committee (the "Committee") of the Board of Directors of the Company (the "Board"). The Board may in its discretion designate the Board or another Committee thereof to administer the Plan, in which event the Board or such other Committee shall be deemed the "Committee" hereunder. 3. PARTICIPANTS; PERFORMANCE PERIODS; PRORATION OF AWARDS. (a) Participants in the Plan shall be selected by the Committee. Participation shall be limited to employees who are officers of the Company or one or more of its subsidiaries. (b) Participants who become eligible to participate in the Plan after June 1, 1993 shall, subject to selection and approval by the Committee, be entitled to target and performance awards pursuant to Section 4 hereof for each Performance Period (as hereinafter defined) determined pursuant hereto. For purposes hereof, each "Performance Period" during the term of the Plan shall begin on a January 1 and shall terminate on the December 31 of the third calendar year ending thereafter; provided that the first Performance Period pursuant to the Plan shall begin on June 1, 1993 and shall end on December 31, 1995. (c) If an officer of the Company becomes eligible to participate in the Plan during any Performance Period, the participant's award for such Performance Period shall be prorated to reflect such participant's actual number of full months of participation. If, during any Performance Period, a participant's job assignment is modified such that the participant's target award (as described below) is no longer representative of the participant's position, the participant's target award shall be adjusted, subject to Committee approval, as of the first day of the month following the change in position to a target award commensurate with the participant's new position. Thereafter, the participant shall be entitled to a performance award under the Plan prorated between the target award categories to reflect the number of months during the Performance Period during which the participant participated under each such category. 4. TARGET AND PERFORMANCE AWARDS. (a) The Committee shall establish a percentage of each participant's annual base salary as of the last day of each Performance Period as a "target award" for such Performance Period. (b) Each participant in the Wheelabrator Technologies Inc. Long-Term Incentive Plan shall be entitled to a performance award for each Performance Period based on the percentile rank of the Company's Total Stockholder Return (as hereinafter defined) among the Total Stockholder Returns of the companies that comprise the Standard & Poor's 500 Stock Index (the "S&P 500") during such Performance Period. For purposes hereof, "Total Stockholder Return" of the Company shall mean the cumulative return on its Common Stock expressed as a percentage, determined by dividing (i) the sum of (a) the cumulative amount of dividends paid for the applicable Performance Period, assuming dividend reinvestment, and (b) the difference between the average of the closing sales prices of such common stock on the last five trading days of such Performance Period and the last five trading days preceding the first day of such Performance Period, by (ii) the average of the closing sales prices of such common stock on the last five trading days preceding the first day of such Performance Period. The "Total Stockholder Return" of any of the companies that comprise the S&P 500 shall mean the cumulative return on its common stock expressed as a percentage, determined by dividing (i) the sum of (a) the cumulative amount of dividends paid for the applicable Performance Period, assuming dividend reinvestment, and (b) the difference between the closing sales price of such common stock on the last trading day of such Performance Period and the last trading day preceding the first day of such Performance Period, by (ii) the closing sales price of such common stock on the last trading day preceding the first day of such Performance Period. (c) The Committee may determine, in its sole discretion, that a participant's award for any Performance Period shall be calculated, in whole or in part, based upon the formula established with respect to a long term incentive plan of any subsidiary of the Company. 5. CASH AND DEFERRED AWARDS. (a) Performance awards for each Performance Period shall be payable as follows: (i) An amount equal to 50% of the performance award (the "Cash Award") shall be paid in cash as soon as practicable after the end of the Performance Period; and (ii) An amount equal to 50% of the performance award (the "Deferred Award"), adjusted as set forth in Section 6 hereof, shall be paid in cash as soon as practicable after the date of vesting, determined pursuant to Section 7 hereof. (b) The maximum amount of a performance award that may be awarded pursuant to Section 4(b) hereof to a participant with respect to any Performance Period pursuant to this Plan shall be limited to 250% of the participant's base salary as of the last day of the Performance Period. The Deferred Award portion of each performance award shall be subject to adjustment as contemplated by Section 6 hereof. 6. DEFERRED AWARD GRANT AND PAYMENT. (a) An amount equal to the Deferred Award granted to each participant pursuant hereto shall be credited to a bookkeeping account maintained by the Company in the name of each participant (a "Deferred Account") as of the last day of each Performance Period with respect to which a Deferred Award is payable. Each amount so credited shall be deemed to have been invested in shares of the Company's common stock, par value $1.00 per share ("Common Stock"), as of the last trading day of such Performance Period. During the period that any part or all of a participant's Deferred Account is deemed to have been invested in shares of Common Stock, such Deferred Account shall be deemed to receive all dividends (whether in the form of stock or cash) and stock splits which would be received with respect to such shares as if such investment had actually been made and such amounts shall be deemed to be reinvested in shares of Common Stock as of the date of receipt, and appropriate credit shall be made to the participant's Deferred Account to reflect such deemed receipts and reinvestments. The investments described above shall be deemed to have been made at a price equal to the average of the closing sales prices of the Common Stock on the New York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Midwest Edition), on each of the five trading days immediately preceding the date as of which a deemed investment is made. (b) As soon as practicable following the date of vesting of a Deferred Award pursuant to Section 7 hereof, the shares of Common Stock deemed reflected in each participant's Deferred Account shall be deemed to have been sold at a price equal to the average of the closing sales prices of the Common Stock on the New York Stock Exchange Composite Tape (as reported in The Wall Street Journal, Midwest Edition), on each of the five trading days immediately preceding the date of such vesting, and the proceeds thereof shall be distributed as soon as practicable to each participant or designated beneficiary in cash. (c) Subject to Section 8 hereof, in the event of a merger, consolidation, exchange of shares or recapitalization of the Company, a similar event affecting the Common Stock, or any other event determined by the Committee in its sole discretion, the Common Stock deemed reflected by a participant's Deferred Account may be deemed by the Committee, in its sole discretion, to be sold, exchanged or otherwise disposed of, and the Committee may make appropriate adjustments in each participant's Deferred Account to recognize such event, and the assumed proceeds of any such disposition may be deemed to be reinvested in any security which the Committee in its sole discretion determines is an appropriate replacement security, or, alternatively, paid to the participant in cash, in the discretion of the Committee. 3 7. VESTING. (a) Unless the Committee shall otherwise determine, in its sole discretion, a participant whose employment as an officer of the Company or one of its subsidiaries is terminated during any Performance Period shall not be entitled to the payment of a performance award under the Plan for such Performance Period. (b) A participant's right to receive a Cash Award or any portion thereof for any Performance Period shall not vest until the close of business on the last day of such Performance Period; provided that if the participant is not an officer of the Company or one of its subsidiaries on such date, such award or any portion thereof shall not vest unless the Committee shall otherwise determine, in its sole discretion. (c) A participant's right to receive a Deferred Award or any portion thereof for any Performance Period shall not vest until the close of business on the date three years after the last day of such Performance Period; provided that if the participant is not an officer of the Company or one of its subsidiaries on such date, then such award or any portion thereof shall not vest, except as hereinafter provided, or as the Committee shall otherwise determine, in its sole discretion. If the participant is not an officer of the Company or one of its subsidiaries on such date as a result of the participant's normal retirement at or after age 65, death or total disability, the participant or his beneficiary designated pursuant to Section 10 hereof shall be entitled to payment of such Deferred Award as soon as practicable after such normal retirement, death or total disability, in an amount equal to the value of such Deferred Account as of the last day of the month in which such normal retirement, death or total disability occurs. 8. CHANGE IN CONTROL. In the event of a Change in Control (as such term is defined in the Company's 1993 Stock Option Plan, as amended from time to time) of the Company, (i) each Performance Period which has not yet ended shall end as of the calendar quarter coincident with or next following the date of such Change in Control (or such other date as established by the Committee), (ii) each unpaid Cash Award from such Performance Periods and each unpaid Deferred Award from such Performance Periods and from prior Performance Periods shall vest as of the close of business on the last day of each such Performance Period (or such other date established by the Committee), (iii) the Committee shall cause the performance awards payable to participants to be promptly calculated, and (iv) the Company shall pay such performance awards to participants as promptly as practicable following the Committee's determination, notwithstanding any Plan provision to the contrary. In calculating the performance awards payable to participants in connection with a Change in Control, the Committee is authorized to take into consideration and make adjustments for such factors as it deems appropriate. 9. PARTICIPANT'S INTERESTS. Although Deferred Awards payable to a participant hereunder are measured by the value of and income derived from the investments 4 deemed made in Common Stock, the Company will not issue any such shares or make any such investment on behalf of a participant. A participant's benefits hereunder shall at all times be reflected on the Company's books as a general unsecured and unfunded obligation of the Company and the Plan shall not give any person any right or security interest in any asset of the Company nor shall it imply any trust or segregation of assets by the Company. 10. DESIGNATION OF BENEFICIARIES. A participant from time to time may name in writing any person or persons (who may be named concurrently, contingently or successively) to whom his or her benefits are to be paid if he or she dies before complete payment of such benefits. Each such beneficiary designation will revoke all prior designations by the participant with respect to the Plan, shall not require the consent of any previously named beneficiary, shall be in a form prescribed by the Committee, and will be effective only when filed with the Committee during the participant's lifetime. If the participant fails to designate a beneficiary before his or her death, as provided above, or if the beneficiary designated by the participant dies before the date of the participant's death or before complete payment of the participant's benefits, the Company, in its discretion, may pay the remaining unpaid portion of the participant's benefits to either (i) one or more of the participant's relatives by blood, adoption or marriage and in such proportion as the Company determines; or (ii) the legal representative or representatives of the estate of the last to die of the participant and his or her designated beneficiary. 11. FACILITY OF PAYMENT. If a participant or his or her beneficiary is entitled to payments under the Plan and in the Company's opinion such person becomes in any way incapacitated so as to be unable to manage his or her financial affairs, the Company may make payments to the participant's or beneficiary's legal representative, or to a relative or friend of the participant or beneficiary for such person's benefit, or the Company may make payments for the benefits of the participant or beneficiary in any manner that it considers advisable. Any payment made in accordance with the preceding sentence shall be a full and complete discharge of any liability for such payment hereunder. 12. NON-ALIENATION OF BENEFITS. All rights and benefits under the Plan are personal to the participant and neither the Plan nor any right or interest of a participant or any person arising under the Plan is subject to voluntary or involuntary alienation, sale, transfer, or assignment without the Company's consent. 13. WITHHOLDING FOR TAXES. Notwithstanding any other provisions of this Plan, the Company may withhold from any payment made by it under the Plan such amount or amounts as may be required for purposes of complying with the tax withholding or other provisions of the Internal Revenue Code or the Social Security Act or any state's income tax act or for purposes of paying any estate, inheritance or other tax attributable to any amounts payable hereunder. 5 14. NO EMPLOYMENT RIGHTS. The Plan is not a contract of employment and participation in the Plan will not cause any participant to have any rights to continue as an employee of the Company (or any affiliated entity), or any right or claim to any benefit under the Plan, unless the right or claim has specifically vested under the Plan. 15. COMMITTEE OR COMPANY DETERMINATIONS FINAL. Each determination provided for in the Plan shall be made by the Committee or the Company, as the case may be, under such procedures as may from time to time be prescribed by the Committee or the Company and shall be made in the absolute discretion of the Committee or the Company, as the case may be. Any such determination shall be conclusive. 16. AMENDMENT OR TERMINATION. The Committee may in its sole discretion terminate or amend the Plan from time to time. No such termination or amendment shall alter a participant's right to receive a vested award under the Plan. 17. SUCCESSORS. Unless otherwise agreed to, the Plan is binding on and will inure to the benefit of any successor to the Company, whether by way of merger, consolidation, purchase or otherwise. 18. CONTROLLING LAW. The Plan shall be construed in accordance with the internal laws of the State of Illinois. * * * The foregoing is the true and complete text of the amended and restated Wheelabrator Technologies Inc. Long Term Incentive Plan as adopted by the Board of Directors of Wheelabrator Technologies Inc. on March 23, 1994. /s/ Stephen P. Stanczak ------------------------------- Stephen P. Stanczak, Secretary 6 EX-10.46 6 AMENDED DIRECTORS PLAN EXHIBIT NO. 10.46 AMENDMENT DATED DECEMBER 22, 1993 TO WHEELABRATOR TECHNOLOGIES INC. 1991 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS 1. The Wheelabrator Technologies Inc. 1991 Stock Option Plan for Non- Employee Directors (the "Directors Plan") is hereby amended by adding the following new subparagraph (d) to Paragraph 3 thereof: "(d) Notwithstanding the provisions of subparagraph 3(a) to the contrary, in the event an option expires unexercised as to any shares of Stock as the result of the resignation of a director for any bona fide reason, a new option grant equal to the lesser of (i) the number of shares of Stock which expired unexercised and (ii) 15,000 shares of Stock, shall be automatically granted to such person upon reelection or reappointment as a director of the Company." 2. The Directors Plan is hereby amended by replacing the existing Paragraph 11 in its entirety with the following new Paragraph 11: "11. EFFECTIVE DATE OF AMENDMENTS. The Board of Directors may adopt and authorize amendments to this Plan subject to subsequent approval of the stockholders of the Company or receipt by the Company of a no-action letter from the staff of the Securities and Exchange Commission (the "Commission") to the effect that stockholder approval of such amendment is not required pursuant to Rule 16b-3 of the rules and regulations of the Commission promulgated under the Securities Exchange Act of 1934. Options may be granted under this Plan prior, but subject, to the receipt of such no-action letter or the approval of such amendment by the stockholders of the Company and, in either such case, the date of grant shall be determined without reference to the date of receipt of such no-action letter or the approval of such amendment by the stockholders of the Company. Notwithstanding any other provision of this Plan to the contrary, no option granted hereunder pursuant to such an amendment shall be exercisable prior to the date on which such amendment is approved by stockholders or a no- action letter in respect of such amendment is received by the Company as herein contemplated. In the event that as the result of an event described in Paragraph 7(b), an option becomes exercisable prior to the date on which receipt of such no-action letter or stockholder approval is obtained, the period for exercise thereof shall automatically be extended to allow for such exercise to made within three months following the date on which such no-action letter or stockholder approval is obtained." EX-10.49 7 AMENDED SERVICES AGRMT EXHIBIT NO. 10.49 AMENDMENT NO. 1 TO RUST INTERCORPORATE SERVICES AGREEMENT This Amendment No. 1 (the "Amendment") to that certain Rust Intercorporate Services Agreement (the "Services Agreement") dated as of January 1, 1993 by and among WMX Technologies, Inc. (formerly known as Waste Management, Inc.) ("WMX"), Chemical Waste Management, Inc. ("CWM"), Wheelabrator Technologies Inc., ("WTI") and Rust International Inc. ("Rust"), all Delaware corporations, is made as of August 10, 1993 by and among WMX, CWM, WTI and Rust. RECITALS WHEREAS, WMX, CWM, WTI and Rust desire to amend the Services Agreement as set forth herein; NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows (terms capitalized herein to have the meanings specified herein or in the Services Agreement): AGREEMENTS 1. Modification of Services Agreement. (a) Section 4(a) of the Services Agreement is hereby amended to substitute the words "$450 million through December 31, 1993 and $350 million thereafter" for the words "$350 million" in clause (i) thereof. (b) Section 4(c) is hereby amended to read in its entirety as follows: "(c) WMX Term Loans to the Company. In the event that the Company requires funds for the conduct of its business and operations which it does not wish to procure as Open Account Indebtedness, the Company may borrow from WMX, and WMX shall lend to the Company, subject to a limit of $350 million plus the amount specified in Section 4(a)(ii) above, funds on a term loan basis pursuant to the provisions of Sections 4(e), (f), and (h)- (m) hereof in such amount as the Company may request." 2. Other Provisions. Except as expressly set forth in this Amendment, all provisions of the Services Agreement in effect immediately prior to the execution and delivery of this Amendment shall remain in full force and effect in accordance with their terms. 3. Choice of Law. This Amendment shall be interpreted and construed in accordance with the internal laws (and not the conflicts of laws rules) of the State of Illinois applicable to contracts made and to be performed in the State of Illinois. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date set forth above. WMX TECHNOLOGIES, INC. By: /s/ Thomas C. Hau -------------------------------------------- Thomas C. Hau Vice President and Controller CHEMICAL WASTE MANAGEMENT, INC. By: /s/ Jerome D. Girsch -------------------------------------------- Jerome D. Girsch Executive Vice President, Treasurer, Controller and Chief Financial Officer WHEELABRATOR TECHNOLOGIES INC. By: /s/ John Sanford -------------------------------------------- John Sanford Vice President, Chief Financial Officer and Treasurer RUST INTERNATIONAL INC. By: /s/ Herbert A. Getz -------------------------------------------- Herbert A. Getz Vice President EX-10.53 8 AMENDMENT AGREEMENT EXHIBIT NO. 10.53 AMENDMENT AGREEMENT THIS AMENDMENT (the "Amendment") is made as of the 28th day of January, 1994 by and among WMX TECHNOLOGIES, INC., CHEMICAL WASTE MANAGEMENT, INC., WHEELABRATOR TECHNOLOGIES INC., WASTE MANAGEMENT INTERNATIONAL, INC., WASTE MANAGEMENT INTERNATIONAL plc and RUST INTERNATIONAL INC. RECITALS WHEREAS, the parties hereto are also party to a certain First Amended and Restated International Business Opportunities Agreement dated as of January 1, 1993 (the "Agreement") pursuant to which they have allocated various business opportunities among themselves. WHEREAS, Chemical Waste Management, Inc. and Waste Management, Inc., a wholly owned subsidiary of WMX Technologies, Inc., agree that it is in their best interests to amend the Agreement with respect to the allocation set forth therein of certain business opportunities in Mexico; NOW, THEREFORE, the parties hereto agree as follows: 1. Section 3.2(b)(ii) of the Agreement is hereby deleted in its entirety and the following is inserted in its stead: (ii) opportunities in North America (other than opportunities allocated to Rust under this Section 3.2(b)) relating to the storage, processing, treatment or disposal of (A) radioactive wastes, (B) hazardous wastes in the United States currently or in the future regulated under the Resource Conservation and Recovery Act or wastes the storage, treatment or disposal of which is currently regulated as hazardous or toxic under the Toxic Substances Control Act in the United States, (C) such wastes in Canada which would be so regulated in the United States or (D) wastes in Mexico which are currently or in the future regulated as hazardous or toxic under the general law of Ecological Equilibrium and Protection to the Environment, as such law now exists or in the future may be amended, modified, revised or restated, or other applicable laws in Mexico, shall be allocated to CWM; 2. Headings. The headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of this Amendment. 3. Third Party Rights. This Amendment shall not provide any third parties with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Amendment. 4. Affiliates. The parties hereto acknowledge that they often conduct their business operations through controlled Affiliates (as defined in the Agreement). The parties hereto therefore agree that they will cause their respective direct and indirect controlled Affiliates to abide by the terms of this Amendment as if they were parties hereto to the extent necessary to carry out the purposes of this Amendment. Further, each party shall be entitled to cause its obligations hereunder to be satisfied, and to cause its benefits hereunder to be received, by its controlled Affiliates. 5. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. 6. Choice of Law. This Amendment shall be interpreted and construed in accordance with the internal laws (and not the conflicts of laws rules) of the State of Illinois applicable to contracts made and to be performed in the State of Illinois. 7. Assignment. This Amendment and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns, but neither this Amendment nor any of the rights, interests or obligations hereunder shall be assigned by any party without the prior written consent of the other parties hereto. 8. Severability. If any provision of this Amendment is prohibited by or held to be invalid under applicable law, such provision will be ineffective to the extent of such prohibition or invalidity, without invalidating the remaining provisions of this Amendment. Each provision in this Amendment shall be read and construed independently of the other provisions hereof. If any provision of this Amendment, as applied to any party or to any circumstances, is adjudged by a court to be invalid or unenforceable for any reason, such judgment shall in no way affect any other provision of this Amendment, the application of such provision in any other circumstances or to any other party or the validity or enforceability of this Amendment. If any provision or part of a provision in this Amendment is held to be unenforceable because of the duration of such provision, the geographical area covered by such provision or the range of activities covered by such provision, the parties agree that the court making such determination will have the power to reduce the duration, area and scope of such provisions and to delete specific words or phrases, if and as necessary under law, and in its reduced form such provision will then be enforceable and will be enforced. 9. Registration of Agreement. If there is any provision of this Amendment, or of any agreement or arrangement of which this Amendment forms part, which causes or 2 would cause this Agreement or that agreement to be subject to registration under the Restrictive Trade Practices Act 1976 of Great Britain, then that provision shall not take effect until the day after particulars of this Amendment or that agreement or arrangement (as the case may be) have been furnished to the Director General of Fair Trading pursuant to Section 24 of that Act. 10. Ratification. Except as specifically amended hereby, the Agreement is hereby ratified, confirmed and approved. WMX TECHNOLOGIES, INC. By:/s/ James E. Koenig -------------------------------- Name: James E. Koenig Title: Senior Vice Preident, Chief Financial Officer and Treasurer CHEMICAL WASTE MANAGEMENT, INC. By:/s/ Jerome D. Girsch ------------------------------- Name: Jerome D. Girsch Title: Vice President, Chief Financial Officer, Treasurer and Controller WHEELABRATOR TECHNOLOGIES INC. By:/s/ John D. Sanford ------------------------------- Name: John D. Sanford Title: Vice President, Chief Financial Officer and Treasurer WASTE MANAGEMENT INTERNATIONAL, INC. By:/s/ Herbert A. Getz -------------------------------- Name: Herbert A. Getz Title: Vice President WASTE MANAGEMENT INTERNATIONAL PLC By:/s/ Edwin G. Falkman --------------------------------- Name: Edwin G. Falkman Title: Chief Executive RUST INTERNATIONAL INC. By:/s/ Harold W. Ingalls --------------------------------- Name: Harold W. Ingalls Title: Vice President, Chief Financial Officer and Treasurer 3 EX-13.1 9 MGMT'S DISC.& ANAL EXHIBIT 13.1 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Prior to January 1, 1993, Wheelabrator Technologies Inc. ("Wheelabrator" or the "Company") conducted business in two industry segments: Environmental Operations and Environmental and Infrastructure Engineering Services. The businesses within the Environmental Operations segment are principally involved in providing clean energy through trash-to-energy and independent power facility ownership and operation, providing clean water products and services including municipal water and wastewater treatment facility operation, biosolids management and industrial water and wastewater management, and providing clean air through a broad range of air quality control systems designed for industrial and utility applications. Pursuant to an agreement with Chemical Waste Management, Inc. ("CWM") and the Brand Companies, Inc. ("Brand"), effective January 1, 1993, Wheelabrator contributed the businesses that constituted its Environmental and Infrastructure Engineering Services segment along with certain other assets to form, in part, Rust International Inc. ("Rust"), a new engineering and construction company. In early May 1993, Brand was merged into a subsidiary of Rust. The Brand merger involved issuance of additional shares of Rust common stock to acquire certain outstanding Brand shares and reduced Wheelabrator's ownership of Rust from the approximately 42 percent originally held by the Company to approximately 40 percent. (See Note 2 of the Notes to Consolidated Financial Statements.) The Rust transaction has no effect on Wheelabrator's 1992 and prior historical financial statements. The Company accounts for its investment in Rust using the equity method, which results in a reduction of revenue, operating expenses and selling and administrative costs for 1993 compared to prior years. Wheelabrator's share of Rust's 1993 net income is included in equity in earnings of affiliates. RESULTS OF OPERATIONS The discussion and analysis of the Company's results of operations that follows focuses on the operating results of Wheelabrator's current lines of business and, as such, is based on historical Environmental Operations segment results for 1991, proforma results for 1992 that assume the Rust transaction had occurred on January 1, 1992, and historical 1993 results. Environmental Operations segment information for 1991 and proforma information for 1992 is set forth in Notes 9 and 2, respectively, of the Notes to Consolidated Financial Statements. Comparative information for Environmental Operations is summarized below (in millions):
Years Ended December 31, -------------------------- 1991 1992 1993 Revenue $775.7 $928.3 $1,142.2 Operating expenses 541.0 633.6 792.7 Selling and administrative expenses 92.5 97.9 107.3 ------ ------ -------- Income from operations $142.2 $196.8 $ 242.2 ====== ====== ========
1 1992 Compared with 1991 - ----------------------- Proforma 1992 revenue increased 20 percent versus comparable 1991 Environmental Operations segment revenue. Air and water quality control businesses acquired in 1991 and 1992 contributed approximately 40 percent of this revenue growth. These acquisitions provided Wheelabrator with an operating base and necessary technical expertise to address the biosolids management requirements of municipal and industrial customers and also broadened the Company's air quality product offerings to include volatile organic compounds ("VOC") and odor control systems as well as continuous emissions monitoring equipment. An additional 25 percent of the revenue increase is attributable to commencing operations at two new 2,250 ton per day trash-to-energy facilities in Broward County, Florida and an 800 ton per day trash-to-energy facility in Spokane, Washington. The South Broward County facility began commercial operations in the third quarter of 1991, and the North Broward facility began commercial operations in the second quarter of 1992. Partially offsetting the revenue increases from the Broward facilities was the late 1991 transition of the Spokane facility, which is owned by the City of Spokane, from construction to long-term contract operation. Existing businesses were responsible for the balance of 1992's revenue growth. Increases in trash receipts and electrical generation at operating energy facilities and higher activity at the Company's Air Pollution Control unit were primarily responsible. The Company's energy, water and air businesses represented approximately 59 percent, 30 percent and 11 percent, respectively, of total proforma 1992 revenue compared with 63 percent, 32 percent, and five percent, respectively, of total 1991 Environmental Operations segment revenue. Gross margins improved from 30.3 percent in 1991 to 31.7 percent in 1992, principally due to operating cost efficiencies realized within the Company's energy facilities. Gross margins in the air and water businesses decreased slightly during 1992 and reflect the impact, including goodwill amortization, of acquisitions made during 1991 and 1992 as well as competitive pressures in municipal water and wastewater service and utility air quality markets. Increases in selling and administrative expenses for 1992 compared to 1991 relate to acquired businesses, which typically increase these costs until the acquisitions are integrated into existing operations. As a percentage of revenue, however, selling and administrative expenses declined from 11.9 percent in 1991 to 10.5 percent in 1992. Interest expense, which relates almost entirely to project debt associated with the Company's trash-to-energy facilities, increased compared with 1991 primarily because of the commencement of operations at the two Broward County facilities. Interest costs for these facilities were capitalized during their construction periods. Interest income decreased versus 1991 due to lower investment earnings on lower cash balances. Wheelabrator's equity in the earnings of its Waste Management International plc ("WM International") affiliate increased in 1992 as a result of growth in that company's operations. On a proforma basis, in 1992 the Company would have recognized $13.4 million of equity income from Rust's net operating earnings, compared with 1991 historical net earnings of approximately 4.2 million from the Environmental and Infrastructure Engineering Services industry segment. During 1992, the Company recognized a nontaxable gain of $47.0 million associated with the initial public offering ("IPO") of shares by WM International. Proforma 1992 results also include a $19.5 million nonoperating gain related to Wheelabrator's equity interest in a similar gain recognized by Rust in connection with WM International's IPO. Excluding the effects of the WM International IPO gains and the 1991 gain on the sale of equity interests in certain foreign manufacturing operations, proforma 1992 income before accounting changes was $125.5 million, or $0.67 per share, compared with 1991 historical net income of $97.2 million, or $0.56 per share. Net income for 1992 reflects one-time charges relating to the adoption, effective January 1, 1992, of two new accounting standards: Statements of Financial Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions ("FAS 106"), and No. 109, Accounting for Income Taxes ("FAS 109"). Adopting FAS 106 resulted in a one-time cumulative after-tax charge of approximately $29.0 million, or 2 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) $0.16 per share. The adoption of FAS 109 resulted in a one-time cumulative charge of approximately $13.2 million, or $0.07 per share. The FAS 109 charge resulted primarily from increasing previously discounted deferred taxes, a method not permitted under FAS 109. Operating results for 1992 were not significantly impacted by these two accounting changes. (See Notes 1 and 3 of the Notes to Consolidated Financial Statements.) 1993 Compared with 1992 Revenues for 1993 increased 23 percent compared to proforma revenues for the previous year. Approximately 40 percent of this growth came from air and water quality control companies acquired during 1992 and 1993. The businesses acquired during 1993 significantly expanded Wheelabrator's capabilities to meet the water and wastewater management needs of industrial customers and provided entry into certain regional biosolids and air quality equipment markets as well as additional wastewater treatment technology. Successful project development efforts are responsible for an additional 30 percent of the 1993 revenue increase and include the full year impact of the North Broward County trash-to- energy facility, the third quarter 1993 start of commercial operations at the Company's New York Organic Fertilizer Company ("NYOFCO") biosolids pelletizer facility located in New York City and construction revenues from the Lisbon, Connecticut trash-to-energy facility being built by Wheelabrator for the Eastern Connecticut Resource Recovery Authority ("ECRRA"). Construction began in the third quarter of 1993 on the Lisbon facility, which will be operated by the Company under a long-term contract with ECRRA following scheduled facility completion in late 1995. Existing businesses contributed the remaining 30 percent of revenue growth in 1993 versus 1992. The major factors in this internal growth were higher revenue from air quality control system construction and installation and greater tonnage at certain trash-to-energy facilities with related increases in trash disposal and electrical generation revenues. Pricing for non-contract, or spot, trash disposal remained, on average, at approximately 1992 levels. Energy businesses represented approximately 52 percent of consolidated 1993 revenue, while the water and air businesses accounted for 32 percent and 16 percent, respectively. Wheelabrator's overall gross margin decreased to 30.6 percent in 1993 from proforma 1992's 31.7 percent level. This decline primarily reflects the effects, including the amortization of goodwill associated with acquisitions, of changes in the Company's ongoing business mix brought about by the rapid growth of air and water operations. In part because they are less capital intensive, these businesses typically have lower gross margins than the Company's energy operations. Selling and administrative expenses increased in absolute terms compared with proforma 1992 levels but decreased as a percentage of revenue to 9.4 percent for 1993 compared to 10.5 percent the previous year. This decline is attributable to the integration of acquired companies into existing businesses and to continuing Company-wide administrative cost containment efforts. Interest expense decreased in 1993 despite the full year impact of interest costs associated with the North Broward County trash-to-energy facility, due to the early retirement of certain outstanding above-market rate long-term debt, including approximately $75.2 million in the third quarter of 1992 associated with the Company's Saugus, Massachusetts trash-to-energy facility and an additional $40.0 million in the first quarter of 1993 associated with its trash- to-energy facility in Westchester County, New York. The decline in 1993 interest earnings results from lower cash balances and interest rates when compared to the prior year. Wheelabrator's equity in the operating earnings of its WM International and Rust affiliates increased compared to proforma prior year results due to earnings growth at Rust. As a result of adverse foreign currency translation effects, WM International's contribution to equity earnings declined versus 1992 despite substantially increased local currency earnings. 3 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) The Company recognized a $7.7 million nontaxable gain in 1993 related to Rust's issuance of additional shares in connection with the Brand merger. (See Note 2 of the Notes to Consolidated Financial Statements.) Prior year results include a similar nontaxable gain of $47.0 million associated with the WM International IPO. Proforma 1992 results also include a $19.5 million nonoperating gain related to Wheelabrator's equity interest in a similar gain recognized by Rust in connection with WM International's IPO. The Company's 1993 tax provision includes a $6.5 million increase in deferred taxes in accordance with FAS 109 as a result of the August enactment of the Omnibus Budget Reconciliation Act of 1993. (See Note 3 to the Notes to Consolidated Financial Statements.) Excluding the above-mentioned 1992 and 1993 nonoperating gains from affiliate stock transactions and the 1993 deferred tax provision adjustment, net income for 1993 increased 29 percent to $161.9 million, or $0.86 per share, compared with proforma 1992 income before accounting changes of $125.5 million, or $0.67 per share. Net income for 1992 reflects one-time charges totaling $42.2 million, or $0.23 per share, relating to the adoption, effective January 1, 1992, of two new accounting standards: FAS 106 and FAS 109. More detail on these charges is provided as part of the "1992 Compared with 1991" section of this discussion. The U.S. Supreme Court heard oral arguments in December 1993 in a case challenging the constitutionality of the Town of Clarkstown, New York's solid waste flow control ordinance. Flow control typically involves a municipality specifying the disposal site for all solid waste generated within its borders. In January 1994, the U.S. Supreme Court also heard arguments in another case to determine whether ash from the combustion of municipal solid waste should be exempt from federal hazardous waste regulations. Decisions on both cases are expected in the spring. Regardless of the court's decisions on these two cases, the Company does not believe the outcomes will have a material adverse impact on the Company's financial condition or results of operations. The majority of the businesses in which the Company is engaged are intrinsically connected with the protection of the environment and involve the potential for discharge of regulated materials into the environment. In addition, the Company becomes involved, in the normal course of business, in judicial and administrative proceedings related to alleged violations of licenses, permits, laws or regulations or differing interpretations of applicable requirements. Wheelabrator has instituted procedures to periodically evaluate potential environmental exposures. When the Company concludes it is probable that a liability has been incurred, provision is made in the financial statements for the Company's best estimate of the liability. These estimates are adjusted as necessary when additional information becomes available. To date, such provisions have not been material. LIQUIDITY AND CAPITAL RESOURCES The Company's principal uses of capital during the past several years relate to investments in new projects, acquisitions and repayments of long-term project debt. Wheelabrator currently has several projects in various stages of construction, as discussed in more detail below, and has additional projects under development. The Company also intends to continue its diversification through select acquisitions into air and water quality control markets, both domestically and internationally. 4 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) Wheelabrator believes it has access to sufficient capital resources to finance its development and construction projects along with future acquisitions. Operating cash flows or borrowings from WMX Technologies, Inc. ("WMX") pursuant to the Master Intercorporate Agreement between the Company and WMX may be utilized to meet short-term funding requirements. Wheelabrator may borrow up to $100 million until September 1995 pursuant to this agreement, plus the amount of cash invested with WMX. The Company currently anticipates meeting its needs for any external long-term capital by permanently financing certain projects. Generally, Wheelabrator provides long-term financing for its projects through a combination of project debt and equity investments by the Company. Wheelabrator will retain ownership of and make equity investments in projects where the Company's tax position and available financing terms make retention of ownership tax benefits desirable. Sale and leasebacks or other financing techniques may be used where the tax benefits will produce lower overall financing costs and potentially greater returns. During 1993 construction was completed on the $120 million NYOFCO biosolids pelletizer facility in New York City, which began commercial operations in August after successfully completing its acceptance tests. Construction continued on a $192 million, 1,500 ton-per-day trash-to-energy facility and associated recycling center in Falls Township, Pennsylvania, as did work on the Company's $78 million wood waste and scrap tire power generating facility in Polk County, Florida. Both of these facilities are expected to begin commercial operations in mid-1994. Additionally, the Company is approximately 60 percent through construction on a $36 million biosolids pelletizer facility in Baltimore, Maryland, and a $5 million biosolids composting facility in Rochester, New Hampshire began start-up at year end. To date, funding for the above projects has been provided from the Company's available cash. Capital expenditures for new project construction totalled $114.4 million, $81.3 million, and $262.2 million in 1991, 1992 and 1993, respectively, and are anticipated to require approximately $120 million of capital in 1994. Standard and Poors Corporation affirmed the Company's debt rating as a provisional "A" in 1993, which should enable Wheelabrator to provide certain guarantees of financial performance on future projects without the cost of third party credit support. Favorable implied debt ratings received from Standard and Poors Corporation and Moody's Investors Service, Inc. in 1991 have already allowed Wheelabrator to significantly reduce the cost of third party credit support for certain trash-to-energy and independent power facilities owned or leased by the Company. The Company acquired in 1993 seven businesses engaged in providing water and air quality - related environmental products and services as well as independent power in exchange for approximately 1.6 million shares of Wheelabrator common stock and $15.0 million of cash. The Company purchased three businesses in 1991 and 17 businesses during 1992 that provided environmental engineering, biosolids management and various clean air technologies. Nine of the 1991 and 1992 acquisitions serve the air and water quality control markets, while the other eleven were included in the businesses contributed to the formation of Rust. Wheelabrator paid cash and issued common stock of approximately $37.7 million and 15.2 million shares and $115.5 million and 6.8 million shares, respectively, for the 1991 and 1992 acquisitions. The proforma effect of the Environmental Operations segment acquisitions made in 1991, 1992 and 1993 on the Company's results of operations is not material. (See Note 2 of the Notes to Consolidated Financial Statements.) In April 1993, the Company filed with the Securities and Exchange Commission an updated "shelf" registration statement covering 12.8 million shares of the Company's common stock for issuance in connection with future acquisitions. 5 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) Wheelabrator has continued to refinance at lower interest rates, or repay prior to maturity, certain of its existing project debt. In 1991 the Company completed a transaction that resulted in the refinancing in the first quarter of 1993 of approximately $154.3 million of long-term project debt underlying the sale leaseback financing of its Baltimore, Maryland trash-to-energy facility. The benefit of this refunding, which reduced the interest rate on the debt from approximately ten percent to seven percent, will be recognized through lower lease payments over the remaining life of the operating lease term. In the third quarter of 1992 approximately $75.2 million of project debt relating to its Saugus, Massachusetts trash-to-energy facility was retired. During the first quarter of 1993, Wheelabrator retired early, at par value, letter of credit backed debt of approximately $40.0 million relating to its Westchester County, New York trash-to-energy facility. An additional $13.0 million of the Westchester facility's project bonds have been retired early since that bond issue became callable in 1992. In March 1994, the Company completed the refinancing of the remaining $113.0 million of project debt associated with the Westchester County facility. The refinancing decreased the interest rate on this debt from approximately 10.25 percent to 5.6 percent. In conjunction with this transaction, the Company agreed to share one-half of the interest rate savings with Westchester County in exchange for certain agreements relating to the County's involvement in the retrofit of the facility to meet the requirements of the Clean Air Act Amendments of 1990 (the "CAAA") and a five-year extension of the solid waste disposal agreement with the County. Additionally, the County has agreed, subject to certain regulatory requirements and other conditions, to finance 80 percent of the cost of the retrofit and, in turn, the Company has agreed to provide the funds necessary to pay the remaining costs for the retrofit. The benefits of the refinancing will begin to be realized in 1994, while the costs associated with the facility retrofit are not expected to be incurred until the latter part of this decade. Taken together, these activities are not expected to have a material impact on the Company's liquidity or results of operations. Before the turn of the century, the air pollution control systems at certain other trash-to-energy facilities owned or leased by Wheelabrator will be required to be modified to comply with more stringent air pollution control standards such as those in the CAAA. Required compliance dates for affected facilities, including Westchester County, are not yet known because the U.S. Environmental Protection Agency has not issued the final emission regulations and timetables required by the CAAA. Although the expenditures related to such modifications will likely be significant, they are not expected to have a material adverse effect on the Company's liquidity or results of operations because provisions in the impacted facilities' long-term waste supply agreements allow the Company to recover from customers the great majority of incremental capital and operating costs. In September 1993, the two regional solid waste districts that together form the major customer of the Company's 200 ton-per-day trash-to-energy facility in Claremont, New Hampshire filed for bankruptcy under Chapter 9 of the Federal Bankruptcy Code. Wheelabrator filed a motion to dismiss the bankruptcy in the belief that the districts' actions were an attempt to avoid settling a long- standing contract payment dispute and were otherwise without merit. In a ruling issued in February 1994, the United States Bankruptcy Court for the District of New Hampshire agreed with the Company's position and dismissed the districts' bankruptcy petition. This ruling has been appealed by the districts. Wheelabrator has made provision in its financial statements for the expected cost of these legal proceedings as well as the settlement of amounts in dispute. Further, even if the districts are successful, the impact on the Company's financial condition and results of operations will not be material. 6 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) On February 16, 1994, a Connecticut Superior Court judge issued a decision on appeals of the Connecticut Department of Environmental Protection's ("DEP") issuance of a permit to construct the Lisbon, Connecticut trash-to-energy facility currently being built by Wheelabrator. In the ruling, the judge agreed with the Company's position on all issues raised in the appeals but remanded the permit back to the DEP for further proceedings on an uncontested permit condition that requires the Lisbon facility to dispose of only Connecticut waste. The Company intends to pursue aggressively favorable resolution of this permit remand through appropriate judicial and regulatory procedures. Although Wheelabrator believes that the probability of an adverse determination as a result of the judge's remand order is remote, such a determination could result in the permanent termination of facility construction. Through a guarantee agreement with ECRRA, the facility's owner, such a consequence may require the Company to redeem the debt issued to finance the facility. In the unlikely event this were to occur, the resulting payments could have a material adverse impact on the Company's financial condition and results of operations. Wheelabrator effected a two-for-one stock split through the issuance on January 7, 1993, of one additional share of common stock for each share outstanding on December 23, 1992. All share and per share amounts in this report have been adjusted to reflect the split for the periods presented. On January 7, 1993, the Company also paid a cash dividend of $0.01 per common share that was declared in November 1992. On April 1, 1993, WTI paid a cash dividend in the amount of $0.02 per common share. Additionally, in May 1993 the Board of Directors declared an annual cash dividend in the amount of $0.06 per common share that was paid on July 1, 1993, to stockholders of record on June 17, 1993. This brought the total dividends declared by the Board of Directors in 1993 to $0.08 per share, a 100% increase over the dividends declared in 1992. The Company is authorized to repurchase up to a total of 8.0 million shares of its common stock through March 1996 on the open market or in privately negotiated transactions, provided market conditions make it attractive to do so. During 1992 approximately 4.2 million shares were repurchased at an aggregate cost of approximately $57.6 million. No shares were repurchased in 1993. Wheelabrator and Koll Real Estate Group, Inc. ("KREG", formerly The Bolsa Chica Company) are parties to a tax sharing agreement covering periods during which Wheelabrator, KREG, The Henley Group Inc. ("Henley") and their respective affiliates were included in the same consolidated group for federal income tax purposes. Pursuant to a recapitalization of Henley in 1992, Abex Inc. ("Abex") has assumed certain of Henley's obligations to KREG under a similar tax sharing agreement. (See Note 3 of the Notes to Consolidated Financial Statements.) In January 1993, the Internal Revenue Service ("IRS") completed an examination of Wheelabrator's consolidated federal income tax returns for the period 1986-1988. Pursuant to the settlement of agreed issues with the IRS, the Company made a payment of approximately $61.7 million for taxes and interest, the liability for which had previously been recorded. Adjusted for the current tax benefit to Wheelabrator of the interest paid and certain tax benefits realizable by the Company in years after 1988, the Company's $50.0 million tax sharing obligation with KREG was reduced approximately $28.8 million by this payment. In the only material unresolved issue arising from the 1986-1988 examination, the IRS proposed a significant adjustment related to the 1988 sale of a former subsidiary. Abex, KREG and Wheelabrator disputed the position taken by the IRS in an action filed before the U.S. Tax Court. In March 1994, Wheelabrator and the IRS filed a Stipulation of Settlement with the U.S. Tax Court resolving the treatment of this disputed issue. Subject to the $21.2 million remaining balance of the $50.0 million tax sharing obligation described above, Wheelabrator is indemnified by KREG and Abex from the liability assessed with regard to this issue. Although the Company is responsible for the initial payment of tax, plus interest, KREG and Abex have confirmed to the Company their respective indemnification obligations. 7 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) FINANCIAL CONDITION Wheelabrator's financial condition at December 31, 1993, compared to that at December 31, 1992, primarily reflects the impact of the Rust transaction. The net impact of the transaction was not material to the Company's overall balance sheet, as contributed net assets were replaced by an equity investment in the new company. Several individual line items, however, were affected by the transaction. Total current assets were reduced by $188.8 million primarily as a result of contributed net receivables of $93.2 million, costs and earnings in excess of billings of $64.8 million and other current assets of $28.3 million. Net property, plant and equipment declined $72.8 million as a result of the transaction, and cost in excess of net assets of acquired businesses declined $76.1 million. Other assets also fell, reflecting the contribution of $30.0 million in waste disposal credits to Rust. Contribution of construction business trade payables, accrued liabilities and advance payments on contracts reduced liabilities approximately $133.2 million. (See Note 2 to the Notes to Consolidated Financial Statements.) After giving effect to the Rust transaction, the change in the Company's financial position reflects normal operating activities as well as the uses of capital discussed above. ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has issued Statements of Financial Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits ("FAS 112"), and No. 115, Accounting for Certain Debt and Equity Securities ("FAS 115"). The Company is required to adopt both of these new standards during the first quarter of 1994. Based upon its analysis to date, Wheelabrator does not believe the adoption of FAS 112 will have a material impact on its financial statements since its current accounting is substantially in compliance with the new standard. The Company does not have and does not contemplate acquiring significant investments of the type covered in FAS 115. 8 EX-13.2 10 CONSOL. FIN.STMTS. EXHIBIT 13.2 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (000's omitted, except per share amounts)
Years Ended December 31, ------------------------------------ 1991 1992 1993 Revenue $1,173,449 $1,483,054 $1,142,219 Operating expenses 906,226 1,108,780 792,719 Selling and administrative expenses 118,441 148,355 107,276 Interest expense 54,635 75,569 64,484 Interest income (38,818) (34,656) (18,278) Equity in earnings of affiliates (13,501) (15,365) (44,809) Gains from stock transactions of affiliates - (47,000) (7,680) Gains from sale of foreign equity investments (47,063) - - Other income, net (7,010) (5,705) (4,530) ---------- ---------- ---------- Income before income taxes and cumulative effects of accounting changes 200,539 253,076 253,037 Income tax provision 74,480 76,694 89,935 ---------- ---------- ---------- Income before cumulative effects of accounting changes 126,059 176,382 163,102 Cumulative effects of accounting changes: Postretirement benefits, net - (29,010) - Income taxes - (13,220) - ---------- ---------- ---------- Net income $ 126,059 $ 134,152 $ 163,102 ========== ========== ========== Weighted average common shares outstanding 172,400 188,200 188,900 ========== ========== ========== Earnings per common share: Before cumulative effects of accounting changes $ 0.73 $ 0.94 $ 0.86 Cumulative effects of accounting changes: Postretirement benefits, net - (0.16) - Income taxes - (0.07) - ---------- ---------- ---------- Net income $ 0.73 $ 0.71 $ 0.86 ========== ========== ========== Dividends declared per common share $ - $ 0.04 $ 0.08 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 1 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (000's omitted except share amounts)
December 31, ----------------------- 1992 1993 ASSETS Current assets: Cash and cash equivalents $ 291,271 $ 36,719 Receivables, net 247,521 188,241 Costs and earnings in excess of billing 80,693 25,712 Other current assets 91,311 84,684 ---------- ---------- Total current assets 710,796 335,356 Property, plant and equipment, net 1,495,241 1,653,920 Cost in excess of net assets of acquired businesses 226,498 205,886 Investments in affiliates 199,188 561,045 Other assets 365,350 334,071 ---------- ---------- Total assets $2,997,073 $3,090,278 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term project debt $ 37,345 $ 33,754 Accounts payable 79,268 70,762 Accrued liabilities 304,247 197,123 Advance payments on contracts 38,472 28,147 ---------- ---------- Total current liabilities 459,332 329,786 ---------- ---------- Long-term project debt 857,625 776,858 ---------- ---------- Deferred income taxes 239,248 292,364 ---------- ---------- Deferred income 101,391 106,562 ---------- ---------- Other long-term liabilities 300,134 297,870 ---------- ---------- Commitments and contingencies Stockholders' equity: Preferred stock, par value $1.00 per share, - - none issued or outstanding Common stock, par value $0.01 per share, 186,473,025 shares outstanding in 1992, 188,820,322 shares outstanding in 1993 1,865 1,888 Capital in excess of par value 758,646 874,580 Cumulative translation adjustment (17,785) (33,670) Treasury stock, 43,127 shares in 1993, at cost - (717) Retained earnings 296,617 444,757 ---------- ---------- Total stockholders' equity 1,039,343 1,286,838 ---------- ---------- Total liabilities and stockholders' equity $2,997,073 $3,090,278 ========== ==========
The accompanying notes are an integral part of these balance sheets. 2 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (000's omitted)
Years Ended December 31, ----------------------------------- 1991 1992 1993 OPERATING ACTIVITIES Income before cumulative effects of accounting changes $ 126,059 $ 176,382 $ 163,102 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 40,346 67,879 75,323 Deferred taxes 5,020 61,604 61,477 Undistributed earnings of affiliates (10,902) (15,365) (44,809) Gains from sale of foreign equity investments (47,063) -- -- Gains from stock transactions of affiliates -- (47,000) (7,680) Deferred lease expense (6,540) (10,540) (7,349) Changes in assets and liabilities, net of effects of acquired and contributed businesses: Receivables, net 13,075 (37,981) (25,283) Costs and earnings in excess of billings (2,343) (30,601) (9,174) Other current assets 3,492 (23,001) (22,870) Accounts payable (7,913) (7,766) (32,008) Accrued liabilities (8,294) 12,614 (22,666) Advance payments on contracts (46,617) (31,393) 380 Other long-term liabilities 34,847 5,317 23,205 Other, net (2,457) (4,258) (27,267) --------- --------- --------- Net cash provided by operating activities 90,710 115,891 124,381 --------- --------- --------- INVESTING ACTIVITIES Capital expenditures (129,844) (148,025) (291,637) Sale of property, plant and equipment 7,619 756 1,682 Investments held by trustees 81,455 18,763 9,917 Cash paid for acquisitions, net of acquired cash (86,220) (145,521) (14,983) Sale of investments in foreign affiliates 154,585 -- -- Other, net 2,823 4,785 7,524 --------- --------- --------- Net cash provided by (used for) investing activities 30,418 (269,242) (287,497) --------- --------- --------- FINANCING ACTIVITIES Additions to long-term project debt 33,411 652 -- Repayments of long-term project debt (23,782) (129,666) (82,185) Proceeds from exercise of stock options and Equity Purchase Program note repayments, net 60,067 31,026 7,575 Dividends paid -- (5,553) (16,826) Stock repurchase program -- (57,629) -- Other, net 626 2,315 -- --------- --------- --------- Net cash provided by (used for) financing activities 70,322 (158,855) (91,436) --------- --------- ---------
Increase (decrease) in cash and cash equivalents 191,450 (312,206) (254,552) Cash and cash equivalents at beginning of period 412,027 603,477 291,271 --------- --------- --------- Cash and cash equivalents at end of period $ 603,477 $ 291,271 $ 36,719 ========= ========= ========= Supplemental disclosure: Interest paid, net of amounts capitalized $ 53,367 $ 78,421 $ 62,490 ========= ========= ========= Income taxes paid $ 27,356 $ 22,112 $ 85,441 ========= ========= ========= Significant noncash investing activities: Net assets contributed to Rust International Inc. $ -- $ -- $ 244,278 ========= ========= ========= Businesses acquired for common stock $ 151,048 $ 85,182 $ 30,972 ========= ========= =========
The accompanying notes are an integral part of these financial statements. 3 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ---------------------------------------------------------- (000'S omitted)
Equity Capital in Purchase Cumulative Common Excess of Program Translation Treasury Retained Stock Par Value Notes Adjustment Stock Earnings Total ------------------------------------------------------------------------------------ Balance, December 31, 1990 $1,645 $515,441 $(37,245) $ 22,314 - $ 43,823 $ 545,978 Net income - - - - - 126,059 126,059 Foreign currency translation - 10,976 - (2,777) - - 8,199 Exercise of stock options 20 15,764 - - - - 15,784 Equity Purchase Program - - 32,721 - - - 32,721 Tax benefit from stock options and Equity Purchase Program - 11,562 - - - - 11,562 Common stock issued for acquisitions 32 40,653 - - - - 40,685 Investment in Waste Management International plc 120 110,243 - - - - 110,363 ---------- -------- ---------- ----------- -------- -------- ---------- Balance, December 31, 1991 1,817 704,639 (4,524) 19,537 - 169,882 891,351 Net income - - - - - 134,152 134,152 Dividends declared - - - - - (7,417) (7,417) Foreign currency translation - - - (37,322) - - (37,322) Exercise of stock options 8 (3,004) - - 21,147 - 18,151 Equity Purchase Program - - 4,524 - - - 4,524 Tax benefit from stock options and Equity Purchase Program - 8,351 - - - - 8,351 Common stock issued for acquisitions 40 85,142 - - - - 85,182 Stock repurchases - - - - (57,629) - (57,629) Treasury shares distributed for stock split - (36,482) - - 36,482 - - ---------- -------- ---------- ----------- -------- -------- ----------
Balance, December 31, 1992 1,865 758,646 - (17,785) - 296,617 1,039,343 Net income - - - - - 163,102 163,102 Dividends declared - - - - - (14,962) (14,962) Foreign currency translation - - - (15,885) - - (15,885) Exercise of stock options 7 4,195 - - 3 - 4,205 Tax benefit from stock options - 3,370 - - - - 3,370 Common stock issued for acquisitions 16 30,707 - - 249 - 30,972 Treasury shares from acquisition adjustments - - - - (969) - (969) Investment in Rust International Inc. - 77,662 - - - - 77,662 ---------- -------- ---------- ----------- -------- -------- ---------- Balance, December 31, 1993 $1,888 $874,580 $ - $(33,670) $ (717) $444,757 $1,286,838 ========== ======== ========== =========== ======== ======== ==========
The accompanying notes are an integral part of these financial statements. 4 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (000's omitted in all tables except, per share amounts) NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES Wheelabrator Technologies Inc. ("Wheelabrator" or the "Company") is a majority- owned subsidiary of WMX Technologies, Inc. ("WMX"). Wheelabrator is a multi- faceted environmental services company engaged in trash-to-energy and independent power facility ownership and operation, providing a comprehensive range of water and wastewater treatment products and services to municipal and industrial customers, and supplying air quality control systems for a broad range of industrial and utility applications. PRINCIPLES OF CONSOLIDATION The Company's financial statements include the accounts of all subsidiaries, after elimination of material intercompany transactions and accounts. Investments in affiliates the Company does not control are accounted for using the equity method after elimination of material interaffiliate transactions. Prior to January 1, 1993, the Company consolidated the financial results of certain businesses contributed to form, in part, Rust International Inc. ("Rust"). Beginning in 1993, the Company's investment in Rust has been accounted for using the equity method (see Note 2). REVENUE RECOGNITION Long-term engineering and construction contract earnings are recognized on the percentage-of-completion basis. Estimated losses are recognized in full when identified. All other revenues are recognized when services are rendered or products are shipped. CONSOLIDATED STATEMENTS OF CASH FLOWS For purposes of the Consolidated Statements of Cash Flows, all highly liquid instruments purchased with an original maturity of three months or less and investments with WMX are considered to be cash equivalents. Wheelabrator and WMX are parties to a Master Intercorporate Agreement that provides, among other things, for Wheelabrator to lend excess cash to WMX at interest rates at least as favorable as those Wheelabrator could otherwise obtain. Under the terms of this agreement, in the event Wheelabrator requires short-term cash for the conduct of its business and operations, WMX will make available to Wheelabrator such amounts as Wheelabrator requires, up to a total of $100.0 million in excess of amounts loaned by Wheelabrator to WMX. In addition, a right of set-off exists for amounts owed by either Wheelabrator or WMX. As such, net amounts invested with WMX pursuant to this agreement are considered to be highly liquid cash equivalents and are included in cash and cash equivalents on the Company's consolidated balance sheets. The Company had net investments with WMX of approximately $222.5 million and $14.9 million, as of December 31, 1992 and 1993, respectively. PROPERTY, PLANT AND EQUIPMENT are carried at cost and are generally depreciated on a straight-line basis using estimated lives that range from 3 to 35 years. The Company holds options to purchase or lease sites for future trash-to-energy or other facilities at existing or future WMX landfills. These land options are classified as property, plant and equipment. The cost attributable to the option for each utilized site will be amortized on a straight-line basis over the estimated useful life of the facility upon commencement of operations. COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES is amortized on a straight-line basis over a maximum of 40 years. The accumulated amortization balances for 1992 and 1993 were $8.2 million and $10.0 million, respectively. On an ongoing basis, the Company measures realizability of goodwill by the ability of the acquired businesses to generate current and expected future operating income in excess of unamortized goodwill. If such realizability is in doubt, an adjustment is made to reduce the carrying value of the goodwill. Such adjustments have not historically been material to the Company's financial statements. DEVELOPMENT AGREEMENT The Company and WMX are parties to an agreement which provides for the reimbursement by WMX of certain project development expenses incurred by Wheelabrator, subject to certain limitations. Under this agreement, Wheelabrator billed WMX $ 10.0 million and $6.9 million in 1991 and 1993 respectively. An additional $7.6 million of development costs remain billable under the terms of the agreement, which expires in August 1994. 5 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ DISPOSAL CREDITS are classified as other assets until applied against the cost of disposing of ash residue from the Company's trash-to-energy facilities or other materials such as biosolids at WMX landfills. These credits are charged to expense as utilized. On January 1, 1993, $30.0 million of the credits were contributed to Rust as part of the transaction discussed in Note 2. In 1993 the Company utilized $1.9 million of disposal credits and at December 31, 1993 had approximately $36.7 million of disposal credits remaining. FACILITY MAINTENANCE ACCRUAL In order to match more consistently expenditures for major maintenance activities with revenues the Company follows a policy of accruing for major maintenance expenditures at its trash-to-energy and independent power facilities. Such accruals are based upon planned maintenance expenditures and are classified as current or noncurrent liabilities based on the expected timing of the expenditures. INCOME TAXES are based on pretax financial statement income and include a deferred tax provision for the effect of temporary differences in the recognition of income and expense for financial statement and tax reporting purposes. Deferred income taxes are not provided on undistributed earnings of affiliates because these earnings are considered to be permanently reinvested. Further, deferred taxes are not provided on gains from stock transactions of affiliates because the Company in conjunction with WMX intends to control its investment in affiliates to maintain the nontaxable status of such gains. Investment credits have been deferred and are included in income as a reduction of income tax expenses over the estimated useful lives of the assets that gave rise to the credits. Effective January 1, 1992, the Company changed its method of accounting for income taxes as a result of the adoption of Statement of Financial Accounting Standards ("FAS") No. 109, Accounting for Income Taxes ("FAS 109"). The cumulative effect of the change was a charge of approximately $13.2 million, or $0.07 per share (see Note 3). ENVIRONMENTAL LIABILITIES Estimated closure and post-closure monitoring costs associated with ash residue monofills for which the Company is responsible include such items as final cap and cover on the site, leachate management and groundwater monitoring and are recognized in proportion to use of the permitted capacity of such disposal sites. These accruals for closure and post-closure costs relate to expenditures to be incurred after a monofill ceases to accept ash residue. To the extent similar costs are incurred during the active life of the site, they are expensed as incurred. Preparation costs associated with these sites and their individual cells are capitalized and amortized over the respective estimated life of the disposal site or individual cell. Wheelabrator has instituted procedures to periodically evaluate other potential environmental exposures. When the Company concludes it is probable that a liability has been incurred, provision is made in the financial statements for the Company's best estimate of the liability. Such estimates are subsequently revised as deemed necessary when additional information becomes available. While the Company does not anticipate that any such adjustment would be material to its financial statements, it is reasonably possible that future technological, regulatory or enforcement developments, results of environmental studies, or other factors could alter this expectation and necessitate the recording of additional liabilities, which could be material. At December 31, 1992 and 1993, total environmental accruals, which include closure and post- closure costs, were approximately $27.0 million and $24.5 million, respectively. POSTRETIREMENT BENEFITS Wheelabrator provides certain postretirement benefits other than pensions primarily to a limited number of former employees. The majority of Wheelabrator's active employees will not receive postretirement benefits other than pensions. Effective January 1, 1992, the Company adopted FAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions ("FAS 106"), on the immediate recognition basis. The cumulative effect of the change was a pretax charge of approximately $44.9 million ($29.0 million, or $0.16 per share after tax) (see Note 6). EARNINGS PER COMMON SHARE are calculated using the weighted average number of shares outstanding for each period, including the effect of common stock equivalents using the treasury stock method. Common stock equivalents consist of unexercised stock options and shares pledged under the Company's Equity Purchase Program (see Note 6). 6 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ The Company effected a two-for-one split of its common stock on January 7, 1993, in the form of a dividend of one additional share of common stock for each share outstanding on December 23, 1992. Earnings per common share and the number of shares outstanding have been adjusted to give retroactive effect to the stock split for all periods presented. PROSPECTIVE ACCOUNTING CHANGES The Financial Accounting Standards Board has issued FAS No. 112, Employers' Accounting for Postemployment Benefits ("FAS 112"), and FAS No. 115, Accounting for Certain Debt and Equity Securities ("FAS 115"). The Company is required to adopt both of these new standards in 1994. Based upon its analysis to date, the Company does not believe the adoption of FAS 112 will have a material impact on its financial statements since its current accounting is substantially in compliance with the new standard. The Company does not have and does not contemplate acquiring significant investments of the type covered in FAS 115. RECLASSIFICATION Certain prior period amounts have been reclassified to conform with the current year presentation. NOTE 2 - CAPITAL TRANSACTIONS, ACQUISITIONS AND DIVESTITURES WASTE MANAGEMENT INTERNATIONAL In the third quarter of 1991, Wheelabrator issued approximately 12.0 million shares of common stock to WMX in exchange for a 15 percent equity interest in a predecessor of Waste Management International plc ("WM International"), a subsidiary of WMX. WM International now owns substantially all of WMX's waste management services operations outside of North America. The investment is accounted for using the equity method. In 1992 the shareholders of WM International provided an additional $200.0 million cash capital contribution in proportion to their relative ownership percentages. Wheelabrator's share of the additional capital contribution was $30.0 million. In April 1992, WM International sold previously unissued ordinary shares in an initial public offering ("IPO"), thereby reducing Wheelabrator's equity interest in WM International from 15 percent to 12 percent. Wheelabrator recognized a $47.0 million nontaxable gain as a result of this transaction. As of December 31, 1993, WM International was owned approximately 12 percent by Wheelabrator, 12 percent by Rust, 56 percent by WMX and 20 percent by the public. During 1991, 1992 and 1993, respectively, Wheelabrator recorded equity in net income of WM International of $7.5 million, $15.6 million and $13.8 million. Wheelabrator's investment in WM International totaled approximately $195.7 million and $194.0 million as of December 31, 1992 and 1993. If valued at the December 31, 1993 quoted closing price of publicly traded shares, the calculated value of the Company's investment in WM International would have exceeded the Company's carrying value by approximately $200.0 million. A summary of certain financial information for WM International follows:
December 31, ------------------------ 1992 1993 Current assets...................................... $ 688,869 $ 629,786 Noncurrent assets................................... 2,103,934 2,694,489 Current liabilities................................. 585,701 533,266 Noncurrent liabilities.............................. 429,100 904,007 Minority interest................................... 147,329 270,640
Years Ended December 31, ------------------------------------- 1991 1992 1993 Revenue................................ $1,075,070 $1,445,735 $1,411,211 Gross profit........................... 316,946 412,472 402,065 Net income............................. 80,433 120,113 114,246
7 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ RUST INTERNATIONAL Pursuant to an agreement with two WMX subsidiaries, Chemical Waste Management, Inc. ("CWM") and The Brand Companies, Inc. ("Brand"), effective January 1, 1993, Wheelabrator contributed its engineering and construction business, its environmental and infrastructure consulting services business and certain other assets to form, in part, Rust, a new engineering and construction company. CWM contributed its hazardous substances remediation services group, its 56 percent equity interest in Brand, its 12 percent interest in WM International and certain other assets to Rust. In early May 1993, Brand was merged into a subsidiary of Rust. Under the terms of the merger, those Brand stockholders who did not elect to receive $18.75 per Brand share in cash received shares of Rust common stock for their Brand shares on a one-for-one basis. The issuance of additional Rust shares to acquire the balance of Brand shares resulted in the Company recognizing a nontaxable gain of $7.7 million and reduced Wheelabrator's ownership from approximately 42 percent to approximately 40 percent. CWM currently owns 56 percent of Rust, and four percent is owned by the public. As a result of the transaction, beginning in 1993 the Company no longer consolidates the financial results of the businesses that it contributed. Wheelabrator now records its investment in Rust using the equity method, which results in a reduction of revenue, operating expenses and selling and administrative costs compared to prior years, with Wheelabrator's share of Rust's 1993 net income included in equity in earnings of affiliates. The transaction has no effect on the Company's 1992 and prior financial statements. 8 The following summary condensed financial statements show the proforma effect on the Company's consolidated balance sheet as of December 31, 1992 and on its consolidated statement of income for 1992, as if the Rust transaction, excluding the merger of Brand, had occurred January 1, 1992 (unaudited):
December 31, 1992 Rust Proforma As As Reported Contribution Adjustments Adjusted ------------------ ------------- ----------- ---------- Current assets $ 710,796 $(188,793) $ - $ 522,003 Property, plant and equipment, net 1,495,241 (72,798) - 1,422,443 Investments in affiliates 199,188 (1,021) 321,940 520,107 Other assets 591,848 (114,826) - 477,022 ---------- --------- -------- ---------- Total assets $2,997,073 $(377,438) $321,940 $2,941,575 ========== ========= ======== ========== Current liabilities $ 459,332 $(109,446) $ - $ 349,886 Long-term project debt 857,625 - - 857,625 Other long-term liabilities 640,773 (23,714) - 617,059 Stockholders' equity 1,039,343 (244,278) 321,940 1,117,005 ---------- --------- -------- ---------- Total liabilities and stockholders' equity $2,997,073 $(377,438) $321,940 $2,941,575 ========== ========= ======== ========== Revenue $1,483,054 $(554,741) $ - $ 928,313 Operating expenses 1,108,780 (475,166) - 633,614 Selling and administrative expenses 148,355 (50,435) - 97,920 Gains from stock transactions of affiliates/1/ (47,000) - (19,538) (66,538) Other, net 19,843 (609) (13,397) 5,837 ---------- --------- -------- ---------- - ------------ /1/The proforma adjustment to gains from stock transactions of affiliates reflects the gain recognized by Rust in connection with WM International's IPO in April 1992. Wheelabrator's total proforma equity in Rust's net income for 1992 was $32,935.
Income before taxes and accounting changes 253,076 (28,531) 32,935 257,480 Income tax provision 76,694 (11,260) - 65,434 ---------- --------- -------- ---------- Income before accounting changes $ 176,382 $ (17,271) $ 32,935 $ 192,046 ========== ========= ======== ========== Earnings per common share before accounting changes $ 0.94 $ 1.02 ========== ==========
9 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ During 1993 Wheelabrator recorded equity in net income of Rust of $31.3 million. Wheelabrator's investment in Rust totaled approximately $364.9 million as of December 31, 1993. If valued at the December 31, 1993 quoted closing price of publicly traded shares, the calculated value of the Company's investment in Rust would have exceeded the Company's carrying value by approximately $391.0 million. A summary of 1993 financial information for Rust follows:
December 31, 1993 ----------------- Current assets.............................. $ 500,416 Noncurrent assets........................... 1,138,035 Current liabilities......................... 249,350 Noncurrent liabilities...................... 496,897 Year Ended December 31, 1993 ---------------------------- Revenue..................................... $1,534,465 Gross profit................................ 284,557 Net income.................................. 79,964
During 1993 Wheelabrator paid Rust approximately $144.7 million for engineering, construction management and other services provided. The terms of the transactions between the Company and Rust are generally the same as the terms of comparable transactions with unaffiliated third parties. ACQUISITIONS The Company acquired three businesses during 1991 and 17 businesses during 1992 that provide environmental engineering, biosolids management and various clean air technologies. Nine of the 1991 and 1992 acquisitions serve the air and water quality control markets, while the other 11 were included in the businesses contributed to the formation of Rust. Wheelabrator paid cash and issued common stock of approximately $37.7 million and 15.2 million shares, and $115.5 million and 6.8 million shares, respectively, for the 1991 and 1992 acquisitions. In 1993 the Company acquired seven businesses engaged in providing water and air quality-related environmental products and services as well as independent power in exchange for approximately 1.6 million shares of Wheelabrator common stock and $15.0 million of cash. The Company utilizes the purchase method of accounting, and the purchase price of the foregoing acquisitions has been allocated to their respective net assets based upon fair market values. The results of operations of acquired entities have been included in Wheelabrator's financial statements from their respective dates of acquisition. The proforma effect of the acquisitions made during 1991 and 1993 is not material. 10 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ The following summarizes the effects of businesses acquired during 1992 had they been acquired as of January 1, 1991 (unaudited):
Years Ended December 31, -------------------------- 1991 1992 Revenue, as reported.................... $1,173,449 $1,483,054 Revenue of purchased businesses for period prior to acquisition........... 239,097 122,912 ---------- ---------- Proforma revenue........................ $1,412,546 $1,605,966 ========== ========== Net income before accounting changes, as reported........................... $ 126,059 $ 176,382 Net income of purchased businesses for period prior to acquisition........... 13,712 3,321 Adjustment for interest and amortization of cost in excess of net assets of acquired businesses..... (7,943) (4,681) ---------- ---------- Proforma net income..................... $ 131,828 $ 175,022 ========== ========== Earnings per share before accounting changes, as reported........................... $ 0.73 $ 0.94 Effect of purchased businesses for period prior to acquisition....... 0.01 (0.02) ---------- ---------- Proforma earnings per share............. $ 0.74 $ 0.92 ========== ==========
DIVESTITURES In 1991, Wheelabrator sold its equity interests in two foreign industrial abrasives manufacturers. Total proceeds from the sale of such interests were approximately $154.6 million, resulting in a combined pretax gain of approximately $47.1 million. Equity earnings from the divested interests were not significant to the Company's results of operations. NOTE 3 - TAXES Wheelabrator and Koll Real Estate Group, Inc. ("KREG", formerly the Bolsa Chica Company) are parties to a tax sharing agreement which provides for the payment of taxes, the cooperation of the parties in realizing certain tax benefits, and the conduct of tax audits and various related matters for the periods during which Wheelabrator, KREG, The Henley Group ("Henley") and their respective affiliates were included in the same consolidated group for federal income tax purposes. Pursuant to a recapitalization of Henley in 1992, Abex Inc. ("Abex") has assumed certain of Henley's obligations to KREG under a similar tax sharing agreement. Wheelabrator is generally responsible for any increase in the income tax liability (including related interest and penalties) of any consolidated, combined or unitary tax group which included the Company, Abex, KREG and any of their predecessors and affiliates for tax periods ending prior to December 31, 1988. However, KREG will indemnify Wheelabrator to the extent that any such increased tax liability attributable to Abex and KREG affiliates exceeds $50.0 million. The Company's liability for the $50.0 million obligation has been previously recorded. KREG is generally indemnified by Abex to the extent that such tax liabilities payable by KREG exceed $25.0 million. 11 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ In January 1993, the Internal Revenue Service ("IRS") completed an examination of Wheelabrator's consolidated federal income tax returns for the period 1986- 1988. In the only material unresolved issue, the IRS proposed a significant adjustment related to the 1988 sale of a former subsidiary. Abex, KREG and Wheelabrator disputed the position taken by the IRS in an action filed before the U.S. Tax Court. In March 1994, Wheelabrator and the IRS filed a stipulation of settlement with the U.S. Tax Court resolving the treatment of this disputed issue. Subject to the $21.2 million remaining balance of the $50.0 million tax sharing obligation described above, the Company is indemnified by KREG and Abex for the full amount of the liability assessed with regard to this issue. Although the Company is primarily liable for the tax, plus interest, KREG and Abex have each confirmed to the Company their respective indemnification obligations. The Company implemented FAS 109 effective January 1, 1992. Excluding the one- time charge of approximately $13.2 million, or $0.07 per share, the adoption of FAS 109 did not materially impact the Company's 1992 operating results. The adoption of FAS 109 resulted in an increase in deferred income tax assets and liabilities generally reflecting the impact of the restatement of assets related to business combinations consummated before the adoption of FAS 109 on a gross basis rather than on the net-of-tax basis previously used. The charge resulted primarily from increasing deferred taxes previously discounted, a method not permitted under FAS 109. In accordance with FAS 109, during the third quarter of 1993, the Company recorded a $6.5 million increase in deferred taxes due to the August enactment of the Omnibus Budget Reconciliation Act of 1993. 12 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ A summary of the Company's income tax provision is given below. Income from foreign sources is not material.
Years Ended December 31, ------------------------- 1991 1992 1993 Federal: Current $54,862 $ 9,275 $19,125 Deferred 4,265 48,497 54,780 State: Current 14,598 5,815 9,333 Deferred 755 13,107 6,697 ------- ------- ------- Total $74,480 $76,694 $89,935 ======= ======= =======
The principal items accounting for the difference in income taxes computed at the U.S. statutory rates and as recorded are as follows:
Years Ended December 31, ------------------------ 1991 1992 1993 Statutory federal income tax rate 34.0% 34.0% 35.0% State income taxes after federal income tax benefit 5.1 4.9 4.1 Equity income (2.3) (2.1) (6.2) Non-deductible expenses 1.3 0.7 1.0 Non-taxable gain from stock transactions of affiliates - (6.3) (1.1)
Deferred tax revaluation relating to Omnibus Budget Reconciliation Act - - 2.6 Other, net (1.0) (0.9) 0.1 ---- ---- ---- Effective tax rate 37.1% 30.3% 35.5% ==== ==== ====
The principal components of the deferred tax provision for 1991 were the excess of tax over financial statement depreciation, deferred income and reserves not deductible until paid. The adoption of FAS 109 required a change in the method of accounting for income taxes to an asset and liability approach. 13 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ The principal items that comprise the 1992 and 1993 deferred tax (assets) and liabilities are as follows:
December 31, ---------------------- 1992 1993 Reserves not deductible until paid $(130,686) $(104,841) Deferred income (27,569) (26,948) Basis difference in investments (30,564) (16,937) Alternative minimum tax credit carryforwards (14,000) (19,000) State net operating loss carryforwards (10,903) (11,692) Other (1,263) (12,335) Less: Valuation allowance 22,545 20,413 --------- --------- Subtotal (192,440) (171,340) --------- --------- Property, plant and equipment 355,260 403,570 Nondeductible prepaid expenses 27,413 14,945 Other 49,015 45,189 --------- --------- Subtotal 431,688 463,704 --------- --------- Deferred tax liability $ 239,248 $ 292,364 ========= =========
The Company has approximately $19.0 million of alternative minimum tax credit carryforwards that may be carried forward indefinitely. Also, various subsidiaries have state operating loss carryforwards of approximately $200.0 million with expiration dates through the year 2008. Valuation allowances have been established due to the uncertainty of ultimately realizing the tax benefit of certain state net operating loss carryforwards and the tax benefits attributed to basis differences in certain investments. The change in the valuation allowance relates primarily to the realization of tax benefits due to the disposition of certain investments. 14 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ NOTE 4 - CAPITAL STOCK COMMON STOCK Wheelabrator is authorized to issue 500.0 million shares of common stock, par value $0.01 per share. As of December 31, 1993, 188.9 million shares were issued of which 188.8 million were outstanding. Approximately 104.6 million shares were held by WMX or its subsidiaries. Under certain circumstances, WMX has options to purchase at fair market value newly issued shares of Wheelabrator common stock. WMX also has certain registration rights until August 24, 1999 with respect to certain of the Wheelabrator common stock it holds. The Company effected a two-for-one split of its common stock on January 7, 1993, in the form of a dividend of one additional share of common stock for each share outstanding on December 23, 1992. Share and per share amounts have been adjusted to reflect the split for all periods. During 1992 the Company repurchased approximately 4.2 million shares of its common stock for an aggregate cost of approximately $57.6 million. The Company is authorized to repurchase up to a total of 8.0 million shares of its common stock through March 1996 on the open market or in privately negotiated transactions, if market conditions make it attractive to do so. During 1992 Wheelabrator declared cash dividends totaling $0.04 per common share, of which $0.03 per share was paid in 1992 and $0.01 per share was paid in January 1993. Additionally, during 1993 the Company declared and paid cash dividends totaling $0.08 per common share. PREFERRED STOCK Wheelabrator is authorized to issue 50.0 million shares of preferred stock, none of which was issued or outstanding at December 31, 1993. NOTE 5 - LONG-TERM PROJECT DEBT AND LEASE COMMITMENTS Long-term debt related to Wheelabrator's projects is as follows:
December 31, ------------------ 1992 1993 Industrial development revenue bonds due 1994 to 2010 at rates of 2.5%-10.5% $782,505 $709,027 Private placement bonds due 1994 to 2008 at rates of 10.64%-13.875% 36,849 34,121 Project financing from syndicates of commercial banks due 1994 to 2000 at rates of 1.5% above LIBOR 42,636 38,309 Secured notes payable related to coal-handling facilities due 1994 to 2000 at rates of 9%-9.875% 32,980 29,155 -------- -------- 894,970 810,612 Less: Current portion 37,345 33,754 -------- -------- Total long-term project debt $857,625 $776,858 ======== ========
15 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ The aggregate fair market value of Wheelabrator's long-term debt was approximately $1,043,000 and $978,400 on December 31, 1992 and 1993, respectively. The fair value of the Company's long-term debt was determined by discounting future cash flows at the quoted or estimated current rate applicable to each type of debt. At December 31, 1993 long-term debt was collateralized by property, plant and equipment with a net book value of approximately $894.4 million and approximately $88.3 million of investments held by trustees. Investments held by trustees typically represent proceeds of long-term debt related to trash-to- energy and independent power projects. These amounts generally consist of reserve funds maintained pursuant to project financing agreement requirements. The investments are held in trust, and use by the Company is restricted. Financing for certain trash-to-energy facilities currently operated by the Company has been provided through sale and leaseback transactions arranged in previous years. The leases are classified as operating leases, with lease expense being recognized on a straight-line basis over the base and bargain renewal periods of each agreement. Timing differences between lease payments and financial statement lease expense are included in other assets in the consolidated balance sheets. Gains realized on the sale transactions are included in deferred income in the consolidated balance sheets and are being amortized over the terms of the respective leases. Principal payments on project debt and non-cancelable operating lease payments for operating and office facilities at December 31, 1993 are due as follows:
Project Operating Debt Leases -------- ---------- 1994 $ 33,754 $ 80,046 1995 36,317 84,814 1996 39,974 83,785 1997 43,166 85,704 1998 47,255 86,790 Thereafter 610,146 838,520 -------- ---------- Total $810,612 $1,259,659 ======== ==========
The Company capitalized net interest expense of $26.9 million, $2.2 million and $10.0 million during 1991, 1992 and 1993, respectively, in connection with various projects under construction. 16 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ Resco Holdings Inc. ("Resco"), a wholly owned subsidiary of Wheelabrator, and Allied-Signal Inc. ("Allied Signal") are parties to an agreement which provides for specific credit support by Allied-Signal for certain of Resco's trash-to- energy project subsidiaries. Under the agreement, Allied-Signal may require Resco to refinance, without Allied-Signal credit support, indebtedness of supported trash-to-energy projects if it is economical (as defined in the agreement) to do so. Resco and certain of its subsidiaries have agreed to reimburse Allied-Signal for all amounts which may be paid by it under the agreement or various related credit support obligations. No support payments have been made by Allied-Signal as of December 31, 1993. Resco is also required to maintain a minimum level of tangible net worth (approximately $549.8 million as of December 31, 1993). As of December 31, 1993, Resco was in compliance with this provision. Resco has agreed not to declare or pay any cash dividends to the Company at any time Resco's tangible net worth is less than the required amount. Resco owns substantially all of the net operating assets of the Company except certain net assets including cash and investments. The Company has the ability to pay cash dividends using assets other than those restricted within Resco. NOTE 6 - STOCK AND BENEFIT PLANS EQUITY PURCHASE PROGRAM In 1986, Wheelabrator established the Equity Purchase Program which authorized the issuance and sale of shares of Wheelabrator common stock to key corporate managers. The Equity Purchase Program also provided that Wheelabrator lend participants 90 percent of their purchase price. All of such loans matured and were repaid with interest during 1992. No additional shares may be issued under the Equity Purchase Program. STOCK OPTION PLANS Wheelabrator's Stock Option Plans provide for the grant of non-qualified options to purchase shares of the Company's common stock at a price equal to fair market value at the time of grant. 17 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ The status of the plans (including predecessor plans under which options remain outstanding) through December 31, 1993 was as follows:
Shares Option Price ------ ------------- January 1, 1991 Outstanding 6,125 $ 3.87 - $ 9.24 Available for future grant 1,548 - - ------ 1991: Granted 1,556 $11.90 - $13.35 Exercised (1,341) $ 3.87 - $13.35 Cancelled (100) $ 3.87 - $13.35 Additional shares reserved for future grant 300 - - ------ December 31, 1991 Outstanding 6,240 $ 3.87 - $13.35 Available for future grant 392 - - ------ 1992: Granted 1,584 $13.55 - $15.75 Exercised (2,211) $ 3.87 - $11.94 Cancelled: Predecessor plans (91) $ 7.76 - $11.90 Current plans (58) $15.75 Predecessor plan shares cancelled upon initiation of 1992 plan (152) - - Additional shares reserved for future grant under current plans 7,000 - - ------ December 31, 1992 Outstanding 5,464 $ 3.87 - $15.75 Available for future grant 5,714 - - ------ 1993: Granted 673 $17.69 - $20.65 Exercised (1,031) $ 3.87 - $15.75 Cancelled: Predecessor plans (14) $11.90 Current plans (46) $14.25 - $20.65 ------ December 31, 1993 Outstanding 5,046 $ 3.87 - $20.65 ====== Available for future grant 5,087 - - ====== Exercisable at end of year 3,163 $ 3.87 - $15.75 ======
18 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ Outstanding options generally have a term of seven years from the date of the grant and expire at various dates through December 17, 2000. SAVINGS AND RETIREMENT PLAN Substantially all employees are participants in the Wheelabrator Savings and Retirement Plan, which is a qualified defined contribution plan consisting of a savings account component (the "Savings Account") and a retirement account component (the "Retirement Account"). Under the terms of the Savings Account, eligible employees of the Company may elect to contribute a portion of their annual compensation not to exceed 16 percent. The Company is required to match a minimum of 30 percent of the first six percent of salary contributed by an employee. Under the terms of the Retirement Account, eligible employees of the Company receive an annual contribution equal to a minimum of three percent of their eligible earnings. Employees vest in Company contributions and the associated earnings in the Savings Account at 20 percent per year and in the Retirement Account after five years. Wheelabrator's contributions to such plans during 1991, 1992 and 1993 amounted to approximately $12.9 million, $16.3 million and $15.8 million, respectively. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company provides certain postretirement benefits other than pensions, which are primarily health care benefits offered to a limited number of former employees. The majority of the Company's active employees will not receive postretirement benefits other than pensions. The Company implemented FAS 106 on the immediate recognition basis effective January 1, 1992. FAS 106 required a change from accounting for postretirement benefits other than pensions from a cash to an accrual basis. Excluding the one-time pretax charge of approximately $44.9 million ($29.0 million, or $0.16 per share, after tax), the adoption of FAS 106 did not have a significant effect on earnings for the year ended 1992. The service and interest components of the net periodic cost of postretirement benefits other than pensions were $0.2 million and $3.1 million , respectively, in 1992 and $0.1 million and $2.6 million, respectively, in 1993. The following sets forth the plans' funded status reconciled with amounts reported in the Company's consolidated balance sheets:
December 31, ---------------- 1992 1993 Accumulated postretirement benefit obligation (APBO): Retirees $41,110 $43,113 Fully eligible active plan participants 2,297 623 Other active plan participants 1,798 789 ------- ------- Total APBO 45,205 44,525 Unrecognized: Prior service cost - 347 Gain/(loss) - (2,658) ------- ------- Accrued postretirement benefit liability $45,205 $42,214 ======= =======
19 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ For measurement purposes, a 12 percent annual rate of increase in the per capita cost of covered health care claims was assumed for 1992, decreasing by 0.5 percent annually to 7.5 percent in 2001 and remaining at that level thereafter. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1993 by approximately $3.9 million and increase the aggregate of the service and interest cost components of net periodic post retirement benefit cost for 1993 by $0.2 million. The weighted average discount rate used in determining the accumulated post retirement benefit obligation was eight percent in 1992 and seven percent in 1993 based on expected payout patterns. NOTE 7 - ADDITIONAL FINANCIAL INFORMATION The allowance for doubtful accounts amounted to $14.2 million and $9.3 million as of December 31, 1992 and 1993, respectively. The following is a summary of inventories, which are valued at the lower of first-in, first-out cost or market and are included in other current assets:
December 31, ---------------------- 1992 1993 Raw materials $ 5,636 $ 5,256 Work in process 7,944 7,531 Finished goods 12,371 10,343 ------- ------- $25,951 $23,130 ======= =======
Also included in other current assets are spare parts and supplies of $20,875 and $24,422 as of December 31, 1992 and 1993, respectively. The following is a summary of property, plant and equipment:
December 31, ---------------------- 1992 1993 Land $ 55,760 $ 53,403 Land options 285,807 285,807 Machinery and equipment 990,824 1,076,576 Buildings and improvements 252,969 223,463 Construction-in-progress 111,595 247,387 Less: accumulated depreciation (201,714) (232,716) ---------- ---------- $1,495,241 $1,653,920 ========== ==========
20 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ The following is a summary of accrued liabilities: December 31, ---------------------- 1992 1993 Wages, salaries and benefits $ 59,978 $ 30,493 Tax sharing agreement 50,000 - Warranty reserves 20,729 11,563 Interest and lease expense 56,041 43,793 Insurance and professional 16,569 12,625 Other 100,930 98,649 -------- -------- $304,247 $197,123 ======== ========
Certain additional financial data are presented below:
Years Ended December 31, ------------------------------- 1991 1992 1993 Maintenance and repair expense $51,342 $48,106 $48,618 Research and development expense 3,891 2,574 4,073 Rent expense 76,361 88,358 71,442
NOTE 8 - COMMITMENTS AND CONTINGENCIES The Company has issued or is a party to approximately 180 bank letters of credit, performance bonds and other guarantees. Such guarantees (averaging $2.0 million each), are given in the ordinary course of business. Management does not expect these guarantees will have a material adverse effect on the financial position or results of operations of the Company. On February 16, 1994, a Connecticut Superior Court judge issued a decision on appeals of the Connecticut Department of Environmental Protection's ("DEP") issuance of a permit to construct the Lisbon, Connecticut trash-to-energy facility currently being built by Wheelabrator. In the ruling, the judge agreed with the Company's position on all issues raised in the appeals but remanded the permit back to the DEP for further proceedings on an uncontested permit condition that requires the Lisbon facility to dispose of only Connecticut waste. The Company intends to pursue aggressively favorable resolution of this permit remand through appropriate judicial and regulatory procedures. Although Wheelabrator believes that the probability of an adverse determination as a result of the judge's remand order is remote, such a determination could result in the permanent termination of facility construction. Through a guarantee agreement with the Eastern Connecticut Resource Recovery Authority, the facility's owner, such a consequence may require the Company to redeem the debt issued to finance the facility. In the unlikely event this were to occur, the resulting payments could have a material adverse impact on the Company's financial condition and results of operations. There are various lawsuits and claims pending against Wheelabrator which have arisen in the normal course of Wheelabrator's business and relate mainly to matters of product liability, personal injury and property damage. The outcome of these matters is not presently determinable, but in the opinion of management, based on the advice of counsel, the ultimate resolution of these matters will not have a material adverse effect on the financial condition or results of operations of the Company. 21 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ NOTE 9 - SEGMENT AND GEOGRAPHIC INFORMATION During 1991 and 1992 the Company conducted business in two principal industry segments: Environmental Operations and Environmental and Infrastructure Engineering Services. The businesses within the Environmental Operations segment are principally involved in providing clean energy through trash-to-energy and independent power facility ownership and operation, providing clean water and wastewater products and services including municipal water and wastewater treatment facility operation, biosolids management and industrial water and wastewater management, and providing clean air quality control systems designed for industrial and utility applications. The Environmental and Infrastructure Engineering Services segment provided environmental engineering, architectural, scientific and photogrammetric services, as well as industrial process design and engineering project management services. Intersegment revenues were at prices which approximate market and were not material. Effective January 1, 1993, Wheelabrator contributed the businesses that constituted its Environmental and Infrastructure Engineering Services segment along with certain other assets to form, in part, Rust (see Note 2). As a result, during 1993 the Company conducted business solely within the Environmental Operations industry. Wheelabrator has foreign operations, primarily in Canada and Europe. Foreign assets, results of operations and export revenues are not significant.
Environmental and Infrastructure Environmental Engineering Operations Services Total ------------- ----------------- ---------- 1991 - ---- Revenue $ 775,673 $397,776 $1,173,449 Operating expenses 540,969 365,257 906,226 Selling and administrative expenses 92,533 25,908 118,441 ---------- -------- ---------- Income from operations $ 142,171 $ 6,611 $ 148,782 ========== ======== ========== Identifiable assets (at year-end) $2,014,784 $168,914 $2,183,698 ========== ======== ========== Depreciation and amortization expense $ 35,776 $ 4,570 $ 40,346 ========== ======== ========== Capital expenditures $ 125,119 $ 4,725 $ 129,844 ========== ======== ========== 1992 - ---- Revenue $ 928,313 $554,741 $1,483,054 Operating expenses 636,126 472,654 1,108,780 Selling and administrative expenses 90,567 57,788 148,355 ---------- ======== ---------- Income from operations $ 201,620 $ 24,299 $ 225,919 ========== ======== ========== Identifiable assets (at year-end) $2,437,368 $318,734 $2,756,102 ========== ======== ========== Depreciation and amortization expenses $ 58,410 $ 9,469 $ 67,879 ========== ======== ========== Capital expenditures $ 100,561 $ 47,464 $ 148,025 ========== ======== ==========
. Identifiable assets exclude unallocated corporate assets of $560.0 million and $241.0 million at year-end 1991 and 1992, respectively. 22 WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ------------------------------------------------------ NOTE 10 - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth Full Year -------- -------- -------- -------- ---------- 1992 - ---- Revenue $321,382 $359,268 $381,953 $420,451 $1,483,054 Operating expenses 246,739 264,324 282,450 315,267 1,108,780 Net income before cumulative effects of accounting changes 26,593 79,214(2) 33,399 37,176 176,382 Net income (loss) (15,637)(1) 79,214 33,399 37,176 134,152(1) Earnings per common share: Before cumulative effects of accounting changes 0.14 0.42(2) 0.18 0.20 0.94 Net income (loss) (0.09)(1) 0.42 0.18 0.20 0.71(1) Weighted average common shares outstanding 186,600 188,600 187,000 188,000 188,200 Market price High 18 5/16 15 15/16 17 1/8 19 1/2 19 1/2 Low 14 15/16 13 13 15 5/16 13 1993 - ---- Revenue $245,525 $279,978 $283,882 $332,834 $1,142,219 Operating expenses 171,706 193,643 194,619 232,751 792,719 Net income 33,408 49,800(3) 35,734(4) 44,160 163,102 Net income per common share 0.18 0.26(3) 0.19(4) 0.23 0.86 Weighted average common shares outstanding 188,300 188,500 188,900 189,700 188,900 Market price High 23 1/2 21 1/4 20 18 1/8 23 1/2 Low 18 1/8 17 5/8 14 3/4 14 5/8 14 5/8
(1) Reflects cumulative effect of accounting changes. See Note 1. (2) Includes gain related to WM International IPO. See Note 2. (3) Includes gain from issuance of stock by equity investee. See Note 2. (4) Reflects increase in U.S. federal income taxes under the Omnibus Budget Reconciliation Act of 1993. See Note 3. 23 EX-21 11 LIST OF SUBSIDIARIES EXHIBIT NO. 21 SUBSIDIARIES OF REGISTRANT Set forth below is a list of subsidiaries of Wheelabrator Technologies Inc. as of December 31 1993. Each subsidiary is organized under the laws of the jurisdiction indicated in parenthesis. Bio Gro Acquisition Sub, Inc. (Delaware) MRI Holding Company (Delaware) Massachusetts Refusetech, Inc. (Delaware) Resco Holdings Inc. (Delaware) Filtres Crepines Johnson (France) S.A. (France) Johnson Filtration Systems Limited (Ireland) Johnson Screens (Australia) Pty. Ltd. (Australia) Neptune Microfloc, Incorporated (Oregon) Pullman Torkelson Utility Fuels Company (Delaware) Signal Overseas Capital Corporation N.V. (Netherlands) Swenson S. A. (France) Swindell-Dressler Energy Supply Company (Delaware) Swindell-Dressler Leasing Company (Delaware) WESI Peekskill Inc. (Delaware) WESI Westchester Inc. (Delaware) Wheelabrator-Berger (Maschinenfabriken) GmbH (West Germany) WB Industrienlagen Consulting GmbH (West Germany) Wheelabrator-Berger Stiftung GmbH (West Germany) Wheelabrator Clean Air Systems Inc. (Delaware) ARI Technologies, Inc. (Illinois) Altech Instrumentation Systems, Inc. (California) Amcec Corporation (Delaware) Huntington Energy Systems Inc. (Delaware) Pullman Power Products Corporation (Delaware) Pullman Power Products International Corporation (Delaware) Pullman Power Products of Ohio, Inc. (Ohio) Westates Carbon, Inc. (California) Westates Carbon-Arizona, Inc. (Arizona) Wheelabrator Air Pollution Control Inc. (Delaware) Wheelabrator Clean Water Systems Inc. (Delaware) Arizona Soils Composting, Inc. (Arizona) Bio Gro Systems, Inc. (Maryland) Bio Gro Florida, Inc. (Florida) EnviroLand, Incorporated (Michigan) Soaring Vista Properties, Inc. (Maryland) Wheelabrator Cobb Inc. (Delaware) Wheelabrator Hagerstown Inc. (Delaware) Enviro-Gro Technologies, Inc. (New York) Enviro-Gro Technologies II, Inc. (New York) EGT, Inc. (Maryland) International Process Systems Canada Inc. (Ontario) IPS International, Inc. (Delaware) AllGro, Inc. (Delaware) International Process Systems, Inc. (Delaware) IPS Pompano Inc. (Delaware) IPS Rochester Inc. (Delaware) IPS Sterling Inc. (Delaware) IPS Torrington Inc. (Delaware) WIPS Putnam Inc. (Delaware) IPS Quinte Inc. (Ontario) Wheelabrator EOS Inc. (Delaware) Envirotech Operating Services (Petaluma), Inc. (Delaware) Wheelabrator EOS Puerto Rico Inc. (Delaware) Wheelabrator Mexicana S.A. de C.V., Inc. (Mexico) Wheelabrator Cleanfuel Corporation (Delaware) Wheelabrator Coal Refinery Inc. (Delaware) CRC Company (Delaware) International Coal Refinery Company (Delaware) The Wheelabrator Corporation (Delaware) Wheelabrator Canada Inc. (Ontario) MPF Engineered Filtered Products Inc. (Ontario) Wheelabrator Technologies (UK) Limited (United Kingdom) Tilghman Wheelabrator Limited (United Kingdom) Tilghman Wheelabrator Special Products Ltd. (United Kingdom) Blastrac Europe Ltd. (United Kingdom) JFS Limited (United Kingdom) Neptune Nichols Limited (United Kingdom) Northedge Limited (United Kingdom) R.B.S. Pension Trustees Limited (United Kingdom) St. George's Engineering Ltd. (United Kingdom) Tilghman (1988) Limited (United Kingdom) Tilghman (Broadheath) Limited (United Kingdom) Tilghman (Engineers) Limited (United Kingdom) Wheelabrator do Brasil Limitada (Brazil) Wheelabrator Energy Leasing Company (Delaware) Wheelabrator Energy Systems Inc. (Delaware) Wheelabrator Engineered Systems Inc. (Delaware) JFS (Japan) Ltd. (Japan) HPD Canada Limited (Illinois) Mem Tech Inc. (Illinois) 2 Wheelabrator HPD Inc. (Illinois) Wheelabrator Environmental Systems Inc. (Delaware) Bensalem Power Company (Pennsylvania) NH/VT Energy Recovery Corporation (New Hampshire) North Broward Holdings Inc. (Delaware) Wheelabrator North Broward Inc. (Delaware) North Broward County Resource Recovery Project, Inc. (Florida) Recycle First North Andover Inc. (Delaware) Riley Energy Systems of Lisbon Corporation (Delaware) Riley Energy Systems of Lisbon Connecticut Corp. (Connecticut) SES Bridgeport Inc. (Delaware) SES Brooklyn Inc. (Delaware) SES Brooklyn Navy Yard Inc. (Delaware) SES Connecticut Inc. (Delaware) SES North Andover Inc. (Delaware) SES Seattle Inc. (Delaware) Signal Capital Sherman Station Inc. (Delaware) Signal RESCO, Inc. (Delaware) South Broward Holdings Inc. (Delaware) Wheelabrator South Broward Inc. (Delaware) South Broward County Resource Recovery Project, Inc. (Florida) WES Medical Services of Florida Inc. (Delaware) WES Medical Services of North Carolina Inc. (Delaware) WES Medical Services of Ohio Inc. (Delaware) WES Medical Services of Texas Inc. (Delaware) WES Medical Services of Wisconsin Inc. (Delaware) WESI Baltimore Inc. (Delaware) WESI Capital Inc. (Delaware) WESI Peabody Inc. (Delaware) WESI Saugus Inc. (Delaware) Wheelabrator Baltimore Inc. (Delaware) Wheelabrator Bridgeport Inc. (Delaware) Wheelabrator Cedar Creek Inc. (Delaware) Wheelabrator Concord Inc. (Delaware) Wheelabrator Concord Operating Inc. (Delaware) Wheelabrator Connecticut Inc. (Delaware) Wheelabrator Culm Services Inc. (Delaware) Wheelabrator Epping Inc. (Delaware) Wheelabrator Falls Inc. (Delaware) Wheelabrator Frackville Energy Company Inc. (Delaware) Wheelabrator Frackville Properties Inc. (Delaware) Wheelabrator Fuel Services Inc. (Delaware) Wheelabrator Genesee Inc. (Delaware) Wheelabrator Gloucester Inc. (Delaware) 3 Wheelabrator Hudson Energy Company Inc. (Delaware) Wheelabrator McKay Bay Inc. (Florida) Wheelabrator Mecklenburg Inc. (Delaware) Wheelabrator Millbury Inc. (Delaware) Wheelabrator NHC Inc. (Delaware) Wheelabrator Norwalk Energy Company Inc. (Delaware) Wheelabrator New Hampshire Inc. (Delaware) Wheelabrator New Jersey Inc. (Delaware) Wheelabrator North Shore Inc. (Delaware) Wheelabrator Northampton Energy Company Inc. (Delaware) Wheelabrator Northampton Inc. (Delaware) Wheelabrator Northampton Linerboard Company Inc. (Delaware) Wheelabrator Penacook Inc. (Delaware) Wheelabrator Pinellas Inc. (Delaware) Wheelabrator Plant Services Inc. (Delaware) Wheelabrator Polk Inc. (Delaware) Wheelabrator Pottstown Inc. (Delaware) Wheelabrator Putnam Inc. (Delaware) Wheelabrator Ridge Energy Inc. (Delaware) Wheelabrator San Diego Inc. (Delaware) Wheelabrator Saugus Inc. (Delaware) Wheelabrator Shasta Energy Company Inc. (Delaware) Wheelabrator Sherman Station One Inc. (Delaware) Wheelabrator Sherman Station Two Inc. (Delaware) Wheelabrator Shrewsbury Inc. (Delaware) Wheelabrator Spokane Inc. (Delaware) Wheelabrator Tidewater Inc. (Delaware) Wheelabrator Fuels Service Corporation (Delaware) Wheelabrator Coal Services Company (Delaware) Wheelabrator Land Resources Inc. (Delaware) Wheelabrator Sinto do Brasil Equipamentos Industriais Ltda. (Brazil) Wheelabrator Utility Services Inc. (Delaware) WTI Rust Holdings Inc. (Delaware) Signal Own-And-Operate Inc. (Delaware) Wheelabrator EOS Canada Inc. (Ontario) WTI International Holdings Inc. (Delaware) WTI Jinyuan Limited Inc. (Delaware) WTI Jinyuan Power Inc. (Delaware) WTI Pingliang Limited Inc. (Delaware) WTI Pingliang Power Inc. (Delaware) 4 EX-23.1 12 CONSENT OF ART. ANDRSN Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports to the Stockholders of Wheelabrator Technologies Inc., included (or incorporated by reference) in this Form 10-K, and into the registrant's previously filed Registration Statements on Form S-8 (registration nos. 33- 31523, 33-13720, 33-47989 and 33-48837) and into the registrant's previously filed Registration Statement on Form S-4 (registration no. 33-36118) and into the registrant's previously filed Registration Statement on Form S-3 (registration no. 33-59606). /s/ Arthur Andersen & Co. ARTHUR ANDERSEN & CO. New York, New York, March 25, 1994 EX-23.2 13 CONSENT OF ART. ANDRSN Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports to the Stockholders of Rust International Inc., included (or incorporated by reference) in this Form 10-K, and into the registrant's previously filed Registration Statements on Form S-8 (registration nos. 33- 31523, 33-13720, 33-47989 and 33-48837) and into the registrant's previously filed Registration Statement on Form S-4 (registration no. 33-36118) and into the registrant's previously filed Registration Statement on Form S-3 (registration no. 33-59606). /s/ Arthur Andersen & Co. ARTHUR ANDERSEN & CO. Chicago, Illinois, March 25, 1994 -----END PRIVACY-ENHANCED MESSAGE-----