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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3/A
(AMENDMENT NO. 1)
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
WASTE MANAGEMENT INTERNATIONAL PLC
(NAME OF ISSUER)
WASTE MANAGEMENT, INC.
WASTE MANAGEMENT INTERNATIONAL PLC
(NAMES OF PERSONS FILING STATEMENT)
ORDINARY SHARES OF 10P EACH
AMERICAN DEPOSITARY SHARES, EVIDENCED BY
AMERICAN DEPOSITARY RECEIPTS,
EACH REPRESENTING TWO ORDINARY SHARES
(TITLE OF CLASS OF SECURITIES)
94090610 (AMERICAN DEPOSITARY SHARES)
(CUSIP NUMBER OF CLASS OF SECURITIES)
GREGORY T. SANGALIS, ESQ.
STEPHEN P. STANCZAK
SENIOR VICE PRESIDENT AND GENERAL
COUNSEL VICE PRESIDENT--LEGAL AFFAIRS
WASTE MANAGEMENT, INC. AND COMPANY SECRETARY
1001 FANNIN, SUITE 4000 WASTE MANAGEMENT INTERNATIONAL PLC
HOUSTON, TEXAS 77002
TELEPHONE: (713) 512-6200 3 SHORTLANDS
HAMMERSMITH INTERNATIONAL CENTRE
LONDON, W6 8RX, ENGLAND
TELEPHONE: 44-181-563-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF PERSONS FILING STATEMENT)
COPIES TO:
CHARLES W. MULANEY, JR., ESQ.
GARY P. CULLEN, ESQ. JEFFREY TWENTYMAN
SKADDEN, ARPS, SLATE, SLAUGHTER AND MAY
MEAGHER & FLOM (ILLINOIS) 35 BASINGHALL STREET
333 WEST WACKER DRIVE LONDON, EC2V5DB, ENGLAND
CHICAGO, IL 60606 TELEPHONE: 44-171-600-1200
TELEPHONE: (312) 407-0700
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This statement is filed in connection with (check the appropriate box):
a.[_]The filing of solicitation materials or an information statement
subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1], Regulation
14C [17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c) [(S) 240.13e-
3(c)] under the Securities Exchange Act of 1934.
b.[_]The filing of a registration statement under the Securities Act of
1933.
c.[_]A tender offer.
d.[X]None of the above.
Check the following box if the soliciting materials referred to in checking
box (a) are preliminary copies: [_]
INTRODUCTION
OVERVIEW
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Transaction
Statement") filed pursuant to Section 13(e) of the Securities Exchange Act of
1934, as amended, relates to the proposal (the "Proposal") in respect of Waste
Management International plc, a company incorporated with limited liability
and registered in England and Wales (the "Company"), pursuant to which the
Company would become an indirect, wholly-owned subsidiary of Waste Management
Holdings, Inc. ("Old WMI"), a Delaware corporation (formerly known as Waste
Management, Inc.) and the holder indirectly of approximately 80 percent of the
outstanding share capital of the Company and, as a result of the Merger (as
described below), an indirect, wholly-owned subsidiary of WMI (as defined
below). Pursuant to the Proposal, holders of the approximately 20 percent
outstanding share capital of the Company not currently owned by Old WMI and
its affiliates would receive 345p in cash for each ordinary share, par value
10p per share (the "Ordinary Shares") held (the "Sterling Consideration") or,
if they elect to receive US dollars (the "Dollar Election") the US dollar
equivalent thereof calculated by converting the Sterling Consideration into US
dollars at the mid-point spot rate for conversion of pounds sterling into US
dollars at 4:00 pm (London time) on the Effective Date (as defined below),
derived from the WM Reuters page showing such rate (the "Dollar Consideration"
and, together with the Sterling Consideration, the "Ordinary Shares
Consideration"). The exchange rate for converting from the Sterling
Consideration to the Dollar Consideration is referred to herein as the "Dollar
Exchange Rate". Pursuant to the Proposal, holders of American Depositary
Receipts ("ADRs") evidencing ADSs (each representing two Ordinary Shares) will
receive in cash the US dollar equivalent of 690p for each ADR, calculated
using the Dollar Exchange Rate (the "ADRs Consideration").
The Proposal will be implemented by means of a Scheme of Arrangement (the
"Scheme") under Section 425 of the United Kingdom Companies Act 1985 (the "UK
Companies Act"). The terms and conditions of the Proposal are set forth in
"Item 4--Terms of the Transaction". See also the Scheme of Arrangement
Document dated [ ], 1998 (the "Scheme Document") which is attached hereto as
Schedule A. The Scheme Document is being sent pursuant to the UK Companies Act
to holders of Ordinary Shares. The following responses and cross-references
are supplied pursuant to General Instruction D to Schedule 13E-3 and show the
locations in the Scheme Document of the information required to be included in
response to the items of this Transaction Statement. Relevant information
contained in the Scheme Document is incorporated by reference in response to
specific items in this Transaction Statement.
The implementation of the Scheme will require, among other things, the
approval of holders (the "Scheme Shareholders") of Scheme Shares (as defined
below) at the Court Meeting (as defined below) which has been convened by
order of the High Court of Justice in England and Wales (the "English High
Court") (at which the approval of a majority in number of those voting
representing three-fourths in value of the Scheme Shares voted, either in
person or by proxy, will be required) and the passing of a special resolution
by holders of Ordinary Shares at the Extraordinary General Meeting (described
below). Scheme Shares are the Ordinary Shares outstanding at the date of the
Scheme Document, other than Ordinary Shares in which WMI and its subsidiaries
are beneficially interested as at the date of the Scheme Document
(collectively, the "WMI Group Shares"), together with: (i) any additional
Ordinary Shares which may be issued after the date of the Scheme Document but
before 5:30 pm (London time) on the business day immediately before the Court
Meeting and (ii) any further Ordinary Shares which may be issued after the
period referred to in clause (i) above but before 5:30 pm (London time) on the
business day immediately before the Hearing Date (as defined below) and on
terms that they are bound by the Scheme. Holders of WMI Group Shares are not
entitled to vote at the Court Meeting, but are entitled to vote at the
Extraordinary General Meeting. In order to become effective, the Scheme must
then be sanctioned by the English High Court at the Court Hearing (as defined
below) and an office copy of the Order of the English High Court must be
registered with the Registrar of Companies in England and Wales by no later
than December 31, 1998.
Holders of ADRs will be entitled to direct the Depositary (as defined below)
to vote on the Scheme pursuant to the terms of the Deposit Agreement dated as
of April 1, 1992, among Citibank, N.A., as Depositary, the
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Company and the holders from time to time of ADRs (the "Deposit Agreement").
The applicable terms of the Deposit Agreement and the means by which holders
of ADRs may vote on the Scheme are set forth in "Item 11--Contracts,
Arrangements or Understandings with Respect to the Issuer's Securities".
Holders of ADRs who wish to attend the Court Meeting or the Extraordinary
General Meeting should take steps to present their ADRs to the Depositary for
cancellation, as such steps are described in the Depositary Notice (as defined
below) to which this Transaction Statement is attached, so that they become
registered holders of Ordinary Shares prior to 5:30 pm (London time) on
October 5, 1998, two days before those meetings.
As discussed below in "Item 7--Purpose(s), Alternatives, Reasons and
Effects", directors of the Company who are independent of WMI and its
subsidiaries, other than the Company and its subsidiaries (the "Independent
Directors"), negotiated the terms and conditions of the Proposal on an arm's
length basis with Old WMI. The Independent Directors, who have been so advised
by KPMG Corporate Finance, a division of KPMG ("KPMG Corporate Finance"),
consider that the terms of the Proposal are fair and reasonable so far as the
Scheme Shareholders are concerned. In providing financial advice to the
Company, and in particular the Independent Directors, in relation to the terms
of the Proposal, KPMG Corporate Finance has taken into account the Independent
Directors' commercial assessments of the Proposal.
The Independent Directors unanimously recommend that Scheme Shareholders
approve the Scheme and vote in favor of the resolutions necessary to implement
it. The Independent Directors intend to vote their own beneficial holdings to
approve the Scheme at the Court Meeting and in favor of the special resolution
to be proposed at the Extraordinary General Meeting. The holders of WMI Group
Shares have confirmed that they intend to vote in favor of the special
resolution to be proposed at the Extraordinary General Meeting. Accordingly,
should the holders of WMI Group Shares so vote, the special resolution will be
passed.
The Proposal was also approved by the Board of Directors of Old WMI (the
"Old WMI Board"). In making its determination, the Old WMI Board received a
fairness opinion from Merrill Lynch & Co., Inc. ("Merrill Lynch") that the
transaction is fair to Old WMI.
On March 10, 1998, Old WMI entered into a definitive merger agreement (the
"Merger Agreement") with USA Waste Services, Inc. ("USA Waste") which
provided, subject to the satisfaction of the conditions contained therein,
that a wholly-owned subsidiary of USA Waste would be merged with and into Old
WMI (the "Merger"). On July 16, 1998, the Merger was consummated. Upon
consummation of the Merger, Old WMI became a direct, wholly-owned subsidiary
of USA Waste and changed its name to Waste Management Holdings, Inc. and USA
Waste changed its name to Waste Management, Inc. The newly-renamed Waste
Management, Inc. is referred to herein as "WMI".
The description of the implementation of the Scheme speaks as of the time
that this Transaction Statement will be sent to Scheme Shareholders.
SPECIAL FACTORS
Purpose(s), Alternatives, Reasons and Effects
The purpose of the Scheme is for the Company to become an indirect, wholly-
owned subsidiary of Old WMI and, as a result of the Merger, an indirect,
wholly-owned subsidiary of WMI, while providing Scheme Shareholders and ADR
holders with the opportunity to realize the value of their investment in the
Company in cash at a premium to the market prices for Ordinary Shares and ADRs
prior to the announcement of the Proposal.
The completion of the Scheme will enable WMI to manage its world-wide waste
services business as a single enterprise. The principal benefits of the
completion of the Scheme to WMI, WMI's affiliates and the Company are the
following: (i) simplifying their corporate structure; (ii) eliminating the
expenses resulting from the Company's public status; (iii) providing enhanced
tax planning opportunities; (iv) reducing overall operating and administrative
costs; (v) enhancing operating flexibility and (vi) streamlining decision-
making.
The detriment of the completion of the Scheme to WMI, WMI's affiliates and
the Company may be that as a wholly-owned subsidiary of WMI, the Company is
less able to obtain direct access to the equity markets for
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funding and will not be able to use stock as acquisition capital. In addition,
another detriment to WMI and its affiliates will be the cash outlay by WMI
required to complete the Scheme.
The material benefits to the holders of Ordinary Shares and ADRs are the
following: (i) realizing the value of their investment in the Company in cash
at a substantial premium to the market prices for Ordinary Shares and ADRs
prior to the announcement of the Proposal and (ii) eliminating the risk of a
decline in the value of their investment in the Company.
The detriment of the completion of the Scheme to holders of Ordinary Shares
and ADRs is that they will cease to have any ownership interest in the Company
and will cease to participate in future earnings and growth, if any, of the
Company. In addition, certain Scheme Shareholders and ADR holders will
recognize a taxable gain upon the completion of the Scheme.
Upon completion of the Scheme, Scheme Shareholders will have the right to
receive the Ordinary Shares Consideration and ADR holders will have the right
to receive the ADRs Consideration. In addition, upon completion of the Scheme,
public trading of the Ordinary Shares and the ADRs will cease.
A US Holder (as defined below) will generally recognize gain or loss for US
federal income tax purposes equal to the difference between such holder's
adjusted tax basis in the Scheme Shares or ADRs and the amount of cash
received. Any gain realized by a person other than a US Holder upon such
holder's disposition of Scheme Shares or ADRs generally will not be subject to
US federal income taxation unless such holder has certain contacts with the
US.
See "Item 7--Purpose(s), Alternatives, Reasons and Effects" for a more
detailed discussion of these matters.
Fairness of the Transaction
The Company believes that the transaction described in this Transaction
Statement is fair to the Scheme Shareholders. All of the Independent Directors
are unaffiliated with Old WMI and any of its affiliates, other than the
Company and its subsidiaries (collectively, the "Company Group"). The
Independent Directors represented the interests of, and negotiated on an arm's
length basis with Old WMI on behalf of, the Scheme Shareholders.
In determining the fairness of the terms of the Proposal, the following
factors, among others, were relevant and supported the determination of the
Independent Directors to recommend the Scheme: (i) the procedural safeguards
that were followed, such as the retention of independent financial and legal
advisors by the Independent Directors; (ii) the terms and conditions of the
Proposal including the requirement of approval of the Scheme by a majority in
number of those voting representing three-fourths in value of the Scheme
Shares voted, either in person or by proxy, at the Court Meeting convened by
the English High Court and the requirement that the Scheme be sanctioned by
the English High Court; (iii) the opinion of KPMG Corporate Finance as to the
fairness from a financial point of view of the Ordinary Shares Consideration
to be received by Scheme Shareholders and the analyses presented to the
Independent Directors by KPMG Corporate Finance; (iv) the history of the
negotiations with respect to the Proposal and (v) the fact that the Ordinary
Shares Consideration and the ADRs Consideration represented substantial
premiums over market prices for Ordinary Shares and ADRs prior to the
announcement of the Proposal.
WMI has adopted the determination that the transaction described in this
Transaction Statement is fair to the Scheme Shareholders. The following
factors are relevant and support that determination: (i) the conclusion by the
Independent Directors that the terms of the Proposal are fair and reasonable
so far as the Scheme Shareholders are concerned, (ii) the Ordinary Shares
Consideration and the ADRs Consideration are included within a number of the
valuation ranges derived by the financial advisor engaged by Old WMI and (iii)
the procedural safeguards followed in negotiating the Proposal, including
that: (w) the Independent Directors consisted of directors who are
unaffiliated with Old WMI and any of its affiliates, other than the Company
Group, and were appointed to represent the interests of, and to negotiate on
an arm's length basis with Old WMI on behalf of, the Scheme Shareholders; (x)
the Independent Directors retained and were advised by independent legal
counsel; (y) the Independent Directors retained KPMG Corporate Finance as
independent financial advisors to assist them in evaluating the Proposal and
(z) the terms and conditions of the Proposal, including the amount
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and form of consideration, resulted from active arm's length bargaining
between the Independent Directors and Old WMI. The following conditions also
ensure procedural and substantive fairness of the Proposal: (i) the completion
of the Scheme is conditional upon the Scheme receiving the affirmative vote of
the holders of a majority in number of those voting representing three-fourths
in value of the Scheme Shares voted, either in person or by proxy, at the
Court Meeting convened by the English High Court and (ii) the completion of
the Scheme is conditional upon the Scheme being sanctioned by the English High
Court.
See "Item 8--Fairness of the Transaction" for a more detailed discussion of
the fairness of the transaction.
Reports, Opinions, Appraisals and Certain Negotiations
The Independent Directors have retained KPMG Corporate Finance to act as
their financial advisors with respect to the Proposal and related matters.
KPMG Corporate Finance has provided a written opinion that the consideration
is fair from a financial point of view to the holders of Scheme Shares and is
fair and reasonable so far as Scheme Shareholders are concerned. See "Item 9--
Reports, Opinions, Appraisals and Certain Negotiations--Opinion of Financial
Advisor of the Company" for a detailed discussion of KPMG Corporate Finance's
opinion.
Old WMI engaged Merrill Lynch to act as Old WMI's exclusive financial
advisor in connection with the Proposal. The Old WMI Board received a fairness
opinion from Merrill Lynch that the transaction is fair to Old WMI. See "Item
9--Reports, Opinions, Appraisals and Certain Negotiations--Opinion of
Financial Advisor of Old WMI" for a detailed discussion of Merrill Lynch's
opinion.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION
(a) The name of the issuer is Waste Management International plc, a company
incorporated in 1991 with limited liability and registered in England and
Wales, and the address of its registered office is 3 Shortlands, Hammersmith
International Centre, London, W6 8RX, England.
(b) The equity securities which are the subject of the Rule 13e-3
transaction are the Company's Ordinary Shares, par value 10p per share, and
ADSs evidenced by ADRs (each ADS representing two Ordinary Shares). An
aggregate of 375,273,456 Ordinary Shares, including Ordinary Shares
represented by 23,215,362 ADRs, were outstanding as of December 31, 1997. The
Company had 422 holders of record of the Ordinary Shares and 584 holders of
record of the ADRs as of July 28, 1998.
(c) The Ordinary Shares are traded on the London Stock Exchange under the
symbol "WMG". The ADRs are traded on the New York Stock Exchange ("NYSE")
under the symbol "WME". The following table shows the per share high and low
sales price as reported on the London Stock Exchange for the Ordinary Shares
and on the NYSE for the ADRs for the periods indicated and for June 26, 1998
(the last full trading day prior to the day on which the Proposal was publicly
announced). Holders of Ordinary Shares and ADRs are encouraged to obtain
current market quotations for Ordinary Shares and ADRs.
MARKET PRICE OF MARKET PRICE OF
ORDINARY SHARES (P) ADRS ($)
------------------- ----------------
HIGH LOW HIGH LOW
------------------- -------- -------
1996
First Quarter...................... 344.0 311.0 10 7/8 9 1/8
Second Quarter..................... 395.0 319.0 12 1/8 9 3/4
Third Quarter...................... 365.0 291.0 11 1/8 9
Fourth Quarter..................... 292.5 243.0 9 1/8 7 7/8
1997
First Quarter...................... 260.0 223.0 8 1/2 7
Second Quarter..................... 282.0 237.5 9 3/8 7 1/2
Third Quarter...................... 279.0 251.5 9 3/8 7 15/16
Fourth Quarter..................... 261.0 176.0 8 1/2 5 3/4
1998
First Quarter...................... 228.0 176.0 7 11/16 5 7/16
June 26 (at close)................. 247.5 8 5/8
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(d) The Company has not paid dividends with respect to Ordinary Shares or
ADRs. Payment of dividends is governed by the Master Dividend Agreement,
discussed in "Item 16--Additional Information--Certain Agreements".
(e) During the past three years, neither the Company, WMI nor Old WMI has
made an underwritten public offering of Ordinary Shares or ADRs for cash which
was registered under the Securities Act of 1933 or exempt from registration
thereunder pursuant to Regulation A.
(f) Neither the Company, WMI nor Old WMI has purchased any Ordinary Shares
or ADRs since the commencement of the Company's second full fiscal year
preceding the date of this Transaction Statement.
ITEM 2. IDENTITY AND BACKGROUND
The Parties
This Transaction Statement is being filed by WMI and the Company. The
principal executive offices of WMI are located at 1001 Fannin, Suite 4000,
Houston, Texas 77002. The telephone number of WMI is (713) 512-6200.
WMI, together with its subsidiaries, including Old WMI, is a leading
international provider of waste management services. WMI is the largest waste
management services company in North America and has an extensive network of
landfills, collection operations and transfer stations throughout North
America. Through Wheelabrator Technologies Inc. ("WTI"), WMI is a leading
developer of facilities for, and provider of services to, the trash-to-energy
and waste-fuel powered independent power markets. The Company is a leading
international provider of waste management services and conducts substantially
all of the waste management operations of WMI located outside of North
America.
The Company provides a wide range of solid and hazardous waste management
services, including the collection, transportation, storage, treatment,
recycling and disposal of waste. It develops and operates water and wastewater
treatment facilities and it performs certain related environmental services.
Such services are integrated to varying degrees in different markets depending
on facilities, regulatory limitations and the stage of market penetration. The
Company currently operates in 18 countries.
On March 10, 1998, Old WMI entered into the Merger Agreement with USA Waste
which provided, subject to the satisfaction of the conditions contained
therein, that a wholly-owned subsidiary of USA Waste would be merged with and
into Old WMI. On July 16, 1998, the Merger was consummated. In connection with
the Merger, a Joint Proxy Statement/Prospectus was sent to the shareholders of
each of Old WMI and USA Waste (the "Joint Proxy Statement"). The Joint Proxy
Statement contains descriptions of the businesses of WMI, Old WMI and USA
Waste. See "Item 16--Additional Information--Incorporation of Certain
Information by Reference" for information on how to obtain copies of the Joint
Proxy Statement and other reports, proxy statements and other information
filed with the Securities and Exchange Commission (the "SEC") by WMI, Old WMI
and USA Waste.
The Directors and Officers of WMI and the Company
Material occupations, positions, offices or employments during the last five
years and the citizenship of directors and officers of WMI are set forth in
Schedule B attached hereto.
Material occupations, positions, offices or employments during the last five
years and the citizenship of directors and officers of the Company are set
forth in Schedule C attached hereto.
Pursuant to the disclosure requirements of Schedule 13E-3 under the Exchange
Act, neither the Company, WMI nor any of their officers or directors has
during the last five years been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
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Pursuant to the disclosure requirements of Schedule 13E-3 under the Exchange
Act, neither the Company, WMI nor any of their officers or directors was
during the past five years a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
Background of the Proposal
In January 1995, the Old WMI Board reviewed and approved several management
recommendations arising out of a comprehensive review of its long-range
strategic plans. Among the conclusions reached were that Old WMI should seek,
over time and as appropriate, to: (i) reduce its level of capital
expenditures, particularly in the area of business acquisitions, and seek to
generate increasing levels of free cash flow which could be used to repurchase
common stock or repay debt, as appropriate, (ii) adopt a more balanced
approach to revenue growth, emphasizing organic growth over acquisitions,
(iii) consider divestitures of business units which were not closely
integrated with Old WMI's core waste management services business or which
were identified as under-performing, (iv) identify opportunities to reduce
operating costs through adoption of standardized best operating practices and
through reengineering certain business processes and systems to take increased
advantage of economies of scale and (v) simplify Old WMI's corporate
structure.
Pursuant to these long-range strategic plans, Old WMI periodically
considered the acquisition of the publicly held minority interests in its
various subsidiaries. As a result, since 1995 Old WMI has acquired the
publicly held shares in the following of its majority-owned subsidiaries:
Chemical Waste Management, Inc. ("CWM"), Rust International Inc. ("Rust") and
WTI. Over the course of the last two years, the Old WMI Board, from time to
time considered acquiring the outstanding public shares of the Company (the
"Minority Shares") as another step in eliminating Old WMI's public subsidiary
structure.
Following the January 1995 meeting of the Old WMI Board and from time to
time through the end of 1996, Dean L. Buntrock and Phillip B. Rooney, then
Chairman of the Board and President of Old WMI, respectively, discussed with
certain members of the Board of Directors of the Company (the "Company Board")
the possibility that Old WMI might make a proposal to acquire all of the
Minority Shares. In January 1997, senior management of Old WMI requested the
members of the Audit Committee of the Company Board (the "Audit Committee"),
to retain independent financial and legal advisors to advise the Audit
Committee in the event that Old WMI made a proposal to acquire the Minority
Shares. The Audit Committee, comprised solely of directors who are independent
of Old WMI and its subsidiaries (other than the Company Group), has and had
full authority to act on behalf of the Company Board in connection with any
transaction involving a conflict or potential conflict of interest with Old
WMI or any of its subsidiaries (other than the Company Group). Following that
approach, the Independent Directors did take advice from financial and legal
advisors. In March 1997, however, Mr. Buntrock informed Sir William Barlow,
the Chairman of the Audit Committee, that the Old WMI Board had determined not
to make any proposal to acquire the Minority Shares because the Old WMI Board
had concluded that a purchase of the Minority Shares would not be the most
effective use of Old WMI's available cash resources at that time. No further
discussions were held.
In June 1997, the Old WMI Board considered going private transactions with
respect to each of the Company and WTI. The Old WMI Board decided that it was
in the best interests of Old WMI for its management to focus only on one going
private transaction at a time and that management should proceed with the WTI
transaction. The Old WMI Board elected to proceed first with the WTI
transaction because the Board felt that completion of that transaction would
provide the greatest value to Old WMI's shareholders.
On January 30, 1998, Robert S. Miller, then Acting Chairman of the Board and
Chief Executive Officer of Old WMI, attended a meeting of the Company Board at
which he expressed his intention to recommend that the Old WMI Board authorize
senior management of Old WMI to make a proposal for the Minority Shares. At
that
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meeting, he requested the Independent Directors to begin the process of
selecting independent financial and legal advisors to assist them in
responding to any such proposal from Old WMI.
At that same meeting, the Company Board received a report from Company
management regarding various alternatives for distributing cash to
shareholders, as well as management's views on preserving cash resources for
future business development opportunities. The report was based on a
comprehensive study undertaken in 1997 at the direction of the Company Board
pursuant to which the following alternatives were considered and analyzed:
institution of a regular dividend at a sustainable level; payment of a one-
time special dividend; a capital reorganization to be followed by a share
buyback; a pro rata repurchase offer to be made to all Company shareholders
(including Old WMI and its subsidiaries); a partial tender offer for the
Minority Shares; and an "any or all" tender offer for the Minority Shares. The
Company Board had previously considered such alternatives in 1997 and had
determined not to undertake any such transaction based upon a number of
considerations, principally including: (i) the limited distributable reserves
available to the Company; (ii) the potential to breach minimum equity levels
required to be maintained under the terms of the Company's syndicated credit
facility; (iii) potential tax issues; (iv) limitations under the Master
Dividend Agreement (see "Item 16--Additional Information--Certain Agreements"
for a description of the Master Dividend Agreement); (v) concerns over the
impact of share repurchase transactions on the liquidity of Ordinary Shares
and ADRs, particularly as they related to the Company's listing on the London
Stock Exchange; and (vi) the effect on available cash resources and earnings
per share.
At the January 1998 meeting, management revisited the earlier conclusions
and recommended that the Company Board reconsider a potential offer to
repurchase the Minority Shares on the basis that this scenario offered
shareholders the best opportunity to realize value for their investment in the
Company over the next three to five years. In the alternative, management
recommended that the Company institute a small annual dividend with the
intention of conserving available cash resources to pursue new business
development opportunities. The Company Board deferred consideration of these
alternatives in light of the proposal made by Mr. Miller at the meeting.
Immediately following that meeting, the Independent Directors met and
decided to retain Slaughter and May to act as independent legal advisors in
connection with the evaluation and negotiation of any forthcoming proposal
from Old WMI. In addition, the Independent Directors discussed the
requirements for selecting an independent financial advisor, the
qualifications and experience required of such an advisor, and the procedure
to be utilized for selecting an investment advisor. The Independent Directors
decided to solicit written proposals from four financial advisors selected by
the Independent Directors based upon their general reputation and experience
in mergers and acquisitions and similar transactions.
Following receipt of submissions from the four financial advisors and
distribution to the Independent Directors of the terms of such proposals and
the relevant experience of each firm in comparable transactions, the
Independent Directors agreed on February 20, 1998 to retain KPMG Corporate
Finance. On February 21, 1998, and prior to agreeing the terms of engagement
with KPMG Corporate Finance, Mr. Miller advised the Company that senior
management of Old WMI had determined not to proceed with a proposal to acquire
the Minority Shares at that time because of concerns over the availability of
financing for the proposal. Therefore, no further negotiations were held and
no engagement letter was signed with KPMG Corporate Finance.
On March 10, 1998, Old WMI and USA Waste jointly announced that they had
entered into the Merger Agreement.
In April 1998, senior management of Old WMI began again to evaluate and
develop more specifically a proposal to acquire the Minority Shares of the
Company. After consulting with Merrill Lynch, Old WMI's financial advisors,
senior management determined to recommend to the Old WMI Board that Old WMI
acquire
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the Minority Shares for cash. Senior management decided to make such
recommendation at this time in view of the Old WMI Board's strategic objective
concerning Old WMI's capital structure, and the other conclusions stated
above, and because financing for such a transaction was then determined to be
available. In reaching this decision, senior management of Old WMI believed
that the acquisition of the Minority Shares would enable Old WMI to manage its
world-wide waste services business as a single enterprise, simplify Old WMI's
corporate structure, reduce overall operational and administrative costs,
eliminate the expenses of running a separate publicly traded subsidiary and
streamline decision-making.
On April 30, 1998, at a meeting of the Company Board, Mr. Miller informed
the Independent Directors that the financing concerns identified on February
21, 1998 appeared to be on their way toward a satisfactory resolution and that
he intended to recommend to the Old WMI Board at its meeting scheduled for May
15, 1998 that Old WMI make a proposal to acquire the Minority Shares. Mr.
Miller requested that the Independent Directors finalize the selection of
independent financial and legal advisors in anticipation of such a proposal
and commence the process of valuing the Minority Shares for purposes of a
going-private transaction.
Immediately following that meeting, the Independent Directors met separately
and agreed to retain Slaughter and May as legal advisors to the Independent
Directors and authorized Sir William Barlow to negotiate the terms of
engagement with KPMG Corporate Finance to act as financial advisors to the
Company, and in particular the Independent Directors. KPMG Corporate Finance
was engaged to analyze and provide advice to its clients with respect to the
proposal and to assist in any negotiations with respect to such a transaction.
On May 12, 1998, Sir William Barlow met with KPMG Corporate Finance, Slaughter
and May and Stephen P. Stanczak, Vice President--Legal Affairs and Company
Secretary, to discuss the review and analysis process which KPMG Corporate
Finance would conduct, various valuation methodologies, a timetable for any
transaction should a proposal be forthcoming from Old WMI and the appropriate
structure or structures for such a transaction. Over the next several weeks,
KPMG Corporate Finance conducted its review and analysis of the Company. See
"Item 9--Reports, Opinions, Appraisals and Certain Negotiations--Opinion of
Financial Advisor of the Company" for a discussion of KPMG Corporate Finance's
evaluation of the Company and Old WMI's proposal to acquire the Minority
Shares.
In order to facilitate their review and analysis of the Company, Old WMI's
financial advisors had requested that the Company prepare five-year financial
projections for the Company's operating businesses, in addition to the three-
year projections customarily prepared by the Company (the "Financial
Projections"). The Financial Projections were furnished to KPMG Corporate
Finance and Merrill Lynch on or about May 13, 1998. A discussion of the
Financial Projections and the material assumptions underlying them is set
forth in "Item 16--Additional Information--Certain Financial Projections of
the Company".
At the May 15, 1998 Old WMI Board meeting, the Old WMI Board reviewed senior
management's recommendation that Old WMI acquire the Minority Shares in the
Company for cash. At the meeting, senior management outlined the potential
advantages in operating benefits, cost efficiencies, organizational
simplification and tax-related benefits that might be realized if the Company
were to become a wholly owned subsidiary of Old WMI. After discussing these
matters, the Old WMI Board approved the making of a proposal to acquire, for
cash, all of the Minority Shares in the Company. The Old WMI Board delegated
to senior management the authority to determine and negotiate the terms of a
transaction on behalf of Old WMI, subject to final approval by the Old WMI
Board.
Shortly thereafter, Mr. Miller initiated specific discussions with Sir
William Barlow concerning the Proposal. On May 29, 1998, Mr. Miller delivered
to Sir William Barlow a letter on behalf of the Old WMI Board, the text of
which follows:
Dear Sir William:
This will follow up on and confirm our conversation earlier this week.
During our conversation, I indicated to you that the Waste Management, Inc.
("WMX") Board of Directors has authorized me to initiate discussions with the
independent directors of Waste Management International plc ("WME") with
respect to a transaction
8
involving the acquisition of all of the outstanding ordinary shares of WME not
owned by WMX and its affiliates. Our advisors have recommended that any such
transaction take the form of a "scheme of arrangement" under Section 425 of
the Companies Act of 1985. I indicated to you that WMX would support such a
transaction priced at the equivalent of US$9.50 per American Depository
Receipt (US$4.75 per ordinary share). Most importantly, I indicated to you
that WMX's proposal is subject to several conditions, including a requirement
that the independent, non-executive directors of WME would recommend such a
transaction to the public shareholders of WME.
I understand that both WME's and WMX's financial advisors are engaged in the
due diligence and financial analysis process, and that WME's advisors are
expected to report to the WME Audit Committee on June 4. I will be on holiday
during the period of June 6 through June 14, and would suggest that
communications during this period either be through our financial advisors, or
be directed to Herb Getz, in my absence.
I will look forward to hearing back from you at your convenience.
Very truly yours,
/s/ Robert S. Miller
Robert S. Miller
Chairman of the Board and
Chief Executive Officer
On June 4, 1998, the Independent Directors (except for Mr. Scholz who was
unable to attend) met with representatives of KPMG Corporate Finance,
Slaughter and May and Mr. Stanczak. At the meeting, KPMG Corporate Finance
reviewed the status of the review and analysis of the Company, which was
substantially complete by that point. The Independent Directors and their
advisors also considered whether there were any potential alternative
transactions involving the sale of the Company or a significant part of its
business to a third party and concluded that such a transaction was
unrealistic given the expressed intention of Old WMI to retain the
international operations of the Company. The Independent Directors and their
advisors also considered the possibility to postpone consideration of a
proposal to acquire the Minority Shares in light of the pending Merger and in
order to afford certain underperforming operations, primarily in Italy, a
further opportunity to demonstrate improved results. The Independent Directors
concluded that there could be no assurance that the Company's operating and
financial results would improve in the near term such that delaying the
transaction could be reasonably expected to result in any significant increase
in the value of the Ordinary Shares. The Independent Directors also determined
that the possibility of receiving shares of Old WMI (or WMI following
completion of the Merger) should be explored as part of any counteroffer. The
Independent Directors decided that it was appropriate to proceed with
negotiations with Old WMI and authorized Sir William Barlow to make a
counteroffer of $12.50 per ADR and to investigate together with Old WMI the
feasibility of modifying the proposal to offer shareholders the option to
receive either cash or common stock of Old WMI for the Minority Shares.
On June 5, 1998, Sir William Barlow contacted Mr. Miller and advised him
that the Independent Directors could not recommend the price of $9.50 per ADR
as proposed by Old WMI. In that conversation, Sir William Barlow and Mr.
Miller agreed to a meeting between KPMG Corporate Finance and Merrill Lynch to
take place the following week. Sir William Barlow also asked that Old WMI
consider offering shareholders the option to receive either cash or shares of
Old WMI common stock in exchange for the Minority Shares. On June 10 and 11,
1998, representatives of the Company and KPMG Corporate Finance met with
representatives of Merrill Lynch. At that meeting, KPMG Corporate Finance
discussed with Merrill Lynch its analyses relating to the valuation of the
Company and the principal methodologies it had used. The financial advisors
also discussed the advisability and practicality of making a proposal which
included an option to elect to receive shares of Old WMI common stock and
concluded that such a transaction was probably not appropriate in light of the
additional complexity and likely delays which would result from making such an
option available.
9
Following the meetings in London on June 10 and 11, KPMG Corporate Finance
discussed with Sir William Barlow potential responses to the original offer
submitted by Old WMI based upon the results of its meetings with Merrill
Lynch. During this same period, Merrill Lynch worked with senior management of
Old WMI to prepare its response to the analysis of KPMG Corporate Finance. In
the period between June 11 and June 16, Sir William Barlow held a series of
telephone conversations with the other Independent Directors in which he
informed them of the results of the meetings between the companies' financial
advisors and obtained their approval to proceed with the counteroffer as
agreed at the June 4 meeting of the Independent Directors.
Sir William Barlow contacted Mr. Miller on June 16 and proposed a
counteroffer of $12.50 per ADR. Mr. Miller expressed reservations over the
price requested by the Independent Directors. Mr. Miller proposed a meeting to
take place the following week between himself and Old WMI's financial advisors
and Sir William Barlow and the Company's financial advisors.
Following this conversation, Mr. Miller asked Merrill Lynch to contact KPMG
Corporate Finance to discuss Merrill Lynch's response to the analysis of KPMG
Corporate Finance in order to facilitate an agreement as to the purchase price
for the Ordinary Shares. On June 17, representatives of Merrill Lynch
discussed with representatives of KPMG Corporate Finance Merrill Lynch's
analysis relating to the valuation of the Company and their response to the
analysis prepared by KPMG Corporate Finance.
On June 23, 1998, Mr. Miller and Sir William Barlow met and each presented
their analyses of the appropriate value of the Ordinary Shares and ADRs. At
that meeting, they considered the advice of the companies' respective
financial advisors regarding offering Scheme Shareholders an option to receive
cash or Old WMI common stock. Mr. Miller and Sir William Barlow concluded that
such option would significantly increase the complexity of any potential
transaction, particularly in light of the pending Merger which remained
subject to shareholder and regulatory approval. Such an option would also very
likely delay completion of any transaction. They also reached the conclusion
in acknowledgment of the fact that any Scheme Shareholder could, if he so
desired, use the proceeds of the Scheme to purchase shares of the parent
company. Sir William Barlow and Mr. Miller then agreed to a cash transaction
price of 345p per Ordinary Share (approximately $11.50 per ADR based on the US
dollars/pounds sterling exchange rate at the time). Legal and financial
advisors to the Company and Old WMI then joined Mr. Miller and Sir William
Barlow to further discuss additional terms and conditions of the Proposal
which included: (i) the Proposal being approved by the full committee of
Independent Directors, (ii) receipt by the Independent Directors of a written
opinion of KPMG Corporate Finance that such consideration is fair from a
financial point of view to the Scheme Shareholders and fair and reasonable so
far as the Scheme Shareholders are concerned, (iii) approval of the Proposal
by the Old WMI Board, (iv) receipt by the Old WMI Board of a written opinion
of Merrill Lynch that the consideration to be paid is fair to Old WMI from a
financial point of view and (v) agreement on additional customary terms and
conditions of the Proposal.
On June 29, 1998, the Independent Directors met with KPMG Corporate Finance,
Slaughter and May and Mr. Stanczak to review the final analyses prepared in
connection with the Proposal. KPMG Corporate Finance also delivered its
written opinion to the Independent Directors that the Proposal is fair from a
financial point of view to the Scheme Shareholders and fair and reasonable so
far as the Scheme Shareholders were concerned. See "Item 9--Reports, Opinions,
Appraisals and Certain Negotiations--Opinion of Financial Advisor of the
Company" for a discussion of KPMG Corporate Finance's written opinion. The
Independent Directors reviewed the terms and conditions of the Proposal as set
forth in a proposed press release which the Independent Directors approved for
release following confirmation that the Proposal had been approved by the Old
WMI Board.
In deliberating on the Proposal, the Independent Directors assessed the
Company Group's growth potential and the possibility for increasing
shareholder value through the mechanisms addressed at the January 1998 Company
Board meeting. This assessment also included consideration of the difficult
trading and operational conditions being experienced within certain of the
Company Group's businesses and the lack of suitable short term investment and
acquisition opportunities. The results of this process led the Independent
Directors to conclude that there is limited prospect of an improvement in the
financial performance of the Company Group occurring in the short term such as
would result in a significant upward revaluation of the Company's share price.
10
The Independent Directors also took into account a number of other factors.
In particular, the Independent Directors acknowledged the intention of Old WMI
to retain its controlling interest in the Company as well as the potential
restrictions on any such sale which would result under the accounting rules
applicable to the Merger. This intention necessarily precluded any
investigation into the possibility of selling the Company to a third party. In
addition, the Independent Directors concluded that it was unlikely that access
to the equity markets would be required to fund growth in the foreseeable
future, as the Company was likely to have sufficient credit facilities
available to it both from Old WMI and from the financial markets and that debt
finance was likely to be the preferred means of financing the Company Group's
anticipated needs. Furthermore, in the anticipated absence of future equity
offerings and issues of Ordinary Shares for the purpose of acquiring
additional businesses, it was not clear that the significant expenses which
result from the Company's public status continue to be justified. The
Independent Directors also concluded that none of the mechanisms considered
which may have increased shareholder value were sufficiently certain or
adequate to offer greater attraction than approval of the Proposal.
In light of the above, the Independent Directors considered that it was
appropriate for the Scheme Shareholders to be given the opportunity to realize
their investment in the Company on terms which the Independent Directors
considered fair and reasonable so far as the Scheme Shareholders are
concerned. Accordingly, the Independent Directors unanimously adopted
resolutions approving the Proposal, granting authority to any two Independent
Directors or any one Independent Director and Mr. Stanczak to take such
actions as may be required in furtherance of the Proposal, and to recommend to
Scheme Shareholders that they vote in favor of the Proposal at the Court
Meeting and the Extraordinary General Meeting.
Also on June 29, 1998, the Old WMI Board met with financial and legal
advisors to discuss: (i) the Proposal, (ii) drafts of the news releases
announcing the Proposal and (iii) a draft of Merrill Lynch's opinion to the
Old WMI Board that the consideration to be paid by Old WMI pursuant to the
Proposal was fair from a financial point of view to Old WMI. See "Item 9--
Reports, Opinions, Appraisals and Certain Negotiations--Opinion of Financial
Advisor of Old WMI" for a discussion of Merrill Lynch's opinion to the Old WMI
Board. After discussing these matters, the Old WMI Board unanimously voted to
adopt resolutions approving the Proposal, approving the draft news releases
and authorizing senior management to take all actions necessary to consummate
the Proposal.
On June 29, 1998, Old WMI and the Company issued press releases disclosing
that Old WMI and the Independent Directors had agreed on the terms of the
Proposal.
Certain Agreements between the Company and its Affiliates
The Company has entered into certain agreements with Old WMI and various of
its other subsidiaries that are described in "Item 16--Additional
Information--Certain Agreements".
ITEM 4. TERMS OF THE TRANSACTION
Introduction
Pursuant to the terms of the Proposal, the Company would become an indirect,
wholly-owned subsidiary of WMI, the holder indirectly of approximately 80
percent of the outstanding share capital of the Company as a result of the
Merger. Holders of the approximately 20 percent outstanding share capital of
the Company (including in the form of ADSs evidenced by ADRs) not currently
owned by WMI and its subsidiaries would receive the Ordinary Shares
Consideration or the ADRs Consideration, as the case may be. The Proposal will
be implemented by means of the Scheme.
Conditions to the Scheme
The Proposal is conditional upon the Scheme becoming unconditional and
becoming effective by not later than December 31, 1998 or such later date as
the Company and Old WMI may agree and the English High Court may approve.
11
The consummation of the Proposal is subject to the following conditions:
1. the approval by a majority in number of those voting representing three-
fourths in value of the Scheme Shares voted, either in person or by
proxy, at the Court Meeting (as defined below) convened by order of the
English High Court;
2. the special resolution required to approve and implement the Scheme
being passed at an Extraordinary General Meeting (described below) of
the Company;
3. the sanction (with or without modification) of the Scheme and
confirmation of the reduction of capital involved therein by the English
High Court and an office copy of the Order of the Court being delivered
for registration to the Registrar of Companies in England and Wales (and
registered by him in relation to the reduction of capital);
4. no government or governmental, quasi-governmental, supranational,
statutory or regulatory body, trade agency, court or other body or
person in any jurisdiction having instituted, implemented or threatened
any action, proceedings, suit, investigation or inquiry, or having
enacted, made or proposed any statute, regulation or order or taken any
measures or other steps, that would or might make the Scheme or any part
of it or the issue of this Transaction Statement, void, unenforceable or
illegal, or directly or indirectly restrain, restrict, prohibit, delay
or otherwise interfere in a material way with the implementation of, or
impose material additional conditions or obligations with respect to, or
otherwise challenge or in a material way hinder, the Scheme or any part
of it or this Transaction Statement, or (except as fairly disclosed to
Old WMI or any of its subsidiaries other than the Company Group prior to
June 29, 1998) otherwise materially and adversely affect the business,
profits or prospects of the Company Group taken as a whole;
5. all authorizations, orders, grants, recognitions, confirmations,
consents, clearances, permissions and approvals ("authorizations") and
determinations which are material in the context of the Company Group
taken as a whole or the Scheme and which are necessary or appropriate in
any jurisdiction for or in respect of the Scheme and each part of it
being obtained in terms and in a form reasonably satisfactory to Old WMI
from any persons or bodies (including, without limitation, any
government or governmental, quasi-governmental, supranational, statutory
or regulatory body, trade agency or court) with whom any member of the
Company Group has entered into contractual arrangements (other than any
such authorization or determination required only from Old WMI itself or
any company controlled in relation to any such authorization or
determination by Old WMI, if any) and such authorizations and
determinations together with all authorizations and determinations
(other than any such authorization or determination required only from
Old WMI itself or any company controlled in relation to any such
authorization or determination by Old WMI, if any) which are material in
the context of the Company Group taken as a whole or the Scheme and
which are necessary or appropriate for any member of the Company Group
to carry on its business remaining in full force and effect and there
being no indication of any intention to revoke, suspend, restrict,
modify or not renew any of the same and all appropriate waiting periods
under any applicable legislation and regulations in any jurisdiction
which are material in the context of the Company Group taken as a whole
or the Scheme and all necessary statutory or regulatory obligations in
any jurisdiction which are material in the context of the Company Group
taken as a whole or the Scheme having been complied with;
6. there being no provision of any arrangement, agreement, licence or other
instrument to which any member of the Company Group is a party or by or
to which any member of the Company Group or any part of its assets may
be bound, entitled or subject which would or might, as a result of the
Scheme or any part of it, to an extent which is material in the context
of the Company Group taken as a whole or the Scheme, result in (i) any
moneys borrowed or other indebtedness (actual or contingent) of any
member of the Company Group being or becoming repayable or capable of
being declared repayable prior to its stated maturity or the ability of
any such member to borrow moneys or incur any indebtedness being
withdrawn or inhibited; (ii) any such arrangement, agreement, licence or
instrument being breached, terminated or materially modified or any
onerous obligation or liability arising or any material action being
taken or right to take the same arising thereunder; (iii) the interests
of any
12
member of the Company Group with any person under any such arrangement,
agreement, licence or instrument or the interests or business of any
such member in or with any other person or body (or any arrangements
relating to such interests or business) being terminated, modified or
materially adversely affected or any right to so terminate, modify or
affect arising, and there being no indication of any intention to so
terminate, modify or affect or (iv) the respective financial or trading
position or prospects of any such member being prejudiced or adversely
affected; and
7. since March 31, 1998, and except for any matter fairly disclosed to Old
WMI or any of its subsidiaries other than any member of the Company
Group prior to June 29, 1998, (i) no adverse change or deterioration
having occurred in the business, assets, financial or trading position
or profits or prospects of the Company or any other member of the
Company Group which is material in the context of the Company Group
taken as a whole; (ii) no litigation or arbitration, prosecution or
other legal proceedings having been instituted or threatened by or
against or otherwise involving any member of the Company Group and no
investigation by any relevant authority against or in respect of any
member of the Company Group having been threatened in writing, announced
or instituted or remaining outstanding by, against or in respect of any
such member and which in any such case might materially and adversely
affect the Company Group taken as a whole and (iii) no contingent or
other liability having arisen which is likely materially and adversely
to affect the Company Group taken as a whole.
Old WMI reserves the right, in its absolute discretion, to waive all or any of
the conditions in paragraphs 4 through 7 above, in whole or in part.
Scheme Stages
Procedurally, the Scheme can generally be divided into three stages: (i)
applying to the English High Court for an order directing a meeting of Scheme
Shareholders to be held (the "Court Meeting"); (ii) holding the Court Meeting
to consider the Scheme and holding the Extraordinary General Meeting
(described below) to pass the special resolution required to give effect to
the Scheme and (iii) applying to the English High Court for the Scheme to be
sanctioned. These stages are discussed in greater detail below.
The Company initiated the Scheme by applying to the English High Court for
an order to allow the Company to convene the Court Meeting and to send out to
all Scheme Shareholders the Scheme Document, attached as Schedule A hereto.
The Scheme Document is comprised of the following: (i) an introductory letter
from the Chairman of the Committee of Independent Directors to Scheme
Shareholders summarizing the Scheme; (ii) an explanatory statement in
compliance with Section 426 of the UK Companies Act; (iii) information on the
Company; (iv) information on WMI; (v) the terms and conditions of the Scheme;
(vi) certain tax information for UK and US holders of Ordinary Shares or ADRs;
(vii) certain additional information; (viii) a formal technical document
setting out the proposals embodied in the Scheme; (ix) the notice of the Court
Meeting to vote on the Scheme and (x) the notice of the Extraordinary General
Meeting of the Company. The English High Court has issued an order to convene
the Court Meeting and has directed that a copy of the Scheme Document be sent
to each Scheme Shareholder at his or her registered or last known address.
The second stage in the Scheme process involves holding the Court Meeting
and the Extraordinary General Meeting. Pursuant to the English High Court
order, the Scheme Document will have been distributed to the Scheme
Shareholders prior to the Court Meeting. Scheme Shareholders may attend the
Court Meeting in person or appoint another as a proxy in their place. An
appropriate form of proxy has been sent to each Scheme Shareholder with the
notice of meeting.
There are no quorum requirements for the Court Meeting and all Scheme
Shareholders who send in a proxy will be counted in the voting as well as
Scheme Shareholders attending the Court Meeting in person. There are two
elements to the majority required to sanction the Scheme: (i) a majority in
number of those voting representing (ii) three-fourths in value of the Scheme
Shares voted, either in person or by proxy, at the Court Meeting. The Court
Meeting will be held at the offices of Slaughter and May, 4 Coleman Street,
London EC2V 5DB, at 10:00 am (London time) on October 7, 1998.
13
Because the Scheme involves the cancellation of the Scheme Shares by way of
a reduction of the share capital of the Company, the Scheme also requires the
passing of a special resolution by the holders of Ordinary Shares at the
Extraordinary General Meeting to give effect to the Scheme. The special
resolution also includes provisions amending the Articles of Association of
the Company to ensure that any Ordinary Shares issued to any person before
5:30 pm (London time) on the business day immediately before the date of the
hearing by the English High Court of the petition to sanction the Scheme (the
"Hearing Date") will be subject to the Scheme and any Ordinary Shares allotted
or issued after 5:30 pm (London time) on the business day immediately before
the Hearing Date will not be subject to the Scheme but will be allotted and
issued on terms that the relevant allottees and any subsequent holders of such
Ordinary Shares will be obliged to transfer them to WMI or its nominee in
consideration for the payment by WMI of 345p for each such Ordinary Share.
This latter provision will ensure that WMI and its subsidiaries own or control
all the Ordinary Shares in the Company if the Scheme becomes effective.
At the Extraordinary General Meeting, the special resolution must be
approved by a majority of not less than 75 percent of votes cast. The quorum
for the Extraordinary General Meeting is two shareholders present in person or
by proxy. All shareholders, including holders of WMI Group Shares, are
entitled to attend the Extraordinary General Meeting and vote on the special
resolution. Holders of WMI Group Shares have confirmed that they intend to
vote in favor of the special resolution to be proposed at the Extraordinary
General Meeting. Accordingly, should the holders of the WMI Group Shares so
vote, the special resolution will be passed. The Extraordinary General Meeting
has been convened for 10:30 am (London time) (or as soon as possible
thereafter as the preceding Court Meeting has been concluded or adjourned) on
October 7, 1998 at the same location as the Court Meeting.
Holders of ADRs will be entitled to direct the Depositary to vote on the
Scheme pursuant to the terms of the Deposit Agreement. The applicable terms of
the Deposit Agreement and the means by which holders of ADRs may vote on the
Scheme are set forth in "Item 11--Contracts, Arrangements or Understandings
with Respect to the Issuer's Securities". Holders of ADRs who wish to attend
the Court Meeting or the Extraordinary General Meeting should take steps to
present their ADRs to the Depositary as such steps are described in the
Depositary Notice to which this Transaction Statement is attached so that they
become registered holders of Ordinary Shares prior to 5:30 pm (London time) on
October 5, 1998, two days before those meetings.
The final stage of the Scheme involves obtaining approval of the Scheme by
the English High Court. This is done by filing a petition with the English
High Court together with supporting affidavits proving service of the notice
of the Court Meeting and verifying the report as to the result of the Court
Meeting. Once the relevant court officers have determined that all
documentation is in order, the petition will be scheduled for a final hearing
(the "Court Hearing"). Notice of the Court Hearing informing Scheme
Shareholders and creditors of their right to attend the Court Hearing and to
be heard by the English High Court will be published in the UK national press
eight days prior to the Court Hearing. The Court Hearing is scheduled for
November 2, 1998.
The English High Court has discretion whether or not to sanction the Scheme.
In determining whether to exercise its discretion to sanction the Scheme, the
English High Court will adopt an objective test and will assess whether the
Scheme is such that an intelligent and honest holder of Scheme Shares, acting
in respect of his or her interest, might reasonably approve the Scheme. In a
scheme of arrangement involving a reduction of capital, the English High Court
will also consider whether the interests of creditors are protected.
Once the English High Court approves the Scheme, an office copy of the Court
Order will be filed with the Registrar of Companies in England and Wales. The
Scheme will be effective and binding when this filing is made and registered
by the Registrar of Companies. Once the Scheme becomes effective all of the
Scheme Shares, without any further action by the Scheme Shareholders, will be
canceled and retired and will cease to exist. Each Scheme Shareholder will
thereafter cease to have any rights with respect to such shares, except the
right of such Scheme Shareholder to receive, without interest, the Ordinary
Shares Consideration. Holders of ADRs will also thereafter cease to have any
rights with respect to such ADRs, except the right to receive, without
interest, the ADRs Consideration.
14
Once the Scheme becomes effective and the Scheme Shares are canceled, the
Company will issue new shares to designated subsidiaries of WMI in an amount
equivalent to the reduction in capital resulting from the Scheme. Since the
Scheme involves the issue of new shares and a reincrease of capital by an
equivalent amount to the initial reduction, creditors of the Company will not
be prejudiced by the Scheme. As noted above, the English High Court will
sanction the Scheme only if it finds, among other things, that the reduction
of capital involved in the Scheme will not prejudice creditors.
Settlement of Consideration
Subject to the Scheme becoming effective, settlement of the consideration to
which any Scheme Shareholder is entitled under the Scheme will be effected in
the following manner:
Checks in respect of their cash entitlements under the Scheme will be mailed
to Scheme Shareholders who hold their Scheme Shares in certificated form or
who have made a Dollar Election (as described below) not later than 14 days
after the date on which the Scheme becomes effective in accordance with its
terms (the "Effective Date"). For Scheme Shares held in uncertificated form
(except where the holder has made a Dollar Election), the cash consideration
to which Scheme Shareholders are entitled will be paid by means of CREST (the
relevant system, as defined in the Uncertificated Securities Regulations 1995
(the "Regulations") in respect of which CRESTCo. Limited is the "Operator" (as
defined in the Regulations)) by processing the creation of an assured payment
obligation in favor of the Scheme Shareholders' payment bank in respect of the
cash consideration due, in accordance with the CREST assured payment
arrangements, by no later than 14 days after the Effective Date. Entitlements
under the Scheme will be determined by reference to registered holdings of
Scheme Shares at 5:30 pm (London time) on the business day immediately
preceding the Effective Date (the "Record Date").
Scheme Shareholders wishing to elect for the Dollar Election in respect of
their Scheme Shares should take steps to complete, sign and return the Dollar
Election Form as such steps are described in the Scheme Document. Elections
for the Dollar Election must be made in respect of the whole of a Scheme
Shareholder's holding and will be irrevocable once made. A Dollar Election
will be valid in respect of all the Scheme Shares registered as at 5:30 p.m.
(London time) on the Record Date in the name of the Scheme Shareholder who has
made the election. Accordingly, if a Scheme Shareholder who has made a Dollar
Election subsequently transfers some or all of his Scheme Shares and the
transfer is registered before that time, the transferee shall receive the
Sterling Consideration in respect of such Scheme Shares unless such transferee
makes or has made a valid Dollar Election with respect thereto. The aggregate
Dollar Consideration due to a Scheme Shareholder who has made a Dollar
Election shall be rounded down to the nearest whole cent. Payment in US
dollars may be inappropriate for holders of Scheme Shares other than persons
in the US.
ADR holders will receive the ADRs Consideration in US dollars and therefore
do not need to make a Dollar Election in respect of their ADRs. Pursuant to
Section 4.02 of the Deposit Agreement, the Depositary shall distribute the
ADRs Consideration to the holders of ADRs. In the event, however, that the
Company or the Depositary is required to withhold and does withhold taxes or
other governmental charges from such cash distribution, the amount distributed
to the holders of ADRs will be reduced accordingly. The Depositary will
distribute only such amount, however, as can be distributed without
attributing to any holder of ADRs a fraction of one cent. Any such fractional
amounts will be rounded down to the nearest whole cent. The ADRs Consideration
must be deposited with the Depositary not later than 14 days after the
Effective Date. The Depositary will thereafter distribute the ADRs
Consideration to ADR holders pursuant to the terms of the Deposit Agreement.
The actual amount of US dollars received by ADR holders or by Scheme
Shareholders who have made a Dollar Election will depend upon the exchange
rate prevailing on the Effective Date. Scheme Shareholders should be aware
that the US dollar/pounds sterling exchange rate which is prevailing at the
date on which an election is made to receive US dollars and on the date of
mailing of payment may be different from that prevailing on the Effective
Date. In all cases, fluctuations in the US dollar/pounds sterling exchange
rate are at the risk of ADR holders and Scheme Shareholders who have made a
Dollar Election.
15
All documents and remittances sent by or to Scheme Shareholders and ADR
holders, or as such persons shall direct, will be sent at their own risk and
may be sent by mail.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE
Upon completion of the Scheme, the Company will be an indirect, wholly-owned
subsidiary of WMI. Therefore, following the completion of the Scheme, the
Scheme Shareholders and ADR holders will no longer share in the future
earnings or growth of the Company or benefit from any increases in the value
of the Company, and they will no longer bear the risk of any decreases in the
value of the Ordinary Shares or ADRs.
Since Scheme Shareholders and ADR holders will have no continuing interest
in the Company following the completion of the Scheme, the Ordinary Shares and
ADRs will no longer meet the requirements of the London Stock Exchange and the
NYSE, respectively, for continued listing and will therefore be delisted from
the London Stock Exchange and the NYSE.
The London Stock Exchange will be requested to cancel the listing of
Ordinary Shares with effect from the close of business on the Effective Date.
Upon the Scheme becoming effective, certificates for the Scheme Shares will
cease to be of value. The Company proposes that the Record Date will be the
last date for dealings in Ordinary Shares on the London Stock Exchange.
The ADRs are currently registered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Upon the Scheme becoming effective,
registration of the ADRs under the Exchange Act will be terminated and the
Company will be relieved of the obligation to comply with the public reporting
requirements of the Exchange Act. In addition, the Company will take the
appropriate measures to delist the ADRs from the NYSE. Accordingly, the
Company will not be subject to the periodic reporting requirements of the
Exchange Act.
Except as otherwise described in this Transaction Statement, neither WMI nor
the Company has, as of the date of this Transaction Statement, approved any
specific plans or proposals for any extraordinary corporate transaction
involving the Company after the completion of the Scheme, any sale or transfer
of a material amount of assets of the Company after the completion of the
Scheme or a material change in the Company's corporate structure or business.
However, as noted below under "Item 7--Purpose(s), Alternatives, Reasons and
Effects", one of the reasons for the Scheme is to achieve certain operational
and cost efficiencies that may result from combining certain functions and
operations of the Company and its subsidiaries with those of WMI or certain of
its subsidiaries. WMI intends after the completion of the Scheme to cause the
Company to engage in such transactions and material changes as may be
appropriate in WMI's judgment in order to achieve such efficiencies. In
addition, while WMI does not have any present intention to sell or transfer
any material amount of assets of the Company, WMI's plans may change at any
time, and WMI may in the future elect to cause the Company to sell, transfer
or otherwise dispose of all or any portion of the assets of the Company to WMI
or any one or more of its subsidiaries or to any other parties as warranted by
future conditions. WMI may also, as warranted in light of future conditions,
cause changes in the Company's dividend policy, indebtedness or
capitalization, including the payment of dividends and repayment of
indebtedness to WMI or certain of its subsidiaries. Following the completion
of the Scheme, it is the intention of the Independent Directors to resign from
the Company Board.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
It is currently expected that approximately $432 million (which is the total
consideration for both ADRs and Ordinary Shares) will be required to pay the
consideration under the Scheme. These funds are available under WMI's $2
billion senior revolving credit facility. The credit facility contains
financial covenants with respect to interest coverage and debt capitalization
ratios. The credit facility also contains limitations on dividends, additional
indebtedness, liens and asset sales. The credit facility is available for
standby letters of credit up to $650 million. The applicable interest rate and
facility fee at December 31, 1997 was 6.1% per annum and 0.1125% per annum,
respectively.
16
The estimated aggregate costs and fees of the Company and WMI in connection
with the Proposal are as follows:
Investment Banking Fees and Expenses.......................... $2,400,000
Filing Fees................................................... $ 52,114
Legal Fees and Expenses....................................... $ 750,000
Printing, Mailing and Vote Solicitation Fees.................. $ 260,000
Accounting Fees............................................... $ 20,000
United Kingdom Takeover Panel Fee............................. $ 80,000
----------
Total..................................................... $3,562,114
==========
Such fees and expenses are to be paid by the party which incurred them,
except for financial printing costs, which shall be borne equally by WMI and
the Company.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS
The purpose of the Scheme is for the Company to become an indirect, wholly-
owned subsidiary of Old WMI and, as a result of the Merger, an indirect,
wholly-owned subsidiary of WMI, while providing Scheme Shareholders and ADR
holders with the opportunity to realize the value of their investment in the
Company in cash at a premium to market prices for the Ordinary Shares and the
ADRs prior to the announcement of the Proposal. Completion of the Scheme is
also expected to: (i) enhance operating flexibility, (ii) reduce expenses,
(iii) simplify WMI's corporate structure and (iv) simplify management
decisions. See "Item 3--Past Contacts, Transactions or Negotiations--
Background of the Proposal" for a discussion of the reasons for undertaking
the Scheme at this time.
Benefits and Detriments of the Scheme
The Company. The principal benefits of the completion of the Scheme to the
Company are the following: (i) simplifying the Company's corporate structure;
(ii) eliminating the expenses resulting from the Company's public status;
(iii) providing enhanced tax planning opportunities; (iv) reducing overall
operational and administrative costs; (v) enhancing operating flexibility and
(vi) streamlining decision-making.
The detriment of the completion of the Scheme to the Company may be that as
a wholly-owned subsidiary of WMI, the Company is less able to obtain direct
access to the equity markets based upon its separate operations and the
Company will not be able to use its own stock as acquisition capital.
WMI and its affiliates other than the Company. The material benefits of the
completion of the Scheme to WMI and its affiliates other than the Company are
the following: (i) simplifying their corporate structure; (ii) enabling WMI to
manage its world-wide waste services business as a single enterprise; (iii)
providing enhanced tax planning opportunities; (iv) eliminating the expenses
associated with a separate publicly traded subsidiary; (v) reducing overall
operational and administrative costs; (vi) enhancing operating flexibility and
(vii) streamlining decision-making.
The detriment of the completion of the Scheme to WMI and its affiliates
other than the Company will be the significant cash outlay by WMI required to
complete the Scheme. In addition, the completion of the Scheme may limit the
Company's future direct access to financing based upon its separate
operations.
Holders of Ordinary Shares and ADRs. The benefits of the completion of the
Scheme to holders of Ordinary Shares and ADRs are the following: (i) realizing
the value of their investment in the Company in cash at a substantial premium
to the market prices for Ordinary Shares and ADRs prior to the announcement of
the Proposal and (ii) eliminating the risk of a decline in the value of their
investment in the Company.
The detriment of the completion of the Scheme to unaffiliated shareholders
is that they will cease to have any ownership interest in the Company and will
cease to participate in future earnings and growth, if any, of the Company. In
addition, certain Scheme Shareholders and ADR holders will recognize a taxable
gain upon the completion of the Scheme.
17
Certain Effects of the Completion of the Scheme
Upon completion of the Scheme, Scheme Shareholders will have the right to
receive the Ordinary Shares Consideration and ADR holders will be entitled to
receive the ADRs Consideration. Also, upon completion of the Scheme, Scheme
Shareholders and ADR holders will cease to have any ownership interest in the
Company and will cease to participate in future earnings and growth, if any,
of the Company. Moreover, upon completion of the Scheme, public trading of the
Ordinary Shares and the ADRs will cease. The Company intends to have the
Ordinary Shares delisted from the London Stock Exchange and the ADRs delisted
from the NYSE.
Pursuant to the terms of the Scheme, Old WMI will pay approximately $432
million plus expenses to complete the Scheme.
Certain Tax Considerations
The following is a summary of certain of the expected US federal income tax
consequences of the receipt of cash upon the completion of the Scheme.
US Holders. The following paragraphs address certain US federal income tax
consequences applicable to Scheme Shareholders and ADR holders that are US
Holders. The term "US Holder" means a beneficial owner of Scheme Shares or
ADRs that is for US federal income tax purposes (i) a citizen or resident of
the US, (ii) a corporation, partnership or other entity created or organized
under the laws of the US or any political subdivision thereof or therein,
(iii) any estate or trust defined in Section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended (the "Code") or (iv) a person whose worldwide
income or gain is otherwise taxable in the US on a net income basis. This
summary is based on the Code, administrative pronouncements, judicial
decisions and regulations, changes to any of which (which may be retroactive)
may affect the tax consequences described herein. This summary assumes that
the Scheme Shares and ADRs have been held as capital assets. It does not
address the tax treatment of individuals who have received Scheme Shares and
ADRs in connection with employment such as by the exercise of options granted
to employees, and it is not addressed to holders owning at least 10% (after
applying the constructive ownership rules of Section 958(b) of the Code) of
the voting power of the Company. This summary also assumes that the Company is
not and has never been a passive foreign investment company for US federal
income tax purposes. This summary does not discuss all tax consequences that
may be relevant to a US Holder of Scheme Shares or ADRs in the light of such
holder's particular circumstances or to holders subject to special rules, such
as certain financial institutions, regulated investment companies, insurance
companies, dealers in securities, exempt organizations, US Holders whose
functional currency is not the US dollar or US Holders engaged in straddle or
"hedging" transactions.
The cancellation by a US Holder of ADRs so that they become Ordinary Shares
is not a taxable event. In general, a US Holder of Scheme Shares or ADRs will,
for US federal income tax purposes, recognize a gain or loss equal to the
difference between such holder's adjusted tax basis in the Scheme Shares or
ADRs cancelled and the amount of cash received in exchange therefor. Such gain
or loss will generally be capital gain or loss. In general, any capital loss
would be currently deductible only to the extent of the holder's capital gains
plus, in the case of a non-corporate holder, ordinary income of up to $3,000
(assuming a joint tax return is filed). A corporation may carryback unused
capital losses to the preceding three years and carryforward unused capital
losses to the next five years; an individual may carryforward such losses
indefinitely. In addition, an accrual basis holder of Scheme Shares or ADRs
that does not elect to be treated as a cash basis taxpayer pursuant to the
foreign currency exchange regulations may have a foreign currency exchange
gain or loss for US federal income tax purposes because of differences between
the US dollars/pounds sterling exchange rates prevailing on the effective date
and on the date of payment. Any such currency gain or loss would be treated as
ordinary income or loss and would be in addition to the gain or loss realized
by the holder as a result of the Scheme.
Non-US Holders. Any gain realized by a person other than a US Holder (a
"Non-US Holder") on the sale of Scheme Shares or ADRs generally will not be
subject to US federal income taxation, unless (i) such gain is effectively
connected with the conduct by the Non-US Holder of a US trade or business,
(ii) the Non-US Holder is present in the US for 183 days or more in the year
of disposition and certain other requirements are met or (iii) the Non-US
Holder is subject to US tax law provisions applicable to certain US
expatriates.
18
The foregoing discussion is for general information only and is intended to
be a summary of the principal US federal income tax considerations of the
Scheme. Each US Holder should consult his or her own tax advisor concerning
the US federal and applicable state, local, foreign and other tax consequences
of the Scheme.
ITEM 8. FAIRNESS OF THE TRANSACTION
The Company believes that the transaction described in this Transaction
Statement is fair to the Scheme Shareholders. The Independent Directors, who
have been so advised by KPMG Corporate Finance, consider that the terms of the
Proposal are fair and reasonable so far as the Scheme Shareholders are
concerned. The Independent Directors are unaffiliated with Old WMI or any of
its affiliates, other than the Company Group, and were acting in the interests
of, and negotiated on an arm's length basis with Old WMI on behalf of, the
Scheme Shareholders. At a meeting held by telephone on June 29, 1998, in which
all of the Independent Directors participated, the Independent Directors
unanimously approved the Scheme and recommended that the Scheme Shareholders
vote to approve the Scheme. The Independent Directors intend to vote their own
beneficial holdings to approve the Scheme at the Court Meeting and in favor of
the special resolution to be proposed at the Extraordinary General Meeting.
In determining the fairness of the terms of the Proposal, the following
factors are relevant and support the determination of the Independent
Directors to recommend the Scheme:
. the fact that the Independent Directors consisted of directors who are
unaffiliated with Old WMI and any of its affiliates, other than the
Company Group, and were appointed to represent the interests of, and to
negotiate on an arm's length basis with Old WMI on behalf of, the Scheme
Shareholders;
. the financial condition, assets, results of operations, business and
prospects of the Company and the risks inherent in achieving those
prospects;
. the terms and conditions of the Proposal, including the amount and form
of consideration, the absence of representations and warranties, the
nature of the parties' covenants and agreements, the limited number of
conditions to the obligations of Old WMI (including the absence of a
financing condition) and the rights of the Independent Directors to
withdraw their respective recommendations;
. the condition to the completion of the Scheme that the Scheme receive the
affirmative vote of the holders of a majority in number of those voting
representing three-fourths in value of the Scheme Shares voted, either in
person or by proxy, at the Court Meeting convened by the English High
Court;
. the condition to the completion of the Scheme that the Scheme be
sanctioned by the English High Court;
. the history of the negotiations with respect to the Proposal that, among
other things, led to an increase in Old WMI's offer from approximately
291p to 345p per Ordinary Share, and the belief of the Independent
Directors that the Ordinary Shares Consideration was fair and reasonable
so far as the Scheme Shareholders are concerned;
. the fact that the Sterling Consideration represents a premium of
approximately 39 percent over the closing middle market price of the
Ordinary Shares on the London Stock Exchange on June 26, 1998, the last
full trading day before the public announcement of the Proposal;
. the fact that the 39 percent premium represented by the Sterling
Consideration far exceeds customary premiums paid in similar transactions
of publicly held minority shareholdings of other UK companies;
. the stock price and trading volume history of the Ordinary Shares and the
ADRs;
. the fact that the Independent Directors retained and were advised by
independent legal counsel;
. the fact that the Independent Directors retained KPMG Corporate Finance
as independent financial advisors to assist them in evaluating the
Proposal;
. the opinion of KPMG Corporate Finance as to the fairness from a financial
point of view of the Ordinary Shares Consideration to be received by
Scheme Shareholders and the analyses presented to the Independent
Directors by KPMG Corporate Finance; and
. the unwillingness of Old WMI to discuss a sale of its controlling stock
ownership in the Company.
19
These factors are not intended to be exhaustive. In light of the number and
variety of factors, it was not practicable to assign relative weights to the
foregoing factors; and accordingly relative weights were not assigned.
Although the Independent Directors did consider historical trading prices of
the Ordinary Shares and ADRs, the Independent Directors did not consider
trading prices for the period following the announcement of the Proposal
because they believed that such prices reflected anticipation of the
completion of the Scheme.
The Independent Directors regularly consulted with KPMG Corporate Finance
during the course of their work in connection with their analysis of the
Company and the evaluation of the Proposal. The Independent Directors believe
that the analyses of KPMG Corporate Finance are reasonable.
WMI has adopted the determination that the transaction described in this
Transaction Statement is fair to the Scheme Shareholders. The following
factors are relevant and support that determination: (i) the conclusion by the
Independent Directors that the terms of the Proposal are fair and reasonable
so far as the Scheme Shareholders are concerned, (ii) the Ordinary Shares
Consideration and the ADRs Consideration are included within a number of the
valuation ranges derived by the financial advisor engaged by Old WMI and (iii)
the procedural safeguards followed in negotiating the Proposal, including
that: (w) the Independent Directors consisted of directors who are
unaffiliated with Old WMI and any of its affiliates, other than the Company
Group, and were appointed to represent the interests of, and to negotiate on
an arm's length basis with Old WMI on behalf of, the Scheme Shareholders; (x)
the Independent Directors retained and were advised by independent legal
counsel; (y) the Independent Directors retained KPMG Corporate Finance as
independent financial advisors to assist them in evaluating the Proposal and
(z) the terms and conditions of the Proposal, including the amount and form of
consideration, resulted from active arm's length bargaining between the
Independent Directors and Old WMI. The following conditions also ensure
procedural and substantive fairness of the Proposal: (i) the completion of the
Scheme is conditional upon the Scheme receiving the affirmative vote of the
holders of a majority in number of those voting representing three-fourths in
value of the Scheme Shares voted, either in person or by proxy, at the Court
Meeting convened by the English High Court and (ii) the completion of the
Scheme is conditional upon the Scheme being sanctioned by the English High
Court.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS
Opinion of Financial Advisor of the Company
The Independent Directors of the Company have retained KPMG Corporate
Finance to act as their financial advisors with respect to the Proposal and
related matters. KPMG Corporate Finance is acting exclusively for the Company
in connection with the Proposal. KPMG Corporate Finance is not acting for any
other person and KPMG Corporate Finance will not be responsible to any person
other than the Company for providing the protections afforded to clients of
KPMG Corporate Finance or for providing advice in relation to the Proposal or
in relation to the contents of this document or any transaction or arrangement
referred to herein.
At a meeting of the Independent Directors on June 29, 1998, KPMG Corporate
Finance delivered its written opinion to the Independent Directors (the "KPMG
Corporate Finance Opinion"). The KPMG Corporate Finance Opinion states that
KPMG Corporate Finance is of the opinion that the consideration is fair from a
financial point of view to the holders of Scheme Shares and is fair and
reasonable insofar as Scheme Shareholders are concerned.
THE FULL TEXT OF THE KPMG CORPORATE FINANCE OPINION ADDRESSED TO THE
INDEPENDENT DIRECTORS AND DATED AS OF JUNE 29, 1998, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN IN
CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS SCHEDULE D, AND IS
INCORPORATED BY REFERENCE. THE KPMG CORPORATE FINANCE OPINION WAS DELIVERED TO
THE INDEPENDENT DIRECTORS FOR THEIR USE IN CONNECTION WITH THEIR CONSIDERATION
OF THE PROPOSAL AND IS NOT INTENDED TO BE, AND DOES NOT CONSTITUTE, A
RECOMMENDATION TO ANY SCHEME SHAREHOLDER AS TO HOW SUCH SCHEME SHAREHOLDER
SHOULD VOTE WITH RESPECT TO THE SCHEME. THE SUMMARY OF THE KPMG CORPORATE
FINANCE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THE OPINION. SCHEME SHAREHOLDERS ARE URGED TO, AND SHOULD,
READ THE KPMG CORPORATE FINANCE OPINION IN ITS ENTIRETY.
20
In connection with rendering its opinion, KPMG Corporate Finance reviewed,
among other things, the financial terms and conditions of the Proposal;
reviewed certain historical business and financial information relating to the
Company; reviewed certain internal financial analyses and forecasts for the
Company prepared by its management; reviewed the reported price and trading
activity for the Ordinary Shares; visited certain of the facilities of the
Company; compared certain financial and stock market information for the
Company with similar information for certain other companies the shares of
which are publicly traded; and reviewed the financial terms of certain
business combinations in the waste industry specifically and in other
industries generally. KPMG Corporate Finance also met with members of the
senior management of the Company and its principal operating subsidiaries to
discuss the past and current operations, financial condition and prospects of
the Company, including the financial forecasts relating to the Company. KPMG
Corporate Finance was not asked to, nor did it, recommend a specific price per
Ordinary Share. No limits were placed on KPMG Corporate Finance's review or
analysis by either the Independent Directors or the Company.
In light of Old WMI's position as the majority shareholder in the Company
and the absence of any indication that Old WMI would support either a sale of
the Company or other alternatives to the Proposal involving a third party, an
active solicitation of third party interest in a transaction involving the
Company was not practicable and therefore was not pursued.
KPMG Corporate Finance relied upon the accuracy and completeness of all of
the financial and other information reviewed by it or conveyed to it in
discussions with the Company or Old WMI and has not assumed any responsibility
for any independent verification of such information or any independent
valuation or appraisal of the assets or liabilities of the Company and was not
provided with any such evaluation or appraisal. With respect to the financial
forecasts relating to the Company and the possible financial benefits of the
Proposal to Old WMI, KPMG Corporate Finance has assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of management of the Company as to such matters. In rendering
its opinion, KPMG Corporate Finance assumed no responsibility for such
forecasts or estimates or the assumptions upon which they are based. In
addition, the opinion does not address the underlying business decision of the
Independent Directors to recommend the Scheme. The opinion of KPMG Corporate
Finance is necessarily based on economic, monetary, market and other
conditions as in effect on, and the information available to them as of, the
date of the opinion.
The following is a summary of the material analyses performed by KPMG
Corporate Finance which were reviewed with the Independent Directors in
connection with providing its opinion:
Stock Market Analysis. KPMG Corporate Finance analyzed the historical
movement in the price of the Ordinary Shares on the London Stock Exchange in
order to determine and explain relevant price movement trends. The analysis
was focused on two key areas. First, whether the price movements of the
Ordinary Shares could be explained by factors specifically relating to the
Company and/or general market factors; alternatively, whether events involving
Old WMI (which were not directly relevant to the intrinsic value of the
Company) had impacted the price of the Ordinary Shares. Second, whether in the
(then) current price of the Ordinary Shares there existed (or not) some level
of premium in anticipation of an imminent buy-out by Old WMI of the Minority
Shares.
A summary of KPMG Corporate Finance's review of the Ordinary Shares price
movement is as follows. Since the flotation of the Minority Shares in the
Company in 1992, the quoted stock values of the Company and Old WMI have shown
a degree of correlation. On the day of the announcement of the Merger, the mid
market price of the Ordinary Shares rose from 190p to 208p and thereafter rose
rapidly to a level of 247.5p (based upon the London Stock Exchange closing
mid-market price on June 26, 1998, the last full trading day before the public
announcement of the Proposal). The Ordinary Shares Consideration of 345p
represents a premium of 82 percent on the 190p price on the day of the
announcement of the Merger, and 66 percent on the 208p price immediately
following the announcement and 39 percent on the 247.5p price as at June 26,
1998. KPMG Corporate Finance's view is that this increase reflected not an
improvement in the underlying fundamentals of the Company, but a belief among
shareholders that USA Waste would improve the value of an investment in the
Company, either by improving the business or by a buy-out of the Minority
Shares at a premium to the then current market price.
21
Discounted Cash Flow Analysis. KPMG Corporate Finance performed a discounted
cash flow analysis for existing business, new business, potential business
from acquisitions and incremental synergies, based upon certain operating and
other financial assumptions, projections and other information provided by the
management of the Company. A discussion of certain financial projections
prepared by the Company is set forth in "Item 16--Additional Information--
Certain Financial Projections of the Company". KPMG Corporate Finance utilized
the projections, restated by KPMG Corporate Finance to reflect anticipated
results from certain Hong Kong-based projects at or near completion and the
projected improvement in operating results of the Company's Italian
subsidiaries following a restructuring which was not taken into account in the
original projections, in forming its opinion on the fairness to the Scheme
Shareholders of the Ordinary Shares Consideration. For purposes of the
analysis, KPMG Corporate Finance used discount rates ranging from nine percent
to 11 percent and perpetuity growth rates for cash flows of around three
percent, which resulted in an enterprise value of (Pounds)1.03 billion to
(Pounds)1.56 billion, and a per Ordinary Share value of 274p to 415p. KPMG
Corporate Finance subtracted aggregate estimated net debt as of April 30, 1998
(consisting of interest bearing debt net of cash balances) of (Pounds)80
million, equivalent to net debt per Ordinary Share of 21p, from the enterprise
value in arriving at an equity value for the Company. KPMG Corporate Finance
selected a representative range of (Pounds)0.95 billion to (Pounds)1.48
billion implied by this analysis, equating to 253p to 393p per share for the
Ordinary Shares to be acquired.
Comparison with Selected Companies and Transactions. KPMG Corporate Finance
analyzed a range of values based on applying market multiples derived from
companies principally involved in waste activities to the Company's revenue
and earnings stream. KPMG Corporate Finance commenced the analysis with a
review of material distorting items within the Company's historic and
projected earnings in order to determine appropriate figures for adjusted
maintainable earnings. The financial measures used in the analysis comprised
sales of (Pounds)1.1 billion for 1997 (historic), (Pounds)0.9 billion for 1998
(prospective) and (Pounds)1.1 billion for 1999 (prospective+1) and earnings
before interest, taxes, depreciation and amortization ("EBITDA"), adjusted to
exclude exceptional items, of (Pounds)225 million for 1997 (historic),
(Pounds)193 million for 1998 (prospective) and (Pounds)248 million for 1999
(prospective+1).
Having established figures for adjusted maintainable earnings, a range of
multiples were applied to those earnings based on those of quoted companies
considered by KPMG Corporate Finance to be comparable to the Company to some
extent and comparable transactions. Appropriate comparatives were taken from
the following quoted companies: Allied Waste Industries, Inc., Browning Ferris
Industries, Inc. ("BFI"), Caird Group plc, Laidlaw Environmental Services,
Inc., Shanks & McEwan Group plc, SITA S.A., USA Waste, Waste Recycling Group
plc and Old WMI. The multiples selected for KPMG Corporate Finance's analysis
represented the lower end of the range of multiples derived from these
companies to reflect the relative performance of the Company vis a vis the
comparative group. For the comparable transactions, the multiples used were
based on financial information to the extent available from acquisitions by
the following companies: Haul Waste Group PLC, BFI, Vivendi S.A., Laidlaw
Inc., Shanks & McEwan plc, SITA S.A., USA Waste, Waste Recycling Group plc,
Groupe Fabricom S.A. and Republic Industries, Inc. The range of multiples used
in the analysis as applied to revenues were historic multiples of 1.19 to
2.03, prospective of 0.8 to 2.0 and prospective+1 of 0.7 to 1.7 and as applied
to adjusted EBITDA were historic multiples of 4.0 to 7.5, prospective of 4.7
to 7.8 and prospective+1 of 4.1 to 6.3.
Based on an approximate number of Ordinary Shares outstanding of 375.2
million, and adjusting to take account of estimated net debt as of April 30,
1998 of approximately (Pounds)80 million and minority interest as at December
31, 1997 of (Pounds)115 million and an amount due in respect of a foreign
income dividend credit of (Pounds)13 million, the range of values per Ordinary
Share implied by reference to revenues was 297p to 540p based on applying the
above range of historic revenues multiples to 1997 sales, 149p to 445p based
on applying prospective multiples to 1998 revenues and 159p to 455p based on
applying prospective+1 multiples to 1999 revenues. Based on EBITDA as a
financial measure, the implied range of values was 191p to 401p applying the
range of historic EBITDA multiples to the 1997 adjusted EBITDA, 193p to 353p
applying prospective multiples to 1998 adjusted EBITDA and 222p to 367p
applying prospective+1 multiples to 1999 adjusted EBITDA.
Analysis of Selected Minority Buy-outs. KPMG Corporate Finance reviewed
information regarding selected transactions in which third parties have bought
out quoted minorities, drawing conclusions as regards the implied
22
valuation of the 20 percent minority interest in the Company. Buy-outs of
minority shareholdings reviewed comprised Societe Generale de Belgique S.A.,
Lloyds Abbey Life PLC, News International plc, Calor Group PLC, The Telegraph
plc, The Isle of Man Steam Packet Co, Gartmore PLC, The Phoenix Timber Group
plc and Ideco Holdings Inc. Excluding News International plc, where the
premium paid for a minority stake was 39 percent, the premiums paid were
relatively consistent at between 15 percent and 20 percent.
KPMG Corporate Finance also analyzed buy-outs of minority holdings by Old
WMI where the premium paid was 10.6 percent for a minority interest in CWM and
27 percent and 26.9 percent, respectively, for interests purchased in Rust and
WTI.
Other Analyses. KPMG Corporate Finance analyzed the buy-out of the minority
interest in the Company from Old WMI's perspective, having regard to the
impact on Old WMI's earnings per share ("EPS"). In this context KPMG Corporate
Finance considered the tax benefits and synergies potentially arising from 100
percent ownership of the Company by Old WMI.
Based on estimated potential immediate cost savings, including closure of
the Company's London headquarters, KPMG Corporate Finance estimated that Old
WMI could justify paying up to 345p per Ordinary Share without the transaction
becoming earnings dilutive for Old WMI in 1999.
The summary set forth above does not purport to be a complete description of
the analyses performed by KPMG Corporate Finance, although it is a summary of
the material financial and comparative analyses provided to the Independent
Directors in connection with the delivery of its opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying the opinion of KPMG Corporate Finance. In arriving at its
fairness opinion, KPMG Corporate Finance considered the results of all such
analyses and did not assign relative weights to any of the analyses.
The analyses were prepared solely for the purpose of KPMG Corporate Finance
providing its opinion to the Independent Directors as to the fairness from a
financial point of view of the consideration to be received under the Scheme
by the holders of Scheme Shares and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may
be sold, which are inherently subject to uncertainty and may be significantly
more or less favorable than as set forth in these analyses. Similarly, any
estimates incorporated in the analyses performed by KPMG Corporate Finance are
not necessarily indicative of actual past or future values or results, which
may be significantly more or less favorable than any such estimates. No
company utilized as a comparison is identical to the Company or the business
segment for which a comparison is being made, and none of the acquisition
transactions or other business combinations utilized as a comparison is
identical to the Proposal. Accordingly, any analysis or review of publicly
traded companies and business combinations resulting from the transactions is
not mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of the
companies or company to which they are being compared. This is particularly
true in the case of the Company because of the absence of existing publicly
traded comparable companies. The discount rates and multiples used in the
analyses were considered appropriate after a consideration of current economic
and financial market conditions, including trading multiples and capital
structures of selected public companies and rates of return on debt and equity
investments in public and private companies and a qualitative judgment as to
the most relevant information and its application to the Company. In
connection with the analyses, KPMG Corporate Finance made, and was provided
with estimates and forecasts by the Company based upon, numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of the Company and
their advisors. Similarly, analyses based upon forecasts of future results are
not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the Company, or their advisors, none
of the
23
Company, WMI, Old WMI, KPMG Corporate Finance or any other person assumes
responsibility if future results or actual values are materially different
from these forecasts or assumptions. The opinion of KPMG Corporate Finance
necessarily was based on the economic, market and other conditions as in
effect on, and the information made available to them as of, the date of their
opinion. The foregoing summary is qualified by reference to the written
opinion of KPMG Corporate Finance set forth in Schedule D to this Transaction
Statement.
As described above, the opinion and presentation of KPMG Corporate Finance
to the Independent Directors was only one of many factors taken into
consideration by the Independent Directors in making their determination to
recommend the Proposal. In addition, the terms of the Proposal were determined
through negotiations between the Independent Directors and Old WMI and were
approved by the Independent Directors. Although KPMG Corporate Finance
provided advice to the Independent Directors during the course of these
negotiations, the decision to recommend the Proposal was solely that of the
Independent Directors.
KPMG Corporate Finance is an internationally recognized investment banking
and corporate finance advisory firm and is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions. KPMG has in the past provided financial advisory and employee
compensation consulting services to Old WMI and/or its affiliates, including
the Company, and may continue to do so and has received, and may receive, fees
for the rendering of such services.
The Independent Directors selected KPMG Corporate Finance to act as its
corporate finance advisors because of their expertise and reputation in
investment banking advice and mergers and acquisitions work.
In connection with the services of KPMG Corporate Finance as advisors to the
Independent Directors with respect to the Proposal and related matters, the
Company has agreed to pay KPMG Corporate Finance: (i) a fee of (Pounds)100,000
payable in cash upon completion of the review and valuation of the Company,
(ii) a fee of (Pounds)100,000 payable in cash upon the agreement of the terms
of the Proposal, (iii) a weekly fee payable between May 18, 1998 and the date
of posting of the Scheme Document (the Company and KPMG Corporate Finance have
agreed that the weekly fee will be (Pounds)10,000 per week for the first ten
weeks and thereafter on a time cost basis), (iv) a fee of (Pounds)150,000 upon
posting of the Scheme Document to Scheme Shareholders and (v) a fee of
(Pounds)200,000 on completion of the Scheme. In addition, the Company has
agreed to reimburse KPMG Corporate Finance for its reasonable out-of-pocket
expenses and to indemnify it and certain related persons against certain
liabilities arising out of its engagement.
Opinion of Financial Advisor of Old WMI
Old WMI engaged Merrill Lynch to act as Old WMI's exclusive financial
advisor in connection with the Proposal. Old WMI retained Merrill Lynch to act
solely as Old WMI's financial advisor, and not as a financial advisor to the
Company, to assist Old WMI in analyzing, structuring, negotiating and
effecting the Proposal. Merrill Lynch rendered an opinion to the Old WMI Board
that the consideration to be paid by Old WMI pursuant to the Scheme was fair
from a financial point of view to Old WMI (the "Merrill Lynch Opinion"). The
Merrill Lynch fairness opinion does not address the fairness of the
consideration to holders of Ordinary Shares or ADRs. On June 29, 1998, Merrill
Lynch made a presentation to the Old WMI Board summarizing the types of
analyses underlying the Merrill Lynch Opinion (the "Merrill Lynch Report") and
participated in a telephone conference call with the Old WMI Board to discuss
the Proposal.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED HERETO AS SCHEDULE E AND IS
INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE MERRILL LYNCH OPINION SET
FORTH IN THIS TRANSACTION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF THE MERRILL LYNCH OPINION. SCHEME SHAREHOLDERS ARE URGED
TO READ SUCH OPINION IN ITS ENTIRETY. THE MERRILL LYNCH OPINION WAS PROVIDED
TO THE OLD WMI BOARD FOR ITS INFORMATION AND IS DIRECTED TO THE FAIRNESS FROM
A FINANCIAL POINT OF VIEW OF THE CONSIDERATION TO BE PAID BY OLD WMI PURSUANT
TO THE SCHEME AND DOES NOT
24
ADDRESS THE MERITS OF THE UNDERLYING DECISION BY OLD WMI TO ENGAGE IN THE
SCHEME AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SCHEME SHAREHOLDER AS
TO HOW SUCH SCHEME SHAREHOLDER SHOULD VOTE ON THE PROPOSED SCHEME OR ANY
MATTER RELATED THERETO. THE MERRILL LYNCH REPORT WAS INTENDED SOLELY TO
PROVIDE ADDITIONAL INFORMATION FOR THE USE AND BENEFIT OF THE OLD WMI BOARD,
AND WAS NOT PREPARED FOR THE PURPOSE OF ADDRESSING THE MERITS OF THE
UNDERLYING BUSINESS DECISION BY OLD WMI TO ENGAGE IN THE SCHEME.
The summary set forth below does not purport to be a complete description of
the analyses underlying the Merrill Lynch Opinion, the Merrill Lynch Report or
the discussion Merrill Lynch had with the Old WMI Board. The preparation of a
fairness opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial analysis
or summary description. In arriving at its opinion, Merrill Lynch did not
attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, Merrill Lynch believes that its
analyses must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, Old WMI and the Company. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, estimates of the value of businesses
or securities do not purport to be appraisals or to reflect the prices at
which such businesses or securities might actually be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty. In
addition, as described above, the Merrill Lynch Opinion was among several
factors taken into consideration by the Old WMI Board in making its
determination to approve the Proposal. Consequently, the Merrill Lynch
analyses described below should not be viewed as determinative of the decision
of the Old WMI Board or Old WMI's management with respect to the fairness of
the consideration to be paid by Old WMI.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to it, discussed with or reviewed by or for it, or publicly
available, and did not assume any responsibility for independently verifying
such information or undertake an independent evaluation or appraisal of any of
the assets or liabilities of the Company. In addition, Merrill Lynch did not
assume any obligation to conduct any physical inspection of the properties or
facilities of the Company. With respect to the financial forecast information
and the Expected Cost Savings (as defined below) furnished to or discussed
with Merrill Lynch by the Company or Old WMI, Merrill Lynch assumed that they
had been reasonably prepared and reflected the best currently available
estimates and judgment of the Company's or Old WMI's management as to the
expected future financial performance of the Company or Old WMI, as the case
may be, and the Expected Cost Savings. Merrill Lynch also assumed that the
final form of the Joint Announcements (as defined below) would be
substantially similar to the last drafts it reviewed.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they exist and can be evaluated on, and on the information
made available to it as of, the date of the Merrill Lynch Opinion. Without
limiting the foregoing, the Merrill Lynch Opinion does not address the
potential effects of fluctuations in the US dollar/pounds sterling exchange
rate after the date thereof. Merrill Lynch assumed approximately 375.2 million
Ordinary Shares outstanding and that each ADS represented by ADRs being the
equivalent of two Ordinary Shares and assumed an exchange rate of US
$1.6673:UK (Pounds)1 as of June 23, 1998. Merrill Lynch also assumed that in
the course of obtaining any necessary regulatory or other consents or
approvals (contractual or otherwise) for the Scheme, no restrictions,
including any divestiture requirements or amendments or modifications, will be
imposed that will have a material adverse effect on the contemplated benefits
of the Scheme.
In connection with the Merrill Lynch Opinion, Merrill Lynch: (1) reviewed
certain publicly available business and financial information relating to the
Company and Old WMI that Merrill Lynch deemed relevant;
25
(2) reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of the
Company, as well as the amount and timing of the cost savings and related
expenses and synergies expected to result from the Scheme (the "Expected Cost
Savings") furnished to Merrill Lynch by the Company and Old WMI; (3) conducted
discussions with members of senior management of the Company and Old WMI
concerning the matters described above, as well as their respective businesses
and prospects before and after giving effect to the Scheme and the Expected
Cost Savings; (4) reviewed the market prices and valuation multiples for the
Ordinary Shares and compared them with those of certain publicly traded
companies that Merrill Lynch deemed to be relevant; (5) reviewed the results
of operations of the Company and compared them with those of certain publicly
traded companies that Merrill Lynch deemed to be relevant; (6) compared the
proposed financial terms of the Scheme with the financial terms of certain
other transactions that Merrill Lynch deemed to be relevant; (7) participated
in discussions and negotiations among representatives of the Company and Old
WMI and their financial and legal advisors; (8) reviewed the potential pro
forma impact of the Scheme on Old WMI; (9) reviewed the US and UK joint press
releases (the "Joint Announcements"), dated June 29, 1998, describing the
terms of the Scheme and (10) reviewed such other financial studies and
analyses and took into account such other matters as Merrill Lynch deemed
necessary, including an assessment of general economic, market and monetary
conditions.
The following is a summary of the various types of analyses presented to the
Old WMI Board in connection with the rendering of the Merrill Lynch Opinion:
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow analysis based upon certain operating and financial assumptions,
forecasts and other information prepared and provided by the management of the
Company for the years 1998 through 2002. In performing the discounted cash
flow analysis, Merrill Lynch used: (i) discount rates from 11 percent to 13
percent and (ii) terminal EBITDA multiples from 6.5x to 7.5x. Merrill Lynch
derived a discounted cash flow valuation based upon the projections provided
by the Company (the "Base Projections") and then derived additional discounted
cash flow valuations by adjusting the Base Projections for the impact of: (a)
certain potential future acquisitions which were included in the Base
Projections (the "Future Company Acquisitions") and (b) the Expected Cost
Savings which were not included in the Base Projections. Merrill Lynch derived
a summary reference range using the Base Projections of $11.20 to $14.35 per
ADR. Merrill Lynch also derived summary reference ranges of: (x) $10.20 to
$12.75 per ADR by excluding Future Company Acquisitions; (y) $11.60 to $14.90
per ADR by including Expected Cost Savings and (z) $10.60 to $13.25 per ADR by
excluding the Future Company Acquisitions and including the Expected Cost
Savings.
Comparison of Selected Public Company Comparables. Merrill Lynch analyzed
certain actual and estimated financial information for the Company and three
other publicly-traded European waste services companies, including Shanks &
McEwan Group PLC, Waste Recycling Group PLC and SITA S.A. (collectively, the
"European Waste Services Group") that Merrill Lynch considered to some extent
comparable to the Company, although not necessarily representative of truly
comparable companies. Merrill Lynch calculated the forward EBITDA multiples
(to the extent of available information) and 1999 price to earnings ratios
(the "1999 P/E Ratios") for the companies. For the European Waste Services
Group, (i) the mean and median of forward EBITDA multiples were each 6.9x and
(ii) the mean and median of the 1999 P/E Ratios were 18.1x and 18.3x,
respectively. Based on the forward EBITDA multiples, Merrill Lynch derived
summary representative ranges of $8.40 to $11.80 per ADR without giving effect
to Expected Cost Savings and $8.85 to $12.45 per ADR after giving effect to
Expected Cost Savings. Based on the 1999 P/E Ratios, Merrill Lynch derived
summary representative ranges of $10.95 to $16.05 per ADR without giving
effect to the Expected Cost Savings and $11.75 to $17.25 per ADR after giving
effect to the Expected Cost Savings.
No company in the European Waste Services Group is identical to the Company.
Accordingly, an analysis of the results of the foregoing companies necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors
that could affect the public trading value of the Company and the companies in
the European Waste Services Group.
26
Analysis of Selected Acquisition Comparables. Merrill Lynch also reviewed
certain publicly-available information for eight selected acquisitions
involving European target companies. In its discussion with the Old WMI Board,
Merrill Lynch noted that the selected transactions primarily involved the
acquisition of a control position in an unrelated target company and not, as
is the case of Old WMI acquiring the remaining interest in the Company, the
acquisition of a remaining interest of an affiliated entity. Merrill Lynch
calculated historical EBITDA multiples (to the extent of available
information) for the selected transactions. The mean and median of offer
values as multiples of LTM EBITDA for the comparable transactions were each
7.0x. In its discussion with the Old WMI Board, Merrill Lynch noted that,
because the Company's actual historical EBITDA included the results of: (i)
businesses which had recently been divested; (ii) long term contracts which
had recently expired and (iii) businesses which had recently experienced
deteriorating operating results, it had used the Company's projected 1998
EBITDA as an estimate of historical EBITDA from ongoing operations for
purposes of this analysis. Based on its analysis, Merrill Lynch derived
summary reference ranges of $9.40 to $11.10 per ADR without giving effect to
Expected Cost Savings and $9.95 to $11.70 per ADR after giving effect to
Expected Cost Savings.
No company or transaction used in the above analysis as a comparison was
identical to Old WMI or the Scheme, respectively. Accordingly, an analysis of
the results of the comparison is not purely mathematical; rather, it involves
complex considerations and judgments concerning differences in historical
projected financial and operating characteristics of the comparable acquired
companies and other factors that could affect the acquisition value of such
companies and Old WMI.
Merrill Lynch is acting as a financial advisor to Old WMI in connection with
the Scheme and will receive a fee from Old WMI for its services, a significant
portion of which is contingent upon the consummation of the Scheme. In
addition, Old WMI has agreed to indemnify Merrill Lynch for certain
liabilities arising out of its engagement. Merrill Lynch acted as exclusive
financial advisor to Old WMI in connection with its merger with USA Waste, and
is an appointed financial advisor to the Company and has, in the past,
provided financial advisory and financing services to USA Waste and Old WMI
and/or its affiliates, including the Company, and may continue to do so and
has received, and may receive, fees for the rendering of such services. In
addition, in the ordinary course of its business, Merrill Lynch may actively
trade the securities of WMI for Merrill Lynch's own account and for the
accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
Merrill Lynch's engagement with Old WMI was formalized in an engagement
letter ("Engagement Letter"), dated June 26, 1998. Pursuant to the Engagement
Letter, Old WMI agreed to pay Merrill Lynch: (i) a fee of $250,000 contingent
upon and payable in cash upon the posting of an explanatory statement with the
English High Court in connection with the Scheme and (ii) a contingent fee of
$1,100,000, less amounts paid pursuant to (i) above, payable upon the Scheme
becoming effective during the period of Merrill Lynch's retention. Old WMI
also agreed to reimburse Merrill Lynch for reasonable out-of-pocket expenses
and reasonable fees and disbursements of its legal counsel. In addition, Old
WMI has agreed to indemnify Merrill Lynch against certain liabilities.
Old WMI retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking
and advisory firm. Merrill Lynch, as part of its investment banking business,
is continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes.
ITEM 10. INTERESTS IN SECURITIES OF THE ISSUER
(a) The relevant information in the Scheme Document is contained in Item 4,
Disclosure of interests and dealings, under Part 7, Additional Information,
and is incorporated herein by reference in response to this Item.
(b) Neither the Company nor any of the persons named in response to
paragraph (a) of this Item has effected a transaction in the Ordinary Shares
or the ADRs during the past 60 days.
27
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES
Participation in the Scheme by Holders of ADRs
Holders of ADRs will be entitled to direct the Depositary to vote on the
Scheme pursuant to the terms of the Deposit Agreement. Section 4.08 of the
Deposit Agreement provides that upon receipt of notice of any meeting or
solicitation of consents or proxies from holders of ADRs, the Depositary will
fix a record date in respect of such meeting for the giving of instructions
for voting such consent or proxy and will mail to the holders of ADRs a notice
(the "Depositary Notice") which will contain the relevant information and
instructions on how to exercise their voting rights or how to instruct the
Depositary to give a discretionary proxy to a person designated by the
Company.
Holders of ADRs who wish to attend the Court Meeting or the Extraordinary
General Meeting should take steps to present their ADRs for cancellation to
the Depositary, as such steps are described in the Depositary Notice to which
this Transaction Statement is attached, so that they become registered holders
of Ordinary Shares prior to 5:30 pm (London time) on October 5, 1998, two days
before those meetings.
Other Arrangements or Agreements
See "Item 16--Additional Information--Certain Agreements" for a discussion
of the following agreements between the Company and certain of its affiliates:
(i) International Development Agreement; (ii) International Business
Opportunities Agreement; (iii) Intercorporate Services Agreement; (iv) Master
License Agreement and (v) Master Dividend Agreement.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD
TO THE TRANSACTION
The Independent Directors consider that the terms of the Proposal are fair
and reasonable so far as the Scheme Shareholders are concerned. The
Independent Directors unanimously recommend that Scheme Shareholders approve
the Scheme and vote in favor of the resolutions necessary to implement it. The
Independent Directors intend to vote their own beneficial holdings to approve
the Scheme at the Court Meeting and in favor of the special resolution to be
proposed at the Extraordinary General Meeting. Upon completion of the Scheme,
it will be binding on all Scheme Shareholders, including the Depositary and
the Independent Directors.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION
(a) Appraisal rights are not provided under applicable law or under the
Company's Articles of Association and will not be voluntarily accorded by the
Company to Scheme Shareholders in connection with the Scheme. Scheme
Shareholders who object to the Scheme may vote against it at the Court Meeting
and against the special resolution to be proposed at the Extraordinary General
Meeting. In addition, after these meetings have been held, the Scheme must be
sanctioned by the English High Court before it can become effective. At the
Court Hearing, Scheme Shareholders who object to the Scheme would again have
an opportunity to voice their objections. The English High Court may consider
these objections in exercising its discretion to sanction the Scheme. Upon
completion of the Scheme, it will be binding on all Scheme Shareholders
including the Depositary and the Independent Directors. Scheme Shareholders'
rights with respect to the Scheme are discussed in greater detail in "Item 4--
Terms of the Transaction".
(b) See "Item 16--Additional Information--Incorporation of Certain
Information by Reference" for information on how to obtain additional
information filed with the SEC by WMI, the Company, Old WMI and USA Waste.
(c) The Scheme does not involve the exchange of debt securities of the
Company, WMI or Old WMI in exchange for Scheme Shares held by Scheme
Shareholders.
ITEM 14. FINANCIAL INFORMATION
Financial information concerning the Company is set forth in Part IV of the
Company's Annual Report on Form 20-F for the fiscal year ended December 31,
1997 and is hereby incorporated herein by reference. See
28
"Item 16--Additional Information--Incorporation of Certain Information by
Reference" for information on how to obtain this report and other information
filed with the SEC by the Company. The relevant information contained in the
Scheme Document under Part 3, Information on the Company, is incorporated
herein by reference in response to this Item.
The following table provides the ratio of earnings to fixed charges and book
value per share for the two most recent fiscal years and the relevant interim
period.
US GAAP UK GAAP
-------------------------------------- --------------------------------------
30-JUN-98 1997 1996 30-JUN-98 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
Earnings to fixed
charges................ 11.11 2.87 0.36 11.34 3.77 0.88
Book value per share.... (Pounds)2.64 (Pounds)2.59 (Pounds)2.82 (Pounds)1.12 (Pounds)0.92 (Pounds)0.84
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED
In addition to the use of mails, proxies and/or voting instructions may be
solicited by officers and directors and regular employees of the Company and
WMI, without additional remuneration, by personal interviews, written
communication, telephone, telegraph or facsimile transmission. The Company
also will request the Depositary, brokerage firms, nominees, custodians and
fiduciaries to forward proxies and/or voting instructions to the beneficial
owners of Scheme Shares held of record and will provide reimbursement for the
cost of forwarding the material in accordance with customary charges. The
Company has hired CIC to coordinate the solicitation of proxies and/or voting
instructions by and through such holders for a fee of approximately $7,000
plus expenses.
The Company engaged KPMG Corporate Finance to act as its exclusive financial
advisor in connection with the Proposal. Old WMI engaged Merrill Lynch to act
as its exclusive financial advisor in connection with the Proposal. See "Item
9--Reports, Opinions, Appraisals and Certain Negotiations" for a discussion of
the terms of engagement of the financial advisors to the Company and Old WMI.
ITEM 16. ADDITIONAL INFORMATION
Certain Agreements
The Company has entered into certain agreements with Old WMI and various of
its other subsidiaries that are described below.
International Development Agreement. The Company, Old WMI, CWM, WTI, Waste
Management International, Inc. ("WMII"), Waste Management Europe N.V., Rust,
WTI International Holdings Inc. and RIH Inc. are parties to a Third Amended
and Restated International Development Agreement ("IDA"), dated January 1,
1993. Among other things, the IDA: (i) provides that Old WMI, Rust and WTI
shall each vote their Ordinary Shares for the appointment of directors such
that one designee of each of Rust and WTI (or such greater number as shall
equal the total number of directors multiplied by the percentage of
outstanding Ordinary Shares so held by such entity, reduced to the nearest
whole number) shall be elected to the Board of Directors of the Company so
long as Rust or WTI (as the case may be) continues to own, or has the right to
acquire from the Company, Ordinary Shares sufficient for it to own at least 10
percent of the Company's outstanding Ordinary Shares; (ii) permits Rust and
WTI each to maintain beneficial ownership of the Company's outstanding
Ordinary Shares at a level having not less than 10 percent of the voting power
of all outstanding Company securities at general meetings of the Company (so
as to facilitate their meeting certain accounting objectives under US tax
laws) until the earlier of July 1, 2000 or April 30 in the year following the
year in which such option becomes exercisable (unless prior to such April 30
Rust or WTI, as the case may be, acquires a sufficient number of Ordinary
Shares to maintain at least 10 percent of the voting power), and permits Old
WMI to maintain beneficial ownership of the Company's outstanding Ordinary
Shares at a level having not less than 55 percent of the voting power of all
outstanding Company securities at general meetings of the Company (including
amounts held by Rust and WTI,
29
so long as they remain majority-owned by Old WMI), in each case pursuant to an
option to purchase additional newly issued Ordinary Shares of the Company for
cash at fair market value, which for purposes of such options shall be the
average of the closing sale prices for Ordinary Shares on the London Stock
Exchange (or, if not then traded on the London Stock Exchange on another
principal exchange or market) for the five trading days ending on the fifth
trading day before the date of notification of the option exercise (adjusted
where appropriate for dividends, stock splits, capitalization issues and
issues of Ordinary Shares at less than fair market value) so long as such
option is exercised within certain prescribed time limits (respectively, the
"Anti-Dilution Options" of Rust and WTI and "Consolidation Option" of Old
WMI); (iii) restricts the Company from making certain share issues or
distributions or proposing certain reorganization plans or arrangements which
could dilute Old WMI's, Rust's or WTI's interests under the Consolidation
Option or the Anti-Dilution Options, without in each case obtaining the
consent of each of Old WMI, Rust and WTI; (iv) restricts Rust's and WTI's
ability until July 1, 2000 to sell their Ordinary Shares unless such sales are
made in compliance with United States securities laws; (v) grants certain
rights of first refusal to Old WMI with respect to disposition of Ordinary
Shares by Rust or WTI; (vi) grants certain rights of participation to Rust and
WTI with respect to a disposition of Ordinary Shares by Old WMI and (vii)
grants each of Old WMI, Rust and WTI a number of registration rights under the
Securities Act of 1933 (demand and participation) and rights to have the
Company facilitate sales by Old WMI, Rust and WTI in offerings outside the
United States, in each case at the Company's expense to the extent permitted
by law (except any underwriting commissions).
Issues of new Ordinary Shares by the Company upon exercise of either the
Anti-Dilution Option or the Consolidation Option will not be subject to the
pre-emptive rights which normally apply under English law to new issues of
equity securities for cash, although issues of new Ordinary Shares upon
exercise of the Consolidation Option would be prohibited under London Stock
Exchange rules unless there was at the time a subsisting annual authorization
of the shareholders of the Company (other than Old WMI and, for so long as
they remain subsidiaries of Old WMI, Rust and WTI).
International Business Opportunities Agreement. Pursuant to the First
Amended and Restated International Business Opportunities Agreement, dated
January 1, 1993, by and among Old WMI, CWM, WTI, WMII, Rust and the Company,
as amended (the "IBOA"), each of Old WMI, CWM, WTI and Rust has agreed that,
until the later of July 1, 2000 or the date on which Old WMI ceases to
beneficially own a majority of the outstanding voting equity interests of such
subsidiary or ceases to beneficially own a majority of the outstanding voting
equity interests of the Company, and in each case no longer has an option to
obtain such ownership, such company will not engage in waste management
services, collection, storage, processing, treatment or disposal of hazardous
wastes (including hazardous substance remediation services), or development
and construction (where the customer is seeking third-party operation), or
operation of water, wastewater and sewage treatment operations (including
facilities for treating hazardous waste streams), outside North America (i.e.,
the United States, its territories and possessions, Canada and Mexico), except
(i) with respect to licensing of technology and minor interests of CWM, WTI or
Rust in publicly held entities; (ii) sales by Old WMI of recyclables and (iii)
with respect to development and operation of waste-to-energy facilities (as
described below). The Company has agreed that for the same time periods as are
applicable to Old WMI, CWM, WTI and Rust as described above, it will not
engage in North America in the type of activities in which Old WMI, CWM, WTI
and Rust have agreed not to engage outside of North America and to abide by
the allocation of certain business opportunities to WTI and Rust outside North
America. Businesses or assets acquired by a party to the IBOA which are in the
domain of another party thereto (according to the allocation principles
described above) must be offered for sale to the other party at fair market
value.
Under the IBOA, opportunities outside of North America, other than in
Germany and Italy, relating to the design, development, construction,
operation and maintenance of waste-to-energy facilities, are allocated to WTI
under the terms of a joint venture framework agreement between WTI and the
Company. The Company has the exclusive allocation of waste-to-energy
opportunities in Germany and Italy. The terms of the joint venture provide
that WTI will have the primary responsibility for the initial identification,
marketing and development of opportunities in the joint venture territories
and will bear the costs relating to these activities. Once a contract
30
has been secured for a project, the Company is entitled (but not obliged) to
subscribe for 49 percent of the equity of the project available to the Old WMI
group as a whole, and WTI will be entitled to subscribe for the balance. Once
approved as a joint venture project, all further costs relating to the project
will be borne by the parties in proportion to their shareholding. If a project
is not approved for joint development, either party may continue to develop it
for its own account. WTI, however, may not construct or operate any waste-to-
energy project outside of North America without the prior consent of the
Company.
By agreement among the parties, Old WMI is responsible for resolving
business allocation disputes among the Company, CWM, WTI, Rust and Old WMI
which are not controlled by the allocations set out in the previous paragraph.
In this connection, the parties to the agreement have agreed that in order to
minimize the potential for conflicts of interest among various subsidiaries
under the common control of Old WMI, and for so long as Old WMI shall have
beneficial ownership of a majority of the outstanding voting equity interests
of such subsidiary (or an option to obtain such ownership), Old WMI has the
right to direct future business opportunities to the Old WMI-controlled
subsidiary which, in Old WMI's reasonable and good faith judgment, has the
most experience and expertise in that line of business, provided that Old WMI
may not allocate a business opportunity to a particular subsidiary if such
business opportunity would involve that subsidiary in a breach of its non-
compete as described above. Opportunities outside North America relating to
the provision of future waste management services are generally to be
allocated to the Company, except that opportunities outside North America
relating to certain permitted WTI and Rust activities are generally to be
allocated to WTI and Rust. No party is liable for consequential damages,
except for lost profits, for any breach of the IBOA.
Intercorporate Services Agreement. The Company and Old WMI have entered into
an Intercorporate Services Agreement, dated March 9, 1992 (as amended by an
addendum dated March 17, 1992) and effective as of December 31, 1991 (the
"ISA"), pursuant to which Old WMI has agreed to provide to the Company: (i) a
committed $750 million credit facility; (ii) a covenant to pay $285 million as
a capital contribution in respect of certain environmental costs and
liabilities of the Company; (iii) certain insurance and letter of credit and
surety bond procurement services and, at Old WMI's discretion, performance
guarantees; (iv) the right for certain Company employees to participate in Old
WMI retirement and certain other employee benefit arrangements to the extent
they participated in such arrangements at December 31, 1991 and (v) certain
corporate and administrative services. The Company has agreed until 2041 to
indemnify Old WMI, without limit, against any liability or expense which Old
WMI may suffer relating to any liability or obligation of the Company,
whenever arising, other than any environmental liabilities of the Company
which are the subject of the environmental covenant from Old WMI. The ISA will
continue indefinitely unless and until terminated by the Company at any time
or by Old WMI with not less than 30 days' prior notice effective December 31
of any year after 1996 or by Old WMI following the occurrence of certain
events of default. No such termination will affect the continued operation of
the environmental covenant or the Company's agreement to indemnify Old WMI.
Each party has agreed to share certain business information with the other and
maintain the confidentiality thereof. The ISA provides that neither party
shall be liable to the other for any consequential damages (except those
arising in connection with liabilities under the environmental covenant), and
that in certain events of force majeure, a non-performing party shall be
excused from performance other than for payment obligations. Certain matters
may be submitted to third party arbitration in the event of a disagreement
between the parties.
Master License Agreement. The Company, Old WMI, CWM, WTI and Rust have
entered into a First Amended and Restated Master License Agreement (the "MLA")
dated January 1, 1993, under which the Company has granted each other party
the right to obtain a license of intangibles and receive ancillary services
from the Company for their respective business activities for use in North
America, and each other party has granted the Company the right to obtain a
license of intangibles and receive ancillary services from each other party
relating to its respective business activities for use outside of North
America. Unless the licensee selects a shorter term, such licenses remain in
effect until the latest of July 1, 2005, the date the grantor or grantee is no
longer majority owned beneficially by Old WMI (and Old WMI no longer has an
option to retain such ownership), and the termination of the useful life of
the facility or equipment incorporating or used with the licensed intangible.
The consideration for each license will be a price based on the fair market
value of a license
31
for the licensed intangible, but will not exceed the most favorable pricing
charged an unaffiliated licensee for a comparable license. Sublicensing of
licensed intangibles is not permitted. All of the parties to the MLA have
retained the right to license their own technology to third parties anywhere
in the world, except as summarized in the next paragraph.
The MLA supplements an Intellectual Property Licensing Agreement dated
September 7, 1990, which provides, among other things, a grant by the Company
to WTI of a 10 year, non-exclusive, royalty-free license, with two successive
five year renewal options, of the BRINI(TM) resource recovery technology owned
by the Company to all of WTI's existing and future waste-to-energy facilities,
so that WTI can develop BRINI(TM) technology systems at or adjacent to its
facilities in connection with the operations of such facility, and an
agreement by the Company not to grant additional licenses to the BRINI(TM)
technology to the owners or operators of waste-to-energy facilities in North
America.
Master Dividend Agreement. Substantially all of the Company's assets are
owned directly and indirectly by Waste Management International B.V.
("WMIBV"), a Netherlands subsidiary, the outstanding equity of which consists
of: 63,750 A shares owned by the Company; 12,750 B shares owned by WMII and
held by SBC Nominees, as nominee of WMII; 12,750 C shares owned by RIH Inc.;
and 12,750 D shares owned by WTI International Holdings Inc. Each of the A, B,
C and D shares (together the "BV Shares") carries one vote at general meetings
of WMIBV. Except with the consent of all the shareholders in WMIBV, future
issues of shares must be on the basis of shares of a particular class being
issued only to the existing holder of shares of that class. In the event of
future issues of further A shares to the Company (e.g., in consideration of
the acquisition by WMIBV of assets owned or acquired by the Company, otherwise
than for cash), each of WMII, RIH Inc. and WTI International Holdings Inc.
will be entitled to subscribe, for cash at par (being NLGI each), for a number
of new B, C or D shares, respectively, sufficient to maintain its respective
voting interest in WMIBV at 12.5 percent.
The Company, WMIBV, WMII, CWM, WTI, RIH Inc., WTI International Holdings
Inc. and SBC Nominees have entered into an Amended and Restated Master
Dividend Deed, dated December 31, 1992 (the "Master Dividend Agreement"),
which governs, among other things, the manner in which dividend payments are
to be declared and paid by the Company and WMIBV, and the liquidation rights
with respect to the Company and WMIBV.
Under the Company's Articles of Association, a dividend may be declared by
the shareholders in general meeting, but no dividend may be declared in excess
of the amount recommended by the Company Board. The Company Board may, without
any prior shareholder approval, pay to the shareholders such interim dividends
as appear to the Company Board to be justified by the financial position of
the Company. Under the Articles of Association of WMIBV, dividends may be
declared only by the shareholders in general meeting. In both cases, dividends
may only be paid out of the profits available by law for distribution.
Under the Master Dividend Agreement, each of WMII, RIH Inc. and WTI
International Holdings Inc. has undertaken not to claim, and acknowledged that
it has no right to, any dividend on any Ordinary Share held by it from time to
time. Whenever WMIBV pays a dividend to WMII, RIH Inc. and WTI International
Holdings Inc., the Company will pay a dividend in respect of the Ordinary
Shares. The amount of each dividend paid by the Company on each Ordinary Share
(plus the associated tax credit available to UK-resident individual taxpayers
receiving dividends from UK-resident companies) will be equal to the aggregate
dividend simultaneously paid by WMIBV to WMII, RIH Inc. and WTI International
Holdings Inc. (gross of any Netherlands withholding tax) divided by the number
of Ordinary Shares which WMII, RIH Inc. and WTI International Holdings Inc.
hold in the Company. The Master Dividend Agreement prohibits any sale or other
disposition by WMII, RIH Inc. or WTI International Holdings Inc. of any BV
shares, other than to the Company or WMIBV itself.
If the Company Board determines to pay a dividend to public holders of
Ordinary Shares, but WMIBV is not in a position to pay an equivalent dividend,
the Company may pay such dividend if WMII, RIH Inc. and WTI International
Holdings Inc. so agree. In this event, the amount of the WMIBV dividend not
paid will be treated as in arrears and will be payable in priority to any
subsequent dividend of WMIBV that may be declared.
32
In addition to the B, C and D shares held by WMII (through its nominee), RIH
Inc. and WTI International Holdings Inc., respectively, WMIBV has also granted
those companies certain participation rights (pursuant to a Participation
Rights Agreement) governed by Netherlands law and conferring on the holders
certain contractual rights against WMIBV. WMIBV has also granted certain other
participation rights which, together with the A Shares, are now vested in the
Company. The benefits of the participation rights are non-transferable, except
to the Company or WMIBV. The combined effect of the Articles of Association of
WMIBV, the Master Dividend Agreement, and the participation rights is that, in
the event of the liquidation of WMIBV, the surplus assets of WMIBV remaining
after its creditors and liquidation expenses have been discharged will be
applied as follows: (i) in paying to the Company on the second anniversary of
WMIBV's liquidation or (if earlier) the first anniversary of the Company's
liquidation any amount by which the assets of the Company are inadequate to
discharge any of its liquidation expenses (or an appropriate portion thereof)
and the claims of the Company's creditors admitted to proof in the Company's
liquidation (or, if the Company is not in liquidation, which would have been
admissible to proof if the Company had commenced liquidation one year after
WMIBV) and of any holders of shares in the Company ranking in a liquidation of
the Company in priority to the Ordinary Shares; (ii) in returning the nominal
amount of all of the BV Shares to the respective holders thereof; (iii) in
paying to each of WMII, RIH Inc. and WTI International Holdings Inc. any
arrears of WMIBV dividends that may have accumulated in proportion to the
amount of such arrears; (iv) in paying to each of WMII, RIH Inc. and WTI
International Holdings Inc. that proportion of any balance of WMIBV's assets
which the ownership of Ordinary Shares by each of them bears to the total
number of Ordinary Shares and (v) in paying to the Company, as the holder of
the A Shares, the whole of any remaining balance. By a combination of the
Articles of Association of the Company and the Master Dividend Agreement, any
surplus assets arising on a liquidation of the Company remaining after
discharging its own liquidation expenses and the claims of its creditors and
any holders of shares ranking in a liquidation of the Company in priority to
the Ordinary Shares, will be distributed pro rata to the holders of the
Ordinary Shares, other than that part of such surplus, if any, which has been
received from WMIBV, which, net of any attributable tax, will be distributed
only to the public holders of Ordinary Shares.
In addition, the Company has entered into certain additional agreements with
affiliates of the Company. A discussion of these additional agreements is
contained in the Scheme Document in Item 6, Material Contracts, under Part 7,
Additional Information, and is incorporated herein by reference in response to
this Item.
Certain Financial Projections of the Company
The Company does not as a matter of course publicly disclose internal
budgets, plans, estimates, forecasts or projections as to future revenues,
earnings or other financial information. The projected financial data which
follows reflect certain selected information which was contained in
projections prepared by management of the Company and furnished to Old WMI,
Old WMI's financial advisors and KPMG Corporate Finance. These projections
were based upon a variety of estimates and assumptions, the material ones of
which are set forth below. The estimates and assumptions underlying the
projections involved judgments with respect to, among other things, future
economic, competitive, regulatory and financial market conditions, exchange
rates, political risk and future business decisions which may not be realized
and are inherently subject to significant business, economic, competitive and
regulatory uncertainties, all of which are difficult to predict and many of
which are beyond control of the Company. While the Company believes these
estimates and assumptions to have been reasonable, there can be no assurance
that the projections are accurate, and actual results may vary materially from
those shown. In light of the uncertainties inherent in forward looking
information of any kind, the inclusion of these projections herein should not
be regarded as a representation by the Company, Old WMI, WMI or any other
person that the anticipated results will be achieved and investors are
cautioned not to place undue reliance on such information.
The Company does not intend to update or otherwise revise the information
presented herein to reflect circumstances existing after the date of the most
recent financial statements incorporated by reference in this Transaction
Statement or to reflect the occurrence of unanticipated events. The
information presented herein should be read together with the financial
information concerning the Company as set forth in Part IV of the
33
Company's Annual Report on Form 20-F for the fiscal year ended December 31,
1997 which is incorporated by reference in this Transaction Statement. The
following financial data reflects certain information that was contained in
the projections prepared by management of the Company.
THE PROJECTIONS ARE NOT INTENDED TO CONSTITUTE A FORECAST OF PROFITS BY THE
COMPANY OR ITS DIRECTORS AND SHAREHOLDERS SHOULD NOT RELY ON SUCH PROJECTIONS
IN MAKING ANY DECISION ABOUT THEIR INVESTMENT IN THE COMPANY.
CERTAIN FINANCIAL PROJECTIONS FOR THE YEAR ENDING DECEMBER 31,
((Pounds) MILLIONS)
1998 1999 2000 2001 2002
---- ----- ----- ----- -----
Revenue...................................... 926 1,111 1,224 1,352 1,489
EBIT......................................... 123 130 155 191 224
EBITDA....................................... 226 251 286 333 379
Net Income (1)............................... 59 65 77 96 115
- --------
(1) Net income includes certain non-recurring items in 1998 and 1999.
The Company operates in 18 countries each of which is subject to unique
environmental, economic, political, regulatory and business conditions. The
inflation, growth, exchange rates and other factors can vary substantially in
the countries in which the Company operates, or is considering entering. The
assumptions presented below are the overall Company assumptions (unless
otherwise disclosed) made when preparing the projections.
Subject to the qualifications and limitations stated above, the information
presented herein generally relies upon the following material assumptions and
bases for the projections:
1. It was assumed that the inflation rate would be between 1.8% and 1.9%
per annum.
2. Volume growth, which includes increased business for the Company as a
result of general economic growth conditions and the Company's ability
to attract new business, was assumed to be between 2.1% and 2.3% of
prior year's revenue.
3. It was assumed that the Company would be able to achieve operating cost
efficiencies which would reduce the costs of the Company. The
assumptions varied by country and in some cases in each year of the
projection and ranged from zero to five percent.
4. It was assumed that the Company would complete acquisitions or new
projects each year that would result in revenue growth of between 5.8%
and 6.5% of the prior year's revenue. It was generally assumed that
certain operating synergies would be achieved as a result of these new
acquisitions. In addition, it was assumed that the Company would
complete an equity investment in Brazil in 1998 (which investment was
completed in July 1998).
5. Capital expenditures, excluding the cost of acquisitions, were expected
approximately to equal the prior year's depreciation plus an allowance
for volume growth.
6. It was assumed that there would be no change in the Company's dividend
policy, and that debt financings would be obtained at rates generally
similar to conditions existing at the time that the projections were
prepared.
7. The Company reports its results in pounds sterling. The effect of
exchange rate changes can have a significant impact on both revenue and
income. The projections assume that the movement of exchange rates would
increase revenues by approximately 10% in 1999 compared to the 1998
projected revenue, and would be stable thereafter.
8. Various scenarios were examined by the Company regarding potential
savings which could be achieved; however, no synergies or savings as a
result of the Proposal are included in the projections.
9. The projections were produced on the assumption that the Company would
be utilizing US generally accepted accounting principles.
34
Cautionary Statement Concerning Forward-Looking Statements
Certain matters discussed herein are forward-looking statements that involve
risks and uncertainties. Forward-looking statements include the information
set forth above concerning the projected consolidated income statement data as
to the years ending December, 31, 1998 through December 31, 2002. Such
information has been included in this Transaction Statement for the limited
purpose of giving the Company's stockholders access to financial projections
by the Company's management that were made available to Old WMI. The
information was based on assumptions concerning the Company's services and
business prospects in the years 1998 through 2002. The information also was
based on other revenue and operating assumptions. Information of this type is
based on estimates and assumptions that are inherently subject to significant
economic and competitive uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the Company's control.
Accordingly, there can be no assurance that the projected results would be
realized or that actual results would not be significantly higher or lower
than those set forth above. In addition, the consolidated income statement
data as to the years ending December 31, 1998 through December 31, 2002 were
not prepared with a view to public disclosure or compliance with the published
guidelines of the SEC or the guidelines established by the American Institute
of Certified Public Accountants or any similar UK body regarding projections
and forecasts and are included in this Transaction Statement only because such
information was made available to Old WMI. Neither the Company's nor Old WMI's
independent accountants have examined or applied any agreed upon procedures to
this information and, accordingly, assume no responsibility for this
information.
Certain Civil Proceedings
In June 1998, an alleged holder of ADRs filed a putative class action
complaint in the Circuit Court of Cook County, Chicago, Illinois, naming Old
WMI, the Company and several directors of the Company as defendants. The
complaint seeks to enjoin the completion of the Scheme or, in the alternative,
rescission or compensatory damages in the event the Scheme is completed. Among
other things, the complaint asserts that the completion of the Scheme will
constitute a breach of defendants' fiduciary duties to the holders of ADRs
and, if the Scheme is completed, the holders of ADRs will be denied a proper
premium for their ADRs. WMI, on behalf of Old WMI, the Company and the named
directors intend to contest this litigation vigorously.
In July 1998, a putative class of alleged holders of Company Ordinary Shares
filed a complaint in the Circuit Court of Cook County, Chicago, Illinois,
naming Donald F. Flynn and Old WMI as defendants. The complaint seeks to
enjoin the completion of the Scheme or, in the alternative, rescission or
compensatory damages in the event the Scheme is completed. Among other things,
the complaint asserts that the completion of the Scheme will constitute a
breach of defendants' fiduciary duties to the shareholders of the Company (Mr.
Flynn is a director of the Company, and Old WMI is its controlling
shareholder) and that, if the Scheme is completed, the shareholders of the
Company will be denied a proper premium for their Ordinary Shares. WMI, on
behalf of Old WMI, and Mr. Flynn intend to contest this litigation vigorously.
Incorporation of Certain Information by Reference
This Transaction Statement incorporates by reference herein the following
documents filed with the SEC pursuant to the Exchange Act:
1. The section of the Joint Proxy Statement entitled "The Companies";
2. The Company's Annual Report on Form 20-F filed with the SEC on March
30, 1998;
3. The Company's Report of Foreign Private Issuer on Form 6-K filed with
the SEC on April 27, 1998;
4. The Company's Report of Foreign Private Issuer on Form 6-K filed with
the SEC on July 6, 1998;
5. The Company's Report of Foreign Private Issuer on Form 6-K filed with
the SEC on July 21, 1998; and
6.The Company's Report of Foreign Private Issuer on Form 6-K filed with
the SEC on July 31, 1998.
35
All documents and reports subsequently filed by the Company pursuant to
Section 12(b) of the Exchange Act after the date of this Transaction Statement
and prior to the date of the Effective Date shall be deemed to be incorporated
by reference in this Transaction Statement and to be a part hereof from the
date of filing of such documents of reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Transaction
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Transaction Statement.
This Transaction Statement incorporates documents by reference which are not
presented herein or delivered herewith. Such documents are on file with the
SEC and may be inspected without charge at the SEC's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from
the Public Reference Section, Securities and Exchange Commission, Washington,
D.C. 20549, upon payment of the prescribed fees. In addition, reports, proxy
statements and other information filed electronically by WMI, Old WMI and USA
Waste are available at the SEC's worldwide web site at http:\\www.sec.gov.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
17(b)(1) Fairness opinion of KPMG Corporate Finance, a division of KPMG.
(Reference is made to Schedule D of the Transaction Statement)
17(b)(2) Fairness opinion of Merrill Lynch & Co., Inc. (Reference is made
to Schedule E of the Transaction Statement)
17(b)(3) Materials prepared for the Independent Directors of Waste
Management International plc by KPMG Corporate Finance, a
division of KPMG.*
17(b)(4) Materials prepared for the Board of Directors of Waste
Management, Inc. by Merrill Lynch & Co., Inc.*
17(b)(5) Consent of Arthur Andersen.
17(c)(1) Deposit Agreement dated as of April 1, 1992, among Citibank,
N.A., as Depositary, the Company, and the holders from time to
time of ADRs.
17(c)(2) Notice to ADR holders from the Depositary dated as of [ ].
17(d)(1) Scheme of Arrangement Document, dated [ ], 1998. (Reference
is made to Schedule A of the Transaction Statement)
- --------
*Previously filed.
36
SIGNATURE
After due inquiry and to the best of our knowledge and belief, we certify
that the information set forth in this statement is true, complete and correct.
August 31, 1998
_____________________________________
(Date)
Waste Management, Inc.
/s/ Gregory T. Sangalis
By: ____________________________
(Signature)
Name: Gregory T. Sangalis
Title: Senior Vice President
Waste Management, Inc.
(Name and Title)
Waste Management International plc
/s/ Stephen P. Stanczak
By: ____________________________
(Signature)
Name: Stephen P. Stanczak
Title: Vice President--Legal Affairs
and Company Secretary
Waste Management International plc
(Name and Title)
37
DRAFT
SCHEDULE A
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE
IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK
YOUR OWN FINANCIAL ADVICE IMMEDIATELY FROM YOUR STOCKBROKER, BANK MANAGER,
SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER AUTHORISED UNDER
THE FINANCIAL SERVICES ACT 1986.
If you have sold or otherwise transferred all of your Ordinary Shares, please
send this document and the accompanying documents at once to the purchaser or
transferee, or to the stockbroker, bank or other agent through whom the sale
or transfer was effected, for transmission to the purchaser or transferee.
- -------------------------------------------------------------------------------
RECOMMENDED PROPOSAL
FOR
WASTE MANAGEMENT INTERNATIONAL PLC
TO BECOME WHOLLY OWNED BY
WASTE MANAGEMENT, INC.
TO BE EFFECTED BY MEANS OF A
SCHEME OF ARRANGEMENT
UNDER SECTION 425 OF THE COMPANIES ACT 1985
- -------------------------------------------------------------------------------
A letter of recommendation from Sir William Barlow on behalf of the
Independent Directors appears on pages 7 to 10.
Notices of the Court Meeting and the Extraordinary General Meeting of the
Company, which will be held at the offices of Slaughter and May, 4 Coleman
Street, London EC2V 5DB, on 7 October 1998, are set out at the end of this
document.
SHAREHOLDERS ARE ASKED TO COMPLETE THE ENCLOSED FORMS OF PROXY IN ACCORDANCE
WITH THE INSTRUCTIONS PRINTED THEREON AS SOON AS POSSIBLE, BUT IN ANY EVENT SO
AS TO BE RECEIVED BY THE COMPANY'S REGISTRAR, COMPUTERSHARE SERVICES PLC, PO
BOX 82, CAXTON HOUSE, REDCLIFFE WAY, BRISTOL, BS99 7YA, NOT LATER THAN 48
HOURS BEFORE THE RELEVANT MEETING. FORMS OF PROXY FOR THE EXTRAORDINARY
GENERAL MEETING WILL NOT BE VALID IF LODGED AFTER THIS TIME. IF FORMS OF PROXY
FOR THE COURT MEETING ARE NOT LODGED BY THEN, THEY MAY BE HANDED TO THE
CHAIRMAN OF THE COURT MEETING BEFORE THE START OF THE COURT MEETING. THE
ACTION TO BE TAKEN BY SHAREHOLDERS IS DETAILED ON PAGES 3 AND 16 OF THIS
DOCUMENT.
KPMG Corporate Finance is acting exclusively for the Company in connection
with the Proposal. KPMG Corporate Finance is not acting for any other person
(including any recipient of this document) and KPMG Corporate Finance will not
be responsible to any person other than the Company for providing the
protections afforded to clients of KPMG Corporate Finance or for providing
advice in relation to the Proposal or in relation to the contents of this
document or any transaction or arrangement referred to herein.
Merrill Lynch International, which is regulated in the UK by the Securities
and Futures Authority Limited, is acting exclusively for WMI in connection
with the Proposal. Merrill Lynch International is not acting for any other
person (including any recipient of this document) and Merrill Lynch
International will not be responsible to any person other than WMI for
providing the protections afforded to clients of Merrill Lynch International
or for providing advice in relation to the Proposal or in relation to the
contents of this document or any transaction or arrangement referred to
herein.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED WITHIN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
A-1
CONTENTS
PAGE
EXPECTED TIMETABLE OF PRINCIPAL EVENTS A- 3
ACTION TO BE TAKEN A- 3
DEFINITIONS A- 4
PART 1 LETTER FROM SIR WILLIAM BARLOW ON BEHALF OF THE INDEPENDENT
DIRECTORS A- 7
PART 2 EXPLANATORY STATEMENT
1.Introduction A-11
2.Summary of the terms of the Scheme A-12
3. Court Meeting and Extraordinary General Meeting A-12
4. Information for holders of ADRs A-13
5. Financial effects of the Scheme on Scheme Shareholders A-13
6. Conditions and operation of the Scheme A-14
7. Settlement and cancellation of listing A-14
8. Management and employees A-15
9. Share Option Plans A-15
10. Taxation A-15
11. Information on the Company A-15
12. Information on WMI and Old WMI A-16
13. Directors' interests A-16
14. Action to be taken A-16
15. Further information A-17
PART 3 INFORMATION ON THE COMPANY A-18
PART 4 INFORMATION ON WMI A-51
PART 5 TERMS AND CONDITIONS A-61
PART 6 TAXATION INFORMATION FOR UK AND US HOLDERS OF ORDINARY SHARES
OR ADRS A-63
PART 7 ADDITIONAL INFORMATION A-65
SCHEME OF ARRANGEMENT A-75
NOTICE OF COURT MEETING A-79
NOTICE OF EXTRAORDINARY GENERAL MEETING A-80
A-2
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Latest time for receipt
of proxies for the:
Court Meeting 10.00 am on 5 October 1998*
Extraordinary General
Meeting 10.30 am on 5 October 1998
Court Meeting 10.00 am on 7 October 1998
Extraordinary General
Meeting 10.30 am on 7 October 1998**
Latest time for receipt
of Dollar Election Form 5.30 pm on 2 November 1998
Court hearing of petition
to sanction the Scheme 2 November 1998
Last day of dealings in
Ordinary Shares 2 November 1998
Record Date of the Scheme 2 November 1998
Effective Date of the
Scheme 3 November 1998
* It is requested that forms of proxy for the Court Meeting be lodged at
least 48 hours prior to the time appointed for the Court Meeting,
although forms of proxy not so lodged may be handed to the Chairman of
the Court Meeting at the Court Meeting. Forms of proxy for the
Extraordinary General Meeting must be lodged at least 48 hours prior to
the Extraordinary General Meeting.
** Or as soon thereafter as the Court Meeting shall have concluded or been
adjourned.
UNLESS OTHERWISE STATED ALL REFERENCES TO TIME IN THIS DOCUMENT REFER TO
LONDON TIME.
DOCUMENTS ENCLOSED
You will find enclosed with this document:
-- a Transaction Statement in relation to the Proposal prepared for the
purposes of the US Securities Exchange Act of 1934;
-- a pink form of proxy for use at the Court Meeting;
-- a blue form of proxy for use at the Extraordinary General Meeting; and
-- a green Dollar Election Form.
ACTION TO BE TAKEN
Whether or not you intend to be present at the Court Meeting or the
Extraordinary General Meeting, it is important that you complete, sign and
return the pink and blue forms of proxy as soon as possible, and in any
event so as to arrive at the offices of Computershare Services PLC, PO Box
82, Caxton House, Redcliffe Way, Bristol BS99 7YA, not later than 10.00 am
and 10.30 am, respectively, on 5 October 1998. If the pink form of proxy is
not so lodged it may be handed to the Chairman of the Court Meeting at that
meeting. The completion and return of the forms of proxy will not prevent
you from attending either or both of the meetings and voting in person if
you wish to do so.
Shareholders wishing to elect for the Dollar Election in respect of their
Scheme Shares should complete, sign and return the Dollar Election Form so
as to arrive at the offices of Computershare Services PLC, PO Box 82, Caxton
House, Redcliffe Way, Bristol BS99 7YA, not later than 5.30 pm on 2 November
1998. Shareholders who wish to receive payment in sterling should not
complete the Dollar Election Form.
A-3
DEFINITIONS
Unless the context requires otherwise, the following definitions apply
throughout this document (except in the text of the Scheme and the notices of
Meetings) and in the accompanying forms of proxy and Dollar Election Form:
"Act" the UK Companies Act 1985 (as amended)
"ADR" an American Depositary Receipt, issued by the
Depositary, evidencing ADSs
"ADS" an American Depositary Share representing the
right to receive two Ordinary Shares
"Code" The City Code on Takeovers and Mergers
"Company" Waste Management International plc
"Court" the High Court of Justice in England and Wales
"Court Meeting"
the meeting of Scheme Shareholders convened by
order of the Court to consider the Scheme,
notice of which meeting is set out on page 79
of this document
"CREST" a relevant system (as defined in the CREST
Regulations) in respect of which CRESTCo
Limited is the Operator (as defined in the
CREST Regulations)
"CREST Regulations" the UK Uncertificated Securities Regulations
1995 (SI 1995 No. 3272)
"Depositary" Citibank, N.A. of 111 Wall Street, 20th Floor,
Zone 7, New York, New York 10043, USA, as
depositary in respect of the ADRs
"Directors" the directors of the Company
"Dollar Election" the election under which Scheme Shareholders
may elect to receive all, but not part, of
their cash entitlement under the Scheme in US
dollars, details of which are set out in
paragraph 2 of the Explanatory Statement
"Dollar Election Form" the form of election accompanying this document
for use in connection with the Dollar Election
"Dollar Exchange Rate" the mid-point spot rate for conversion of
pounds sterling into US dollars at 4.00 pm on
the Effective Date derived from the WM Reuters
page showing such rate
"Effective Date" the date on which the Scheme becomes effective
in accordance with its terms
"Explanatory Statement" the explanatory statement prepared in
accordance with section 426 of the Act set out
on pages 11 to 17 of this document
"Extraordinary General
Meeting"
the extraordinary general meeting of the
Company, notice of which is set out on pages 80
and 81 of this document
A-4
"Group" the Company and its subsidiaries
"Hearing Date" the date of the hearing by the Court of the
petition to sanction the Scheme
"Independent Directors" Sir William Barlow (Chairman), Mr Jan Ekman, Mr
Giorgio Porta and Dr Manfred Scholz, being the
Directors who are independent of the WMI Group
(excluding the Group)
"London Stock Exchange" London Stock Exchange Limited
"Meetings" the Court Meeting and the Extraordinary General
Meeting
"Merger" the merger of Old WMI with a wholly owned
subsidiary of WMI, which was completed on 16
July 1998
"Merrill Lynch" Merrill Lynch International
"NYSE" New York Stock Exchange
"Old WMI" the company formerly known as Waste Management,
Inc. and
now called Waste Management Holdings, Inc., a
wholly owned subsidiary of WMI
"Optionholders" holders of options to subscribe for Ordinary
Shares under the Share Option Plans
"Ordinary Shares" ordinary shares of 10p each in the capital of
the Company
"Panel" the UK Panel on Takeovers and Mergers
"Proposal" the proposal set out in this document for the
Company to become wholly owned by WMI
"Record Date" the business day immediately preceding the
Effective Date
"Scheme" or "Scheme of the scheme of arrangement under section 425 of
Arrangement" the Act set out on pages 75 to 78 of this
document, together with any modification,
addition or condition approved or imposed by
the Court
"Scheme Shareholders" holders of the Scheme Shares
"Scheme Shares" the Ordinary Shares in issue at the date of
this document, other than WMI Group Shares,
together with:
(i) any additional Ordinary Shares which may
be issued after the date of this document
but before 5.30 pm on the business day
immediately before the Court Meeting; and
(ii) any further Ordinary Shares which may be
issued after the period referred to in
paragraph (i) above but before 5.30 pm on
the business day immediately before the
Hearing Date and on terms that they are
bound by the Scheme
A-5
"Shareholders" holders of Ordinary Shares
"Share Option Plans" means the Waste Management International plc
Share Option Plan for Independent Directors and
the Waste Management International plc Share
Option Plan
"Transaction Statement"
the Schedule 13e-3 transaction statement filed
with the US Securities and Exchange Commission
in respect of the Scheme, a copy of which has
been posted to Scheme Shareholders together
with this document
"Wessex" Wessex Water Plc
"WMI" Waste Management, Inc. (formerly USA Waste
Services, Inc.)
"WMI Group" WMI and its subsidiaries
"WMI Group Shares" those issued Ordinary Shares in which any
member of the WMI Group is beneficially
interested as at the date of this document
"WMII" Waste Management International, Inc., a wholly
owned subsidiary of WMI
A-6
PART 1
LOGO WASTE MANAGEMENT INTERNATIONAL PLC
Registered in England No. 2669336
DIRECTORS: REGISTERED OFFICE:
EG Falkman (Chairman) 3 Shortlands
BGA Gabrielson Hammersmith International Centre
PB Dessing London
DF Flynn W6 8RX
JM Holsten
RS Miller
Sir William Barlow* . September 1998
J Ekman*
G Porta*
Dr M Scholz*
(* Independent Directors)
To Shareholders and, for information only, to ADR holders and Optionholders
Dear Shareholder,
RECOMMENDED PROPOSAL FOR THE COMPANY TO BECOME
WHOLLY OWNED BY WMI
1.INTRODUCTION
As announced on 29 June 1998, it is proposed that the Company should become
wholly owned by WMI. It is intended that the Proposal should be effected by
means of a Scheme of Arrangement under section 425 of the Act, further details
of which are set out in the Explanatory Statement which follows this letter.
Before the Proposal can be implemented it must be approved at the Court
Meeting and at the Extraordinary General Meeting of the Company, both convened
for 7 October 1998.
I am now writing to you to explain the background to, and the terms of, the
Proposal and the financial effects of the Scheme for Scheme Shareholders. Mr
Jan Ekman, Mr Giorgio Porta, Dr Manfred Scholz and I, as the Independent
Directors, have considered and now recommend the Proposal to you. In reaching
our conclusions, the Independent Directors have received financial advice from
KPMG Corporate Finance, the substance of which is set out in paragraph 8 of
this letter. The remaining Directors are connected with WMI and are therefore
not Independent Directors. Accordingly, they did not participate in
considering whether or not to recommend the Proposal and have not joined in
the recommendation given in this letter by the Independent Directors.
2. SUMMARY OF THE TERMS OF THE SCHEME
Under the Proposal, if the Scheme becomes effective, Scheme Shareholders will
receive:
FOR EACH SCHEME SHARE 345P IN CASH
A-7
The Proposal values the entire existing issued share capital of the Company at
approximately (Pounds)1,295 million and the existing Scheme Shares at
approximately (Pounds)260 million.
This represents a premium of approximately 39 per cent. to the closing middle
market price of 247.5p per Ordinary Share on the London Stock Exchange on 26
June 1998, the last business day before the announcement of the Proposal.
Under the Dollar Election, Scheme Shareholders may elect to receive all (but
not some only) of their cash entitlement under the Scheme in US dollars on the
following basis:
FOR EACH SCHEME SHARE THE US DOLLAR EQUIVALENT OF 345P
CALCULATED USING THE DOLLAR
EXCHANGE RATE
Elections for the Dollar Election will be irrevocable once made.
3. BACKGROUND TO AND REASONS FOR THE PROPOSAL
(a)Background to the Proposal
The Company was established in 1991 as a wholly owned subsidiary of Old WMI to
assume substantially all of the waste management operations of Old WMI located
outside North America. In April 1992, 20 per cent. of the issued share capital
of the Company was offered for sale to the public in the form of Ordinary
Shares and ADSs. The Ordinary Shares were admitted to the Official List of the
London Stock Exchange and the ADSs were quoted on the NYSE. The purpose of the
offering was to increase access to equity markets, raise the profile and
status of the Company and enhance the potential to expand the business by
utilising Ordinary Shares as consideration for the acquisition of additional
businesses.
Notwithstanding this offering, the Company remained under the control of Old
WMI which, through its subsidiaries, continued to own approximately 80 per
cent. of the issued Ordinary Shares and continued to influence the Company's
strategic direction. Since the offering in 1992, the Company has not used
Ordinary Shares to acquire additional businesses.
Following the offering in 1992, the closing middle market price of the
Ordinary Shares on the London Stock Exchange reached a peak of 790p on 16
November 1992. This compares to the average closing middle market price of the
Ordinary Shares on the London Stock Exchange over the twelve months preceding
the date of the announcement of the Proposal of 227p per share. The last date
on which the price of the Ordinary Shares on the London Stock Exchange was
equal to or greater than the amount available to Scheme Shareholders under the
Scheme of 345p per Scheme Share was 19 July 1996.
(b)Reasons for the Proposal
On 10 March 1998, Old WMI announced that it had agreed to merge with a wholly
owned subsidiary of WMI (then known as USA Waste Services, Inc.). The Merger
was completed on 16 July 1998. Following the announcement of the Merger, an
approach was made by Old WMI to the Independent Directors with a view to
obtaining their recommendation for a transaction whereby the Company would
become wholly owned by WMI. Negotiations between Old WMI and the Independent
Directors on the terms of such a transaction resulted in the terms of the
Proposal being agreed and the Independent Directors agreeing to recommend the
Proposal to the Scheme Shareholders.
The approach by the directors of Old WMI to the Independent Directors followed
a period of deliberation by the board of the Company in which the Group's
growth potential and the possibility for increasing shareholder value through
a variety of mechanisms were assessed. This assessment also included
consideration of the difficult trading and operational conditions being
experienced within certain of the Group's businesses and the short term lack
of suitable investment and acquisition opportunities. The results of this
process have led the board of the Company to conclude that there is limited
prospect of an improvement in the financial performance of the Group
A-8
occurring in the short term such as would result in a significant upward
revaluation of the Company's share price. Acting on behalf of the Independent
Directors, KPMG Corporate Finance has reviewed the Group's historical results,
strategic plans and current operations. The Independent Directors believe the
analysis conducted by KPMG Corporate Finance has confirmed the conclusions of
the board of the Company.
In reaching the decision to recommend the Proposal, the Independent Directors
also took into account a number of other factors. In particular, the
Independent Directors acknowledged the intention of each of Old WMI and WMI to
retain its controlling interest in the Company. This intention necessarily
precluded any investigation into the possibility of selling the Company to a
third party. In addition, the Independent Directors concluded that it was
unlikely that access to the equity markets would be required to fund growth in
the foreseeable future, as the Company was likely to have sufficient credit
facilities available to it both from its parent companies and from the
financial markets and that debt finance was likely to be the preferred means
of financing the Group's anticipated needs. Furthermore, in the anticipated
absence of future equity offerings and issues of Ordinary Shares for the
purpose of acquiring additional businesses, it is not clear that the
significant expenses which result from the Company's listed status continue to
be justified. The Independent Directors also concluded that none of the
mechanisms considered which may have increased shareholder value were
sufficiently certain or adequate to offer greater attraction than the
Proposal.
The Independent Directors also considered the financial effects of the
Proposal on capital value and income for Scheme Shareholders, details of which
are set out on pages 13 and 14 of this document.
In light of the above, the Independent Directors considered that it was
appropriate for the Scheme Shareholders to be given the opportunity to realise
their investment in the Company on terms which the Independent Directors
considered fair and reasonable so far as the Scheme Shareholders are
concerned.
The Proposal is expected to simplify WMI's corporate organisational and
management structure and facilitate the integration of the Company into the
new management structure of WMI. It is also anticipated that the proposed
transaction will enhance the operating flexibility of the WMI Group, reduce
the WMI Group's expenses and simplify WMI Group management decisions.
4.EMPLOYEES
WMI has confirmed that, following implementation of the Scheme, the existing
rights, including pension rights, of employees of the Company will be fully
safeguarded. Your attention is drawn to paragraph 8 of the Explanatory
Statement which follows this letter.
5. TAXATION
Taxation information for United Kingdom and United States Shareholders or ADR
holders is summarised in Part 6 of this document. These summaries are intended
only as a general guide to current law and practice. ANYONE WHO IS IN ANY
DOUBT AS TO HIS TAX POSITION, OR WHO IS SUBJECT TO TAX IN ANY JURISDICTION
OTHER THAN THE UNITED KINGDOM OR THE UNITED STATES, SHOULD CONSULT AN
APPROPRIATE PROFESSIONAL ADVISER.
6. IMPLEMENTATION OF THE SCHEME
Implementation of the Scheme will require, inter alia, the approval of Scheme
Shareholders at the Court Meeting which has been convened by order of the
Court (at which the approval of a majority in number of those voting
representing 75 per cent. in value of the Scheme Shares voted, either in
person or by proxy, will be required) and the passing of a special resolution
by Shareholders at the Extraordinary General Meeting. Holders of WMI Group
Shares are not entitled to vote at the Court Meeting, but are entitled to and
will vote at the Extraordinary General Meeting. Further details of the special
resolution to be considered at the Extraordinary General Meeting are given in
paragraph 3 of the Explanatory Statement which follows this letter.
If the Scheme becomes effective, it will be binding on all Scheme
Shareholders, including the Depositary, regardless of whether they attended or
voted at the Meetings.
Details of the conditions of the Scheme are set out in paragraph 6 of the
Explanatory Statement which follows this letter.
A-9
7. SHARE OPTION PLANS
Optionholders should refer to the separate letter sent to them by the Company.
8. CONCLUSION
The Independent Directors, who have been so advised by KPMG Corporate Finance,
consider that the terms of the Proposal are fair and reasonable so far as the
Scheme Shareholders are concerned. In providing financial advice in relation to
the terms of the Scheme, KPMG Corporate Finance has taken into account the
Independent Directors' commercial assessments of the Proposal.
9. RECOMMENDATION
The Independent Directors unanimously recommend that Scheme Shareholders
approve the Scheme and vote in favour of the resolutions necessary to implement
it.
The Independent Directors intend to vote their own beneficial holdings to
approve the Scheme at the Court Meeting and in favour of the special resolution
to be proposed at the Extraordinary General Meeting.
The holders of the WMI Group Shares (which currently represent approximately 80
per cent. of the issued Ordinary Shares) have confirmed that they intend to
vote in favour of the special resolution to be proposed at the Extraordinary
General Meeting. Accordingly, should the holders of the WMI Group Shares so
vote, that resolution will be passed.
Yours faithfully,
Sir William Barlow
Chairman of the Independent Directors
A-10
PART 2
EXPLANATORY STATEMENT
LOGO (IN COMPLIANCE WITH SECTION 426 OF THE COMPANIES ACT 1985)
LOGO
MERRILL LYNCH INTERNATIONAL ROPEMAKER PLACE 25 ROPEMAKER STREET LONDON EC2Y
9LY
KPMG CORPORATE FINANCE
8 SALISBURY SQUARE LONDON EC4Y 8BB
. SEPTEMBER 1998
To Shareholders and, for information only, to ADR holders and Optionholders
Dear Shareholder,
RECOMMENDED PROPOSAL FOR THE COMPANY TO BECOME WHOLLY OWNED BY WMI
1. INTRODUCTION
As announced on 29 June 1998, it is proposed that the Company should become
wholly owned by WMI. The Proposal is to be effected by means of a Scheme of
Arrangement between the Company and Scheme Shareholders under section 425 of
the Act. At present, members of the WMI Group own in aggregate approximately
80 per cent. of the issued Ordinary Shares. The purpose of the Scheme is to
provide for the Company to become wholly owned by members of the WMI Group, to
be achieved by the cancellation of the Scheme Shares and for the reserve
arising from such cancellation to be applied in paying up in full new shares
in the Company with an aggregate nominal value equal to that of the cancelled
Scheme Shares and issuing such new shares to WMII or as it may direct.
In proposing the Scheme, the Independent Directors have been advised by KPMG
Corporate Finance and WMI has been advised by Merrill Lynch. We have been
authorised by the boards of the Company and WMI, respectively, to write to you
on their behalf to explain the Proposal and the provisions and effects of the
Scheme. KPMG Corporate Finance and Merrill Lynch are acting only for the
Company and WMI, respectively, in connection with the Proposal and neither
KPMG Corporate Finance nor Merrill Lynch will treat any other person receiving
or relying on this document as being, by virtue thereof, its client.
YOUR ATTENTION IS DRAWN TO THE LETTER FROM SIR WILLIAM BARLOW SET OUT IN PART
1 OF THIS DOCUMENT (WHICH FORMS PART OF THIS EXPLANATORY STATEMENT)
SUMMARISING THE PROPOSAL, EXPLAINING THE BACKGROUND TO AND REASONS FOR THE
PROPOSAL AND RECOMMENDING THAT SCHEME SHAREHOLDERS VOTE IN FAVOUR OF THE
SCHEME AT THE FORTHCOMING MEETINGS.
A-11
2.SUMMARY OF THE TERMS OF THE SCHEME
Basic Proposal
Under the Proposal, if the Scheme becomes effective, Scheme Shareholders will
receive:
FOR EACH SCHEME SHARE 345P IN CASH
The Proposal values the entire existing issued share capital of the Company at
approximately (Pounds)1,295 million and the existing Scheme Shares at
approximately (Pounds)260 million.
At the close of business on 26 June 1998 (the date before the announcement of
the Proposal), the middle market price on the London Stock Exchange of an
Ordinary Share was 247.5p.
Dollar Election
Scheme Shareholders may also elect to receive all (but not some only) of their
cash entitlement under the Scheme in US dollars on the following basis:
FOR EACH SCHEME SHARE THE US DOLLAR EQUIVALENT OF 345P CALCULATED
USING THE DOLLAR EXCHANGE RATE
Elections for the Dollar Election will be irrevocable once made.
A Dollar Election shall be valid in respect of all the Scheme Shares
registered as at 5.30 pm on the Record Date in the name of the Scheme
Shareholder who made the election. Accordingly, if a Scheme Shareholder who
has made a Dollar Election subsequently transfers some or all of his Scheme
Shares and the transfer is registered before that time, the transferee shall
receive payment in sterling in respect of such Scheme Shares unless such
transferee makes or has made a valid Dollar Election.
The aggregate US dollar amount due under the Scheme to a Scheme Shareholder
who has made a Dollar Election shall be rounded down to the nearest whole
cent.
3. COURT MEETING AND EXTRAORDINARY GENERAL MEETING
Court Meeting
The Scheme requires approval by Scheme Shareholders at the Court Meeting and
the subsequent sanction of the Court.
You will find set out on page 79 of this document a notice of the Court
Meeting, which has been convened by order of the Court for the purpose of
considering and, if thought fit, approving the Scheme (with or without
modification). The Court Meeting will be held at the offices of Slaughter and
May, 4 Coleman Street, London EC2V 5DB, at 10.00 am on 7 October 1998.
At the Court Meeting, voting will be on a poll whereby Scheme Shareholders,
voting in person or by proxy, will be entitled to one vote for each Scheme
Share held. The resolution will be passed if a majority in number of the
Scheme Shareholders, present and voting either in person or by proxy,
representing 75 per cent. in value of the Scheme Shares voted, vote in favour
of the Scheme.
IN ORDER THAT THE COURT CAN BE SATISFIED THAT VOTES CAST CONSTITUTE A FAIR
REPRESENTATION OF THE VIEWS OF THE HOLDERS OF THE SCHEME SHARES, IT IS
IMPORTANT THAT AS MANY VOTES AS POSSIBLE ARE CAST AT THE COURT MEETING. YOU
ARE THEREFORE URGED TO COMPLETE AND RETURN AS SOON AS POSSIBLE, AND IN ANY
EVENT BY NOT LATER THAN 10.00 AM ON 5 OCTOBER 1998, THE PINK FORM OF PROXY IN
ACCORDANCE WITH THE INSTRUCTIONS PRINTED THEREON, WHETHER OR NOT YOU INTEND TO
ATTEND AND VOTE IN PERSON AT THE COURT MEETING. RETURNING THE FORM OF PROXY
WILL NOT PRECLUDE YOU FROM ATTENDING AND VOTING IN PERSON AT THE COURT MEETING
SHOULD YOU WISH TO DO SO. THE PINK FORM OF PROXY MAY ALSO BE HANDED TO THE
CHAIRMAN OF THE COURT MEETING AT THAT MEETING.
A-12
UPON THE SCHEME BECOMING EFFECTIVE, IT WILL BE BINDING ON ALL HOLDERS OF
SCHEME SHARES, IRRESPECTIVE OF WHETHER THEY ATTENDED OR VOTED AT THE COURT
MEETING.
Holders of the WMI Group Shares are not entitled to vote at the Court Meeting,
but will undertake to the Court to consent to the Scheme and to be bound by
its terms.
Extraordinary General Meeting
The Scheme involves the cancellation of the Scheme Shares by way of a
reduction of the share capital of the Company. Accordingly, the Scheme also
requires the approval of Shareholders at the Extraordinary General Meeting.
You will find on pages 80 and 81 of this document a notice of the
Extraordinary General Meeting convened for the purpose of considering and, if
thought fit, passing a special resolution to give effect to the Scheme. The
special resolution also includes provisions amending the Articles of
Association of the Company to ensure that any Ordinary Shares issued to any
person before 5.30 pm on the business day immediately before the Hearing Date
shall be subject to the Scheme and any Ordinary Shares allotted or issued
after 5.30 pm on the business day immediately before the Hearing Date will not
be subject to the Scheme but will be transferred to WMII on the basis set out
in the notice of Extraordinary General Meeting. This latter provision will
ensure that the WMI Group owns or controls all the Ordinary Shares in the
Company if the Scheme becomes effective.
The Extraordinary General Meeting has been convened for 10.30 am (or as soon
thereafter as the preceding Court Meeting has been concluded or adjourned) on
7 October 1998 at the same location as the Court Meeting. At the Extraordinary
General Meeting it is necessary for the special resolution to be approved by a
majority of not less than 75 per cent. of votes cast. All Shareholders are
entitled to attend the Extraordinary General Meeting and vote on this
resolution and the holders of the WMI Group Shares (representing approximately
80 per cent. of the issued Ordinary Shares) have confirmed that they intend to
vote in favour of the resolution. Accordingly, should the holders of the WMI
Group Shares so vote, the special resolution will be passed. Voting will be on
a show of hands, unless a poll is demanded, in which case those present in
person or by proxy will be entitled to one vote for each Ordinary Share held.
YOU ARE URGED TO COMPLETE AND RETURN THE BLUE FORM OF PROXY IN ACCORDANCE WITH
THE INSTRUCTIONS PRINTED THEREON AS SOON AS POSSIBLE, AND IN ANY EVENT BY
10.30 AM ON 5 OCTOBER 1998. RETURNING THE BLUE FORM OF PROXY WILL NOT PRECLUDE
YOU FROM ATTENDING OR VOTING IN PERSON AT THE EXTRAORDINARY GENERAL MEETING
SHOULD YOU WISH TO DO SO.
4. INFORMATION FOR HOLDERS OF ADRS
Holders of ADRs will not be entitled to attend the Court Meeting or the
Extraordinary General Meeting (although the Depositary will be so entitled and
will vote in accordance with valid instructions that may be received from
holders of ADRs). Holders of ADRs who wish to attend the Court Meeting or the
Extraordinary General Meeting should take steps to present their ADRs for
cancellation to the Depositary, so that they become registered holders of
Ordinary Shares prior to 5.30 pm on 5 October 1998, the day two days before
the Meetings. The Meetings will take place on 7 October 1998.
Holders of ADRs wishing to give voting instructions to the Depositary should
refer to the Transaction Statement for such information.
5. FINANCIAL EFFECTS OF THE SCHEME ON SCHEME SHAREHOLDERS
The following table shows, for illustrative purposes only and on the bases and
assumptions set out in the notes below, the financial effects of the Proposal
on capital value and income for a holder of 100 Scheme Shares if the Scheme
becomes effective.
A-13
(a)Capital value
Cash consideration (Pounds)345.00
Market value of 100 Ordinary Shares on 26 June 1998 (Pounds)247.50*
Increase in capital value 39%**
The Company has never paid a dividend to its shareholders. The future
income of the Scheme Shareholders, if the Scheme becomes effective, will
depend on how they reinvest the cash proceeds.
- --------
* The market value is based on the closing middle market quotation of 247.5p
per Ordinary Share as derived from the London Stock Exchange Daily Official
List for 26 June 1998, the last business day prior to the announcement of
the Proposal.
** No account has been taken of any liability to taxation.
6. CONDITIONS AND OPERATION OF THE SCHEME
Implementation of the Scheme is subject to, and conditional upon, inter alia:
(a) approval of the Scheme by a majority in number of the Scheme Shareholders,
present and voting either in person or by proxy, representing 75 per cent.
in value of the Scheme Shares voted at the Court Meeting or at any
adjournment thereof;
(b) the special resolution set out on pages 80 to 81 of this document being
passed at the Extraordinary General Meeting or at any adjournment thereof;
and
(c) the Scheme being sanctioned by the Court, with or without modification as
provided for in the Scheme, and an office copy of the order of the Court
being delivered for registration to the Registrar of Companies in England
and Wales (and registered by him in relation to the reduction of capital)
not later than 31 December 1998, or such later date as the Company and
WMII may agree and the Court may allow.
Further details of the terms and conditions of the Scheme are set out in Part
5 of this document.
If the Scheme does not become effective on or before 31 December 1998, or such
later date as the Company and WMII may agree and the Court may allow, it will
lapse.
The purpose of the Scheme is to provide for the Company to become a wholly
owned subsidiary of the WMI Group, to be achieved by the cancellation of the
Scheme Shares and for the reserve arising from such cancellation to be applied
in paying up in full new shares in the Company with an aggregate nominal value
equal to that of the cancelled Scheme Shares and issuing such new shares to
WMII or as it may direct.
7. SETTLEMENT AND CANCELLATION OF LISTING
Subject to the Scheme becoming effective, settlement of the consideration to
which any Scheme Shareholder is entitled under the Scheme will be effected in
the following manner:
(a) Scheme Shares in certificated form
Cheques in respect of the cash receivable under the Scheme will be posted
to Scheme Shareholders who hold their Scheme Shares in certificated form
(i.e. not in CREST) by no later than 14 days after the Effective Date.
A-14
(b) Scheme Shares in uncertificated form (i.e. in CREST)
Subject to (c) below, where Scheme Shares are held in uncertificated form
(i.e. in CREST), the cash receivable under the Scheme will be paid to
Scheme Shareholders through CREST by no later than 14 days after the
Effective Date. However, WMII may (if, for any reason, it wishes to do so)
determine that all or part of such cash will be paid instead by cheque
despatched by post no later than 14 days after the Effective Date.
(c) Dollar Election
Cheques in respect of the US dollar amount receivable under the Scheme will
be posted to Scheme Shareholders who have made a Dollar Election by no
later than 14 days after the Effective Date.
(d) ADR Holders
ADR Holders should refer to the Transaction Statement for details of
settlement.
(e) General
All documents and remittances sent by or to Scheme Shareholders, or as such
persons shall direct, will be sent at their own risk and may be sent by
post.
Entitlements under the Scheme will be determined by reference to holdings
of Scheme Shares at 5.30 pm on the Record Date.
The London Stock Exchange will be requested to cancel the listing of
Ordinary Shares with effect from the close of business on the Effective
Date. Upon the Scheme becoming effective, certificates for Scheme Shares
will cease to be of value and should, if so requested by the Company, be
sent to the Company for cancellation. The Company proposes that the Record
Date will be the last date for dealings in Ordinary Shares on the London
Stock Exchange.
8. MANAGEMENT AND EMPLOYEES
Following implementation of the Proposal it is the intention of the
Independent Directors to resign from the board of the Company. WMI has
confirmed that, following implementation of the Proposal, the existing rights,
including pension rights, of employees of the Company will be fully
safeguarded.
9. SHARE OPTION PLANS
Optionholders should refer to the separate letter sent to them by the Company.
10. TAXATION
Taxation information for United Kingdom and United States Shareholders or ADR
holders is summarised in Part 6 of this document. These summaries are intended
only as a general guide to current law and practice. ANYONE WHO IS IN ANY
DOUBT AS TO HIS TAX POSITION, OR WHO IS SUBJECT TO TAX IN ANY JURISDICTION
OTHER THAN THE UNITED KINGDOM OR THE UNITED STATES, SHOULD CONSULT AN
APPROPRIATE PROFESSIONAL ADVISER.
11. INFORMATION ON THE COMPANY
The Company, acting through the members of the Group, is a leading
international provider of waste management services and conducts substantially
all of the waste management operations of WMI located outside North America.
The Company provides a wide range of solid and hazardous waste management
services, including the collection, transportation, storage, treatment,
recycling and disposal of waste. It develops and operates water and wastewater
treatment facilities and it performs certain related environmental services.
Such services are integrated to varying degrees in different markets depending
on facilities, regulatory limitations, and the stage of market penetration.
The Company currently operates in 18 countries.
The Company's consolidated net sales and profit after tax and minority
interests for the year ended 31 December 1997 were (Pounds)1.1 billion and
(Pounds)21.3 million, respectively.
A-15
Further information relating to the Company is set out in Part 3 of this
document. In addition, the Transaction Statement (which is required in order
to comply with regulatory requirements in the United States) contains certain
additional information including additional financial information about the
Company, WMI and Old WMI. Any projections included in such financial
information are not intended to constitute a profit forecast by the Company,
its Directors or by anyone else and Scheme Shareholders should not rely on any
such projections in making any decisions concerning the Scheme.
12. INFORMATION ON WMI AND OLD WMI
WMI, together with its subsidiaries, including Old WMI, is a leading
international provider of waste management services. WMI is the largest waste
management services company in North America and has an extensive network of
landfills, collection operations and transfer stations throughout North
America. Through Wheelabrator Technologies Inc., WMI is a leading developer of
facilities for, and provider of services to, the trash-to-energy and waste-
fuel powered independent power markets. The Company is a leading international
provider of waste management services and conducts substantially all of the
waste management operations of WMI located outside of North America.
On March 10, 1998, Old WMI entered into a merger agreement with USA Waste
Services, Inc. which provided, subject to the satisfaction of the conditions
contained therein, that a wholly-owned subsidiary of USA Waste Services, Inc.
would be merged with and into Old WMI. On July 16, 1998, the Merger was
consummated.
Further information relating to WMI is set out in Part 4 of this document.
13. DIRECTORS' INTERESTS
The interests (for the purposes of Part X of the Act) of the Directors in the
Ordinary Shares are set out in paragraph 4 of Part 7 of this document. The
effect of the Scheme on the interests of the Directors does not differ from
its effect on the like interests of any other Scheme Shareholder. Certain of
the Directors have options granted under the Share Option Plans which will
become exercisable as a result of the Proposal.
14. ACTION TO BE TAKEN
You will find enclosed with this document:
- -- a pink form of proxy for use at the Court Meeting;
- --a blue form of proxy for use at the Extraordinary General Meeting; and
- --a green Dollar Election Form.
Whether or not you intend to be present at the Court Meeting or the
Extraordinary General Meeting, it is important that you complete, sign and
return the pink and blue forms of proxy as soon as possible, and in any event,
so as to arrive at the offices of Computershare Services PLC, PO Box 82,
Caxton House, Redcliffe Way, Bristol BS99 7YA, not later than 10.00 am and
10.30 am, respectively, on 5 October 1998. If the pink form of proxy is not so
lodged it may be handed to the Chairman of the Court Meeting at that meeting.
The completion and return of the forms of proxy will not prevent you from
attending either or both of the meetings and voting in person if you wish to
do so.
Scheme Shareholders wishing to elect for the Dollar Election in respect of
their Scheme Shares should also complete, sign and return the Dollar Election
Form so as to arrive at the offices of Computershare Services PLC, PO Box 82,
Caxton House, Redcliffe Way, Bristol BS99 7YA, not later than 5.30 pm on 2
November 1998.
Shareholders who wish to receive payment in sterling should not complete the
Dollar Election Form.
A-16
15. FURTHER INFORMATION
Your attention is also drawn to Parts 3 to 7 of this document which contain
additional information.
Yours faithfully
for KPMG Corporate Finance for and on behalf of Merrill Lynch International
Stephen Barrett Laurent Haziza
Partner Director,
Investment Banking
A-17
PART 3
INFORMATION ON THE COMPANY
1. INTERIM ANNOUNCEMENT OF THE GROUP FOR THE SIX MONTHS ENDED 30 JUNE 1998
Following are the Group's interim results for the six months to 30 June 1998,
including the full text of the announcement dated 22 July 1998 made by the
Company:
London 22 July 1998 -- 3.00 pm
WASTE MANAGEMENT INTERNATIONAL PLC ANNOUNCES SECOND QUARTER RESULTS FOR 1998
. Turnover for the second quarter was (Pounds)227.2 million compared with
(Pounds)282.2 million in the same period in 1997
. Operating profits as a percentage of turnover were 10.1% compared with
13.3% in the second quarter of 1997
. Profits before tax were (Pounds)29.8 million compared with (Pounds)35.2
million for the same period in 1997
. Cash flow for the quarter was (Pounds)13.7 million
. Results include a non-operating gain of (Pounds)6.5 million before tax
. The Company and its South American partner to acquire 80% of Brazil's
leading solid waste company for US$88 million
. Earnings per share were 5.5p compared to 5.2p in 1997
FIRST SIX MONTHS
Turnover for the first six months was (Pounds)450.6 million compared to
(Pounds)560.1 million in the same period in 1997. Operating profits as a
percentage of turnover were 9.9% compared to 13.4% in 1997. Profits before
taxation, including non-operating gains totalling (Pounds)22.6 million, were
(Pounds)67.2 million compared with (Pounds)69.1 million in 1997. Earnings per
share for the first half were 8.5p compared with 9.7p in 1997.
CHIEF EXECUTIVE'S STATEMENT FROM BO GABRIELSON
In our first quarter announcement, we expressed our intention to increase
acquisition and project development activities in order to leverage the
Company's strong balance sheet. Since then, we have completed three tuck-in
acquisitions which will strengthen our operations in Australia, New Zealand
and Denmark, and we have agreed together with our South American partner to
acquire an 80% stake in Brazil's leading solid waste company. This acquisition
will serve as our platform for growth in the most dynamic economy in South
America.
Overall, we were satisfied with the performance of most of our operations
during the quarter, although the problems that have impacted our Italian
business persist. Difficult trading conditions and delays in permitting new
landfill capacity continue to impact our performance in Italy. We have
appointed a new country manager and are continuing our efforts to obtain
additional disposal space.
The reduction in turnover from the second quarter last year was largely due to
the termination of services in Buenos Aires, the 1997 sale of our businesses
in France and Spain and the sale in January 1998 of our German waste-to-energy
facility. Lower volumes in Italy and the effect of currency translations on
non-sterling revenues also contributed to the reduction in turnover. Cash flow
for the year to date was (Pounds)84.4 million.
A-18
On 30 June, the Company announced it had agreed the terms of a proposal to
become an indirect wholly owned subsidiary of its majority shareholder, Waste
Management, Inc. Under the proposal, holders of the approximately 20%
outstanding ordinary shares of Waste Management International not currently
owned by Waste Management subsidiaries will receive 345p in cash for each
ordinary share held. On the announcement date, the proposal valued each Waste
Management International ADR (each representing two Waste Management
International ordinary shares) at approximately $11.50. The US dollar value of
the proposal will fluctuate with the sterling-dollar exchange rate.
On 16 July, our US parent merged with USA Waste Services, Inc. The new
combined company is called Waste Management, Inc. Following completion of the
merger, the Company received notice from Wessex Water Plc, its UK joint
venture partner, that the merger constituted an "Event of Default" under the
joint venture agreement. As previously disclosed, the change in control of the
Company's former parent company may constitute an "Event of Default" under the
agreement, thereby giving Wessex the right to require the Company to sell its
51% interest in Wessex Waste Management for its fair value. Wessex's notice
does not indicate an intention to exercise this right and Wessex has publicly
stated that it has not decided whether to exercise such right. Neither the
consummation of the merger nor the exercise by Wessex of its "call" right
would affect the pending proposal to acquire the publicly-traded shares of
Waste Management International.
The Company and its South American partner, Sideco Americana, agreed to
acquire an 80% interest in Enterpa Ambiential SA (EASA), the largest solid
waste company in Brazil. Waste Management International will obtain a 32%
stake in EASA for a cost of US$35.2 million in cash and notes. Together, the
Company and Sideco have the right after three years to acquire the remaining
20% of EASA. This acquisition will provide us with the vehicle to take
advantage of Brazil's high rate of urbanisation and the country's rapid drive
towards privatisation of public services.
BO GABRIELSON, CHIEF EXECUTIVE -- 22 JULY 1998
Waste Management International plc is a leading provider of comprehensive
solid and hazardous waste management services, including collection,
transportation, storage, treatment, recycling, incineration, disposal, waste-
to-energy facilities and water and wastewater treatment.
The Company currently operates in eight European countries -- Austria,
Denmark, Finland, Germany, Italy, the Netherlands, Sweden, and the United
Kingdom -- as well as Argentina, Australia, Brazil, Brunei, China (including
the Hong Kong SAR), Indonesia, Israel, Malaysia, New Zealand and Thailand.
A-19
WASTE MANAGEMENT INTERNATIONAL PLC
GROUP PROFIT AND LOSS ACCOUNTS
(UNAUDITED)
For the three months ended For the six months ended
30 June 30 June
------------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
------------- ------------- ------------ ------------
Turnover 227,224 282,193 450,603 560,114
------------- ------------- ------------ ------------
Operating expenses 176,405 213,287 349,480 422,411
Selling and administra-
tive expenses 27,913 31,332 56,627 62,851
------------- ------------- ------------ ------------
Operating profit 22,906 37,574 44,496 74,852
Interest income 1,064 2,136 2,040 5,808
Interest expense (1,975) (4,976) (4,112) (12,091)
Other income (expense),
net 7,811 458 24,768 530
------------- ------------- ------------ ------------
Profit on ordinary
activities before
taxation 29,806 35,192 67,192 69,099
Tax on profit on ordi-
nary activities 5,660 10,942 26,500 21,318
------------- ------------- ------------ ------------
Profit on ordinary ac-
tivities after taxation 24,146 24,250 40,692 47,781
Minority interests 3,674 4,910 8,703 11,519
------------- ------------- ------------ ------------
Retained profit for the
period attributable to
shareholders 20,472 19,340 31,989 36,262
============= ============= ============ ============
Average ordinary shares
outstanding 375,273 375,273 375,273 375,272
============= ============= ============ ============
Earnings per ordinary
share 5.5p 5.2p 8.5p 9.7p
============= ============= ============ ============
Net income and Earnings per Ordinary Share determined in accordance with
United States generally accepted accounting principles (US GAAP) are shown in
the following table:
1998 1997 1998 1997
------------- ------------- ------------ ------------
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
------------- ------------- ------------ ------------
Net income (retained
profit) as shown above 20,472 19,340 31,989 36,262
Sale of businesses -- -- 8,841 --
Amortisation of good-
will, net (4,305) (4,909) (8,650) (10,077)
------------- ------------- ------------ ------------
Net income in accordance
with US GAAP 16,167 14,431 32,180 26,185
============= ============= ============ ============
Net income per ordinary
share in accordance
with US GAAP 4.3p 3.8p 8.6p 7.0p
============= ============= ============ ============
A-20
WASTE MANAGEMENT INTERNATIONAL PLC
GROUP BALANCE SHEET
(UNAUDITED)
30 June 31 December
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
----------- -----------
FIXED ASSETS
Tangible assets 601,953 653,851
Investments 6,920 6,349
-------- --------
608,873 660,200
-------- --------
CURRENT ASSETS
Debtors: amounts due within one year 266,167 279,955
Debtors: amounts due after one year 76,528 75,788
Prepayments, parts and supplies 24,879 24,978
Deferred costs: amounts to be released within one year 3,752 4,147
Deferred costs: amounts to be released after one year 26,029 21,093
Investments 738 5
Cash at bank and in hand 29,399 36,652
-------- --------
427,492 442,618
CREDITORS: amounts due within one year (342,247) (398,389)
-------- --------
NET CURRENT ASSETS 85,245 44,229
-------- --------
Total assets less current liabilities 694,118 704,429
CREDITORS: amounts due after one year (50,199) (136,313)
Provisions for liabilities and charges (113,378) (107,300)
-------- --------
NET ASSETS 530,541 460,816
======== ========
CAPITAL AND RESERVES
Called-up share capital 37,527 37,527
Other reserves 862,171 862,171
Foreign currency translation reserve 14,271 21,516
Profit and loss account 367,751 335,763
Goodwill reserve (860,989) (911,691)
-------- --------
Total equity shareholders' funds 420,731 345,286
MINORITY INTERESTS 109,810 115,530
-------- --------
TOTAL CAPITAL EMPLOYED 530,541 460,816
======== ========
A-21
WASTE MANAGEMENT INTERNATIONAL PLC
GROUP CASH FLOW STATEMENT
(UNAUDITED)
For the six months
ended
30 June
-----------------------
1998 1997
----------- -----------
(Pounds)000 (Pounds)000
----------- -----------
OPERATING ACTIVITIES
Operating profit 44,496 74,852
Depreciation charges 38,654 43,812
Loss on sale of tangible fixed assets 808 31
Decrease/(increase) in debtors and prepayments, parts
and supplies 2,749 (8,250)
Decrease/(increase) in deferred costs 140 (850)
Decrease in creditors and accruals (36,504) (17,763)
Decrease in provisions (1,076) (1,767)
-------- --------
NET CASH INFLOW FROM OPERATING ACTIVITIES 49,267 90,065
-------- --------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 2,040 5,808
Interest paid (4,325) (14,555)
Dividends paid to minority interests (7,096) (4,593)
Other income 8,068 263
-------- --------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SER-
VICING OF FINANCE (1,313) (13,077)
-------- --------
TAX PAID (5,324) (2,471)
-------- --------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (45,565) (34,921)
Sale/(purchase) of investments (373) 182,243
Sale of tangible fixed assets 13,075 3,618
-------- --------
NET CASH FLOW/(OUTFLOW) FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (32,863) 150,940
-------- --------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (725) (2,230)
Sale of subsidiary undertakings 81,455 31,779
Changes in minority interests (5,641) (2,499)
-------- --------
NET CASH INFLOW FROM ACQUISITIONS AND DISPOSALS 75,089 27,050
-------- --------
NET CASH INFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES
AND FINANCING ACTIVITIES 84,856 252,507
MANAGEMENT OF LIQUID RESOURCES (413) --
-------- --------
NET CASH INFLOW BEFORE FINANCING ACTIVITIES 84,443 252,507
-------- --------
FINANCING ACTIVITIES
Exercise of share options -- 3
New loans 146,570 206,697
Changes in indebtedness with ultimate parent company 1,709 (93,629)
Repayments of loans (239,524) (351,256)
-------- --------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES (91,245) (238,185)
-------- --------
INCREASE/(DECREASE) IN CASH AT BANK AND IN HAND (6,802) 14,322
======== ========
A-22
2. FINANCIAL INFORMATION ON THE GROUP FOR THE THREE YEARS ENDED 31 DECEMBER
1997
The financial information set out in this paragraph 2 of Part 3 of this
document has been extracted without material adjustment from the consolidated
financial statements of the Group for each of the three years ended 31
December 1997. The financial information does not constitute statutory
accounts of the Group within the meaning of section 240 of the Act. Arthur
Andersen, chartered accountants and registered auditors, of 1 Surrey Street,
London, WC2R 2PS are the Group's auditors and have reported on the statutory
accounts of the Group for each of the three years ended 31 December 1997
within the meaning of section 235 of the Act. Each such report was unqualified
within the meaning of section 262(1) of the Act and did not contain a
statement under section 237(2) or (3) of the Act. Statutory accounts for the
years ended 31 December 1995, 1996 and 1997 have been delivered to the
Registrar of Companies in England and Wales pursuant to section 242 of the
Act.
In relation to notes 23 and 25 of the "Notes to the Accounts", subsequent to
the date of the consolidated financial statements the Merger was consummated.
As a result, WMI is now the ultimate parent company of the Company. In
relation to note 25, please also refer to pages 70 and 71.
A-23
WASTE MANAGEMENT INTERNATIONAL PLC
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER
1997 1996 1995
Notes (Pounds)000 (Pounds)000 (Pounds)000
----- ----------- ----------- -----------
TURNOVER
Continuing operations 1,078,238 1,218,894 1,180,783
Acquisitions 9,358 -- --
----------- ----------- -----------
2 1,087,596 1,218,894 1,180,783
Operating expenses (826,947) (910,080) (866,477)
Exceptional charges 22 (65,456) (127,735) (123,160)
Selling and administrative
expenses (125,447) (143,673) (149,289)
----------- ----------- -----------
OPERATING PROFIT
Continuing operations 68,624 37,406 41,857
Acquisitions 1,122 -- --
----------- ----------- -----------
2 69,746 37,406 41,857
Other interest receivable 10,704 7,962 10,718
Other income, net 3 2,130 25,437 23,686
Interest payable 4 (18,890) (39,863) (53,136)
Write down of investment 10c -- (18,500) --
----------- ----------- -----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 5 63,690 12,442 23,125
Tax on profit on ordinary
activities 7 (25,029) (59,979) (10,942)
----------- ----------- -----------
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION 38,661 (47,537) 12,183
Minority interests (17,363) (18,662) (15,642)
----------- ----------- -----------
RETAINED PROFIT/(LOSS) FOR THE
FINANCIAL YEAR 21,298 (66,199) (3,459)
=========== =========== ===========
EARNINGS/(LOSS) PER ORDINARY
SHARE 8 5.7p (17.6)p (0.9)p
=========== =========== ===========
Weighted average number of
ordinary shares in issue
during the year 375,273,000 375,213,000 375,121,000
=========== =========== ===========
A statement of movements on reserves and total equity shareholders' funds is
given in Note 18.
The accompanying notes are an integral part of the Profit and Loss Account.
A-24
WASTE MANAGEMENT INTERNATIONAL PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
Retained profit/(loss) for the
financial year 21,298 (66,199) (3,459)
Effect of foreign exchange rate changes
on foreign currency net investments (26,060) (8,657) 1,327
------- ------- ------
TOTAL RECOGNISED GAINS AND LOSSES
RELATING TO THE YEAR (4,762) (74,856) (2,132)
======= ======= ======
A-25
WASTE MANAGEMENT INTERNATIONAL PLC
BALANCE SHEET
31 DECEMBER
Group Company
----------------------- -----------------------
1997 1996 1997 1996
Notes (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----- ----------- ----------- ----------- -----------
FIXED ASSETS
Tangible assets 9 653,851 766,819 -- --
Investments 10 6,349 10,442 677,009 857,652
-------- --------- ------- --------
660,200 777,261 677,009 857,652
-------- --------- ------- --------
CURRENT ASSETS
Debtors: amounts due
within one year 11 279,955 391,342 2,961 --
Debtors: amounts due af-
ter one year 11 75,788 86,589 102,766 108,286
Prepayments, parts and
supplies 24,978 28,952 435 497
Deferred costs: amounts
to be released within
one year 12 4,147 3,906 -- --
Deferred costs: amounts
to be released after
one year 12 21,093 31,216 -- --
Investments 13 5 183,283 -- --
Cash at bank and in hand 36,652 40,891 40 2,515
-------- --------- ------- --------
442,618 766,179 106,202 111,298
CREDITORS: Amounts due
within one year 14 (398,389) (529,071) (774) (33,072)
-------- --------- ------- --------
NET CURRENT ASSETS 44,229 237,108 105,428 78,226
-------- --------- ------- --------
TOTAL ASSETS LESS CUR-
RENT LIABILITIES 704,429 1,014,369 782,437 935,878
CREDITORS: Amounts due
after one year 15 (136,313) (453,358) -- (154,861)
PROVISIONS FOR LIABILI-
TIES AND CHARGES 16 (107,300) (125,935) 156 (1,123)
-------- --------- ------- --------
NET ASSETS 460,816 435,076 782,593 779,894
======== ========= ======= ========
CAPITAL AND RESERVES
Called-up equity and
share capital 17 37,527 37,527 37,527 37,527
Share premium account 18 394,199 394,196 394,199 394,196
Other reserves 18 467,972 467,972 325,880 326,162
Foreign currency trans-
lation reserve 18 21,516 47,576 -- --
Profit and loss account 18 335,763 314,465 24,987 22,009
Goodwill reserve 18 (911,691) (946,834) -- --
-------- --------- ------- --------
TOTAL EQUITY SHAREHOLD-
ERS' FUNDS 18 345,286 314,902 782,593 779,894
MINORITY INTERESTS 115,530 120,174 -- --
-------- --------- ------- --------
TOTAL CAPITAL EMPLOYED 460,816 435,076 782,593 779,894
======== ========= ======= ========
The accompanying notes are an integral part of these Balance Sheets.
A-26
WASTE MANAGEMENT INTERNATIONAL PLC
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
1997 1996
Notes (Pounds)000 (Pounds)000
----- ----------- -----------
OPERATING ACTIVITIES
Operating profit 69,746 37,406
Depreciation and amortisation charges 87,379 97,351
Profit on sale of property and equipment (663) (480)
Exceptional charge 65,456 127,735
(Increase)/decrease in debtors and prepaid ex-
penses, parts and supplies 67,438 (24,354)
(Increase)/decrease in deferred costs (1,134) 6,047
Increase/(decrease) in creditors and accrued ex-
penses (25,213) 1,742
Decrease in deferred items (2,175) (24,776)
-------- --------
NET CASH INFLOW FROM OPERATING ACTIVITIES 260,834 220,671
-------- --------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 10,704 7,962
Interest paid (22,827) (45,492)
Dividends paid to minority interests (17,819) (596)
Other income/(expense) 1,568 (316)
Dividends received 39 1,906
-------- --------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (28,335) (36,536)
-------- --------
TAX PAID
United Kingdom corporation tax (5,630) (2,519)
Overseas tax (10,166) (16,764)
-------- --------
NET CASH OUTFLOW FROM TAXES PAID (15,796) (19,283)
-------- --------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (87,755) (130,734)
Purchase of investments (2,190) (2,074)
Sale of tangible fixed assets 15,752 22,966
-------- --------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (74,193) (109,842)
-------- --------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (net of cash
acquired) 19a (6,431) (9,049)
Sale of investments in affiliates 184,798 5,299
Sale of business (net of cash divested) 19b 71,686 --
Changes in minority interests (543) 4,595
-------- --------
NET CASH INFLOW FROM ACQUISITIONS AND DISPOSALS 249,510 845
-------- --------
NET CASH INFLOW BEFORE MANAGEMENT OF LIQUID RE-
SOURCES AND FINANCING 392,020 55,855
-------- --------
MANAGEMENT OF LIQUID RESOURCES 3,240 (3,144)
-------- --------
NET CASH INFLOW BEFORE FINANCING 395,260 52,711
-------- --------
FINANCING ACTIVITIES
Exercise of share options 3 283
New loans 277,055 347,983
Changes in indebtedness with ultimate parent
company (92,137) 9,805
Repayment of loans (582,564) (405,483)
-------- --------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES (397,643) (47,412)
-------- --------
INCREASE/(DECREASE) IN CASH AT BANK AND IN HAND (2,383) 5,299
======== ========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET DEBT
Increase/(decrease) in cash (2,383) 5,299
Effect of foreign exchange rate changes (1,856) (2,409)
Change in liquid resources (3,240) 3,144
Change in debt 442,184 129,839
-------- --------
Change in net debt 434,705 135,873
Net debt at beginning of period (597,809) (733,682)
-------- --------
NET DEBT AT END OF PERIOD 19c (163,104) (597,809)
======== ========
The accompanying notes are an integral part of this Group Cash Flow Statement.
A-27
WASTE MANAGEMENT INTERNATIONAL PLC
NOTES TO THE ACCOUNTS
NOTE 1 ACCOUNTING POLICIES
A summary of the principal accounting policies adopted in arriving at the
financial information set out in this report, all of which have been applied
consistently throughout the year and throughout the preceding years, is set
out below:
Basis of accounting
The accounts are prepared under the historical cost convention and in
accordance with the accounting standards applicable in the United Kingdom.
Basis of consolidation
Subsidiary undertakings acquired by the Group during the year are accounted
for using the acquisition method of accounting. Goodwill arising on
consolidation of those undertakings (representing the excess of the fair value
of the consideration given over the fair value of the separable net assets
acquired, having made appropriate provisions) is written off against reserves
on acquisition. The allocation of fair values in respect of the net assets of
subsidiary undertakings acquired is based on the best information available,
which may initially include estimates. As a result, subsequent adjustments to
fair values may be required.
In December 1997 the UK Accounting Standards Board (ASB) issued FRS 10
"Goodwill and Intangible Assets". This statement is effective for accounting
periods ending on or after 23 December 1998 although early adoption is
encouraged. FRS 10 will require newly purchased goodwill to be classified as
an amount on the balance sheet and amortised over its useful economic life.
Existing goodwill can either remain in equity, but be eliminated against
reserves until sold or otherwise impaired, or presented on the balance sheet
(net of amortisation attributable to prior years). The Group is currently
examining the most appropriate method for adoption of FRS 10.
In the Company's accounts, investments in subsidiary undertakings are stated
at cost less amounts written off. Dividends received and receivable are
credited to the Company's profit and loss account.
No profit and loss account is presented for the Company as provided by Section
230 of the Act. The Company's retained profit for the financial year
determined in accordance with the Act, was (Pounds)2,978,000 (1996--retained
loss (Pounds)1,815,000).
Tangible fixed assets
Tangible fixed assets are shown at original historical cost less accumulated
depreciation. Disposal sites are carried at historical cost and, to the extent
this exceeds estimated end of use realisable value, such excess is depreciated
over the estimated life of the disposal site. Site preparation and permit
costs are capitalised and charged to operations over the estimated useful life
of the site or term of the permit; operating costs are expensed as incurred.
Preparation costs for individual secure land disposal cells are capitalised
and amortised as the airspace is filled.
Depreciation is provided at rates calculated to write off the cost, less
estimated residual value, of each asset on a straight line basis over its
expected useful life as follows:
Land improvements and
disposal sites Economic life not exceeding 40 years
Buildings 10-40 years
Heavy collection
vehicles 8-10 years
Leasehold improvements Lesser of term of lease or economic life not exceeding 40 years
Machinery, equipment,
and containers 2-20 years
Profits or losses on the disposal of fixed assets are included in the
calculation of operating expenses.
A-28
Investments
Except as stated below, fixed asset investments are shown at cost less
provision for permanent diminution in value. Current asset investments are
stated at the lower of cost and net realisable value.
Interests in associated undertakings
Associated undertakings are entities in which a consolidated member of the
Group has a participating interest or over whose operating and financial
policy it exercises a significant influence. These investments are dealt with
by the equity method of accounting. That is, the Group profit and loss account
includes the appropriate share of these companies' profits less losses and the
Group's share of post-acquisition retained profits and changes in reserves is
added to the fair value of the investment in the Group balance sheet.
Any difference between the aggregate of the fair value of the net assets
acquired and the fair value of the consideration given is taken directly to
reserves.
Long-term contracts
Profit on long-term engineering, construction and operating contracts is taken
as the work is carried out if the final outcome can be assessed with
reasonable certainty. The profit included is calculated to reflect the
proportion of the work carried out at the year end, by recording turnover and
related costs as contract activity progresses. Turnover is calculated as that
proportion of total contract value which costs incurred to date bear to total
expected costs for that contract. Full provision is made for losses on
contracts in the year in which they are first foreseen.
Deferred costs
Expenditure incurred on specific projects is carried forward when its
recoverability can be foreseen with reasonable assurance, and amortised in
relation to the turnover from such projects. The directors consider this
treatment results in a proper matching of costs and turnover.
Taxation
Corporate taxes payable are provided on taxable profits at the current rate.
Deferred taxation has been calculated on the liability method. Deferred
taxation is provided on timing differences which will probably reverse, at the
rates of tax likely to be in force at the time of reversal. Deferred taxation
is not provided on timing differences which, in the opinion of the directors,
will probably not reverse.
Foreign currencies
For the purpose of consolidation, the results of overseas subsidiary
undertakings are translated into pounds sterling using the net investment
method under which translation gains or losses are shown as a movement on
reserves. Profit and loss accounts of overseas subsidiary undertakings are
translated at the average exchange rate and the difference in relation to year
end rates is taken directly to reserves. For subsidiary undertakings operating
in countries where hyper-inflation exists the temporal method is used, under
which all foreign exchange gains and losses are dealt with in the Group profit
and loss account.
Turnover
Turnover, which excludes turnover taxes, represents sales of services to third
parties in the normal course of business, and is recognised as services are
performed.
Leases
Rentals on operating leases are charged on a straight-line basis over the
lease term, even if the payments are not made on such a basis. Further
information on charges in the year and future commitments is given in Notes 5
and 20c.
A-29
Environmental liabilities
The Group provides for closure and post-closure monitoring costs over the
operating life of disposal sites as air space is consumed. These costs include
such items as the final cap and cover on the site, methane gas and leachate
management, and groundwater monitoring. The Group has also established
procedures to evaluate potential environmental remediation liabilities at
sites which it owns or operated, including sites acquired in business
combinations. Where the Group concludes that it is probable that a liability
has been incurred, provision is made in the financial statements for the
Group's best estimate of the liability. Such estimates are subsequently
revised as deemed necessary as additional information becomes available.
Pursuant to the Intercorporate Services Agreement ("ISA"), Old WMI agreed to
pay the Company $285,000,000 with respect to certain environmental costs
associated with sites and facilities owned, leased, operated or used by the
Group on or prior to 31 December 1991.
Pensions
The Group operates defined benefit pension schemes which require contributions
to be made to separately administered funds. Contributions to these funds are
charged to the profit and loss account so as to spread the cost of pensions
over the employees' working lives with the Group. The regular cost is
attributed to individual years using the projected unit credit method.
Variations in pension cost, which are identified as a result of actuarial
valuations, are amortised over the average expected remaining working lives of
employees in proportion to their expected payroll costs. Differences between
the amounts funded and the amounts charged to the profit and loss account are
treated as either provisions or prepayments in the Group balance sheet. In
addition, the Group also operates defined contribution pension schemes.
Further information on pension arrangements is given in Note 20d.
Reclassifications
Certain amounts in previously issued financial statements have been
reclassified to conform to 1997 classifications.
NOTE 2 SEGMENT INFORMATION
Substantially all of the operations of the Group are concerned with its
principal activity of providing waste management and related services outside
North America.
Contributions to Group turnover, operating profit and net assets by
geographical area are as follows:
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
TURNOVER
Italy 270,396 298,769 273,295
Rest of Europe 577,644 671,450 686,873
Asia, Pacific 180,700 176,313 151,746
Other 58,856 72,362 68,869
--------- --------- ---------
1,087,596 1,218,894 1,180,783
========= ========= =========
OPERATING PROFIT/(LOSS)
Italy (8,638) 23,795 (235)
Rest of Europe 43,315 (26,315) 26,483
Asia, Pacific 34,375 30,231 17,970
Other 694 9,695 (2,361)
--------- --------- ---------
69,746 37,406 41,857
========= ========= =========
A-30
The total figures for operations in 1997 included the following amounts
relating to acquisitions: operating expenses of (Pounds)6.3 million (1996 -
(Pounds)8.7 million) and selling and administrative expenses of (Pounds)1.9
million (1996 - (Pounds)1.0 million). Operating profits were reduced by the
exceptional charges discussed in Note 22.
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
ANALYSIS OF NET ASSETS
Italy 127,739 154,301 165,181
Rest of Europe 309,525 406,111 441,068
Asia, Pacific 179,764 233,981 246,658
Other 14,601 40,457 28,847
-------- -------- --------
631,629 834,850 881,754
Unallocated items, principally debt (170,813) (399,774) (506,599)
-------- -------- --------
460,816 435,076 375,155
======== ======== ========
The Group has operations in Hong Kong. The Hong Kong economy has been impacted
by the economic uncertainty associated with many of the countries in the
region. High and volatile interest rates have been associated with speculation
regarding the future of the currency. In addition to Hong Kong, the Group does
business in Indonesia and Thailand. These countries have experienced
illiquidity, volatile currency exchange and interest rates and reduced
economic activity. The Group will be affected for the foreseeable future by
the economic conditions in this region although it is not possible to
determine the extent of such impact. At 31 December 1997, the Group had a net
investment of (Pounds)65.1 million in these countries (including Hong Kong).
Pre-tax income from Indonesia and Thailand has not been significant to date.
In 1997 the pre-tax income generated from the Hong Kong operations was
(Pounds)15,645,000, after minority interests.
Late in 1997 the Group learnt that its bid to renew its city cleaning contract
in Buenos Aires, Argentina had been unsuccessful, and the Group's contract
would terminate on 31 January 1998. In 1997 operations in Argentina generated
approximately (Pounds)58,856,000 in turnover, and pre-tax income after
minority interest but before the exceptional charge of (Pounds)9,527,000.
The segment information presented in this note includes the Group's Hamm,
Germany facility which was sold in January 1998 (see Note 20).
NOTE 3 OTHER INCOME, NET
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
Income from interests in associated under-
takings 457 25,753 24,879
Other income/(expense) 1,673 (316) (1,193)
----- ------ ------
2,130 25,437 23,686
===== ====== ======
The Group's interests in associated undertakings are described in Note 10c.
NOTE 4 INTEREST PAYABLE
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
On bank loans, overdrafts and other loans
- --repayable within five years, by instal-
ments 3,358 5,117 6,645
- --repayable within five years, not by in-
stalments 18,404 33,175 50,781
On other loans 286 829 1,209
On advances from ultimate parent company 779 6,371 1,244
Interest capitalised (3,937) (5,629) (6,743)
------ ------ ------
18,890 39,863 53,136
====== ====== ======
Interest has been capitalised on significant land disposal cells and projects
under development.
A-31
NOTE 5 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
Profit on ordinary activities before taxa-
tion is stated after charging:
Depreciation of tangible fixed assets 87,379 97,351 88,397
Hire of vehicles and equipment under oper-
ating leases 7,131 8,934 9,038
Other operating leases rentals 12,547 12,756 12,754
Auditors' remuneration in respect of audit
services 1,201 1,317 1,351
Staff costs (see Note 6) 324,473 397,412 398,344
Non-audit fees paid to Arthur Andersen in the UK relating to 1997 amounting to
(Pounds)143,000 (1996--(Pounds)103,000; 1995--(Pounds)156,000) were charged to
the profit and loss account.
NOTE 6 STAFF COSTS
1997 1996 1995
Number Number Number
employed employed employed
----------- ----------- -----------
The average weekly number of persons
employed by the Group during the year
was as follows:
Operations 13,494 15,428 16,098
Administration 2,046 2,094 2,234
------- ------- -------
15,540 17,522 18,332
======= ======= =======
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
Employee costs (including executive
directors) during the year
amounted to:
Wages and salaries 256,609 315,901 317,912
Social Security costs 61,652 75,284 74,484
Other pension costs (see Note 20d) 6,212 6,227 5,948
------- ------- -------
324,473 397,412 398,344
======= ======= =======
Directors' remuneration:
Fees as directors 139 150 150
Other emoluments (including accrued
pension contributions) 1,187 1,144 674
------- ------- -------
Total remuneration 1,326 1,294 824
======= ======= =======
The directors' remuneration shown
above (excluding accrued pension
contributions) included:
Highest paid director 398 570 164
======= ======= =======
NOTE 7 TAX ON PROFIT ON ORDINARY ACTIVITIES
1997 1996 1995
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
The tax charge is based on the profit
for the year and comprises:
Current taxation 26,475 18,466 24,003
Deferred taxation (1,446) 41,513 (13,061)
------- ------- -------
United Kingdom corporation tax at
31.5% was (Pounds)6,118,000 (1996--
(Pounds)27,840,000; 1995--
(Pounds)4,647,000) 25,029 59,979 10,942
======= ======= =======
A-32
NOTE 8 EARNINGS PER ORDINARY SHARE
The calculation of basic earnings per ordinary share is based on the profit on
ordinary activities after taxation and minority interests of the Group and the
weighted average number of ordinary shares in issue during the year. The
exercise of outstanding share options would not result in a material dilution
of earnings per ordinary share.
NOTE 9 TANGIBLE FIXED ASSETS
The Group's movement during 1997 comprises:
Land and buildings
----------------------------------------
Land, Leasehold Vehicles
primarily improve- and
disposal sites Buildings ments equipment Total
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
-------------- ----------- ----------- ----------- -----------
COST
Beginning of the year 266,118 142,481 15,914 716,378 1,140,891
Additions 19,102 4,430 1,768 66,392 91,692
Subsidiary undertakings
acquired 5 563 -- 3,453 4,021
Disposals (20,734) (9,683) (2,812) (59,411) (92,640)
Other 4,981 5,132 27 (10,140) --
Exchange adjustment (19,565) (13,468) (948) (64,791) (98,772)
------- ------- ------ ------- ---------
End of the year 249,907 129,455 13,949 651,881 1,045,192
------- ------- ------ ------- ---------
DEPRECIATION
Beginning of the year 74,113 30,054 7,733 262,172 374,072
Charge 18,816 5,946 1,326 61,291 87,379
Disposals (8,391) (1,807) (738) (23,853) (34,789)
Other 161 (228) (141) 208 --
Exchange adjustment (6,265) (3,114) (434) (25,508) (35,321)
------- ------- ------ ------- ---------
End of the year 78,434 30,851 7,746 274,310 391,341
------- ------- ------ ------- ---------
NET BOOK VALUE
Beginning of the year 192,005 112,427 8,181 454,206 766,819
======= ======= ====== ======= =========
End of the year 171,473 98,604 6,203 377,571 653,851
======= ======= ====== ======= =========
NOTE 10 FIXED ASSET INVESTMENTS
Group Company
----------------------- -----------------------
1997 1996 1997 1996
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- -----------
Investment in subsidiary
undertakings, at cost -- -- 556,149 556,149
Investment in associated
undertakings 4,729 6,568 -- --
Other investments and loans 1,620 3,874 120,860 301,503
----- ------ ------- -------
6,349 10,442 677,009 857,652
===== ====== ======= =======
A-33
a) Principal Group investments
The Company and the Group have investments in the following subsidiary
undertakings all of which principally affected the profits or net assets of the
Group. Details concerning investments which are not significant have been
omitted from the list set out below in order to avoid a statement of excessive
length.
Country of
incorporation Percentage of ordinary
or shares held by the
registration ------------------------
and operation Principal activity Group Company
------------- -------------------------- ------------ -----------
PRINCIPAL SUBSIDIARY UN-
DERTAKINGS:
Afvalstoffen Terminal Netherlands Waste Collection/Treatment 100 --
Moerdijk B.V.
Enviropace Limited Hong Kong Waste Management 70 --
Green Valley Landfill Hong Kong Disposal 50 plus --
Limited 1 share
ICOVA B.V. Netherlands Waste Collection 100 --
IGM S.p.A. Italy Waste Collection/Disposal 100 --
Manliba S.A. (see Note Argentina Waste Collection 55 --
2)
Pacific Waste Management Australia Waste Collection/Disposal 100 --
Pty Limited
SACAGICA Srl Italy Waste Collection/Disposal 100 --
Schreiber Germany Waste Collection/Disposal 100 --
Stadtereinigung GmbH &
Co. KG
Waste Management GmbH & Germany Waste-to-Energy 100 --
Co. MVA Hamm OHG (see
Note 20a)
Waste Management Inter- Netherlands Holding Company -- 62.5
national B.V.
Waste Management New New Zealand Waste Collection/Disposal 61 --
Zealand Limited
Wessex Waste Management England Waste Collection/ 50 plus --
Limited Treatment/Disposal 1 share
Waste Management Inter- Sweden Waste Collection/ 100 --
national Sellbergs AB Treatment/Disposal
Voting rights in subsidiary undertakings do not differ from the percentage of
ordinary shares held.
A-34
b) Investment in subsidiary undertakings of the Group
The Group made 13 acquisitions during 1997, none of which was individually
material to the Group, for a cash consideration of (Pounds)7,737,000, which
together gave rise to goodwill of (Pounds)1,757,000. Fair values attributable
to the net assets of all subsidiary undertakings acquired in the year are
shown in the following table:
Fair
Acquisition value to
Book value adjustments the Group
(Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- -----------
FIXED ASSETS
Tangible 3,983 38 4,021
CURRENT ASSETS
Debtors 4,563 -- 4,563
Cash 1,306 -- 1,306
Other 3,414 (1,689) 1,725
------ ------ ------
TOTAL ASSETS 13,266 (1,651) 11,615
------ ------ ------
LIABILITIES
Bank loans (299) -- (299)
Other creditors (5,589) (366) (5,955)
Provisions 144 475 619
------ ------ ------
Total liabilities (5,744) 109 (5,635)
------ ------ ------
NET ASSETS 7,522 (1,542) 5,980
====== ====== ======
Consideration 7,737
Net assets (5,980)
------
Goodwill arising 1,757
Goodwill adjustments in respect of prior
year acquisitions 3,975
------
TOTAL GOODWILL ARISING 5,732
======
The above acquisition adjustments, none of which were individually material,
provide for environmental monitoring and other restoration costs and bring
accounting policies into line with those of the Group.
c) Investment in associated undertakings of the Group
The movement in the year comprises:
Share of tangible
net assets
--------------------------
1997 1996
(Pounds)000 (Pounds)000
------------- -----------
Beginning of the year 6,568 170,437
Additions 1,314 1,760
Share of retained profit 457 22,437
Dividends received (39) (1,906)
Disposals and transfers (3,298) (5,299)
Reclassified to current investments (see Note 13) -- (180,037)
Exchange adjustment (273) (824)
-------- --------
End of the year 4,729 6,568
======== ========
A-35
During the first quarter of 1997, the Group sold to Wessex its B and C
shareholdings and a portion of its ordinary shares in Wessex. This sale,
together with the sale of the remaining ordinary shares in Wessex through on-
market transactions resulted in a loss which was accrued in the Group's 1996
financial statements of (Pounds)18,500,000 before income taxes, and
(Pounds)19,030,000 in income tax expense, resulting in a net loss of
(Pounds)37,530,000. Cash proceeds were approximately (Pounds)181,100,000. The
Group's share of net income from Wessex, which was recorded on the equity
method of accounting, was (Pounds)nil in 1997 (1996--(Pounds)21,805,000).
d) Other investments and loans
Group Company
----------- -----------
Loans to
subsidiary
Other under
investments takings
(Pounds)000 (Pounds)000
----------- -----------
COST:
The movement in the year comprises:
Beginning of the year 3,874 301,503
Additions 212 --
Disposals, transfers and repayments (2,215) (180,518)
Exchange adjustment (251) (2,105)
-------- --------
End of the year 1,620 118,880
======== ========
The cost of investments held by the Group and listed overseas included in the
above was (Pounds)70,000 (1996--(Pounds)98,000). See Note 21 for discussion of
market value. The remainder were unlisted. The Company had no listed
investments.
NOTE 11 DEBTORS
Group Company
----------------------- -----------------------
1997 1996 1997 1996
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- -----------
AMOUNTS FALLING DUE WITHIN ONE
YEAR:
Trade debtors 222,700 300,308 -- --
Amounts recoverable on con-
tracts 9,426 49,570 -- --
Other debtors 47,829 41,464 2,961 --
------- ------- ------- -------
279,955 391,342 2,961 --
======= ======= ======= =======
AMOUNTS FALLING DUE AFTER ONE
YEAR:
Notes receivable 4,056 12,061 -- --
Amounts recoverable on con-
tracts 56,992 62,854 -- --
Amounts owed by ultimate par-
ent company -- -- 102,766 108,286
Other debtors 14,740 11,674 -- --
------- ------- ------- -------
75,788 86,589 102,766 108,286
======= ======= ======= =======
Amounts owed to the Company by the ultimate parent company comprise primarily
the benefit of the environmental covenant (see Note 16b).
Group
-----------------------
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
Costs and estimated earnings on uncompleted contracts 293,400 254,268
Less: Billings on uncompleted contracts (226,982) (141,844)
-------- --------
Amounts recoverable on contracts 66,418 112,424
======== ========
A-36
The amounts recoverable on contracts are expected to be billed and collected
within five years. There is no significant retention. Amounts recoverable on
contracts primarily represent unbilled turnover on long-term contracts to
design, build and operate a hazardous waste treatment facility, a solid waste
landfill and a transfer station, all in Hong Kong.
NOTE 12 DEFERRED COSTS
Group Company
----------------------- -----------------------
1997 1996 1997 1996
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- -----------
Project development costs 17,212 27,080 -- --
Contract procurement costs 4,814 5,177 -- --
Other 3,214 2,865 -- --
------ ------ ----- -----
After one year 25,240 35,122 -- --
====== ====== ===== =====
AMOUNTS TO BE RELEASED: 4,147 3,906 -- --
Within one year 21,093 31,216 -- --
------ ------ ----- -----
After one year 25,240 35,122 -- --
====== ====== ===== =====
NOTE 13 CURRENT ASSET INVESTMENTS
Group
-----------------------
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
Listed investments
- --Wessex shareholding (see Note 10c) -- 180,037
- --Overseas 4 5
Term deposits 1 3,241
------ -------
5 183,283
====== =======
The aggregate market value or contracted sale value of listed investments is
not materially different from the carrying value.
NOTE 14 CREDITORS: AMOUNTS DUE WITHIN ONE YEAR
Group Company
----------------------- -----------------------
1997 1996 1997 1996
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- -----------
Current maturities of long-
term debt 63,444 188,583 -- 30,066
Trade creditors 107,733 136,375 -- --
Other creditors 17,880 26,506 -- --
Accruals and deferred income 204,791 169,227 774 3,006
current portion of acquisition
provisions 4,541 8,380 -- --
------- ------- ------ -------
398,389 529,071 774 33,072
======= ======= ====== =======
A-37
NOTE 15 CREDITORS: AMOUNTS DUE AFTER ONE YEAR
Group Company
------------------------ -----------------------
1997 1996 1997 1996
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- -----------
Debt (see below),
substantially all
comprising bank borrowings 135,645 362,982 -- 65,798
Amounts due to ultimate
parent company 668 90,376 -- 89,063
------- -------- ----- -------
136,313 453,358 -- 154,861
======= ======== ===== =======
Debt:
3.4625--4.15% unsecured
revolving credit facility 125,692 301,300 -- 65,798
10.5% unsecured revolving
credit facilities in Hong
Kong Dollars 4,300 37,746 -- --
6.025% unsecured loan in
Pounds Sterling, not
repayable by instalments -- 25,000 -- 25,000
Other 69,097 187,519 -- 5,066
------- -------- ----- -------
199,089 551,565 -- 95,864
Less current maturities (63,444) (188,583) -- (30,066)
------- -------- ----- -------
135,645 362,982 -- 65,798
======= ======== ===== =======
The amount of instalments falling due after five years at 31 December 1997 is
(Pounds)245,000 (1996--(Pounds)2,772,000).
Debt is repayable as follows:
Second year 7,510 22,784 -- --
Third year 126,706 30,140 -- --
Fourth year 1,051 303,378 -- 65,798
Fifth year 133 3,908 -- --
------- ------- ----- ------
135,400 360,210 -- 65,798
Sixth year and thereafter 245 2,772 -- --
------- ------- ----- ------
135,645 362,982 -- 65,798
======= ======= ===== ======
During 1995, the Company borrowed $150,000,000, due wholly on 29 September 2000
at a 6.6 per cent. interest rate, from Old WMI under the terms of the ISA. This
loan was repaid from the proceeds of the Wessex sale in February 1997 (see Note
10c).
During 1995, the Company entered into a (Pounds)400,000,000 unsecured
revolving credit facility (the "Facility"), replacing a similar facility, of
which (Pounds)125,692,000 is utilised at 31 December 1997 (1996--
(Pounds)301,300,000). The Facility expires on 20 December 2000. None of the
debt outstanding at 31 December 1997 or 31 December 1996 was guaranteed by Old
WMI under the provisions of the ISA. During 1997 the commitment was reduced to
(Pounds)220,000,000.
A-38
NOTE 16 PROVISIONS FOR LIABILITIES AND CHARGES
Group Company
------------------------ ------------------------
1997 1996 1997 1996
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- -----------
Deferred taxation 12,124 (17) (156) 1,123
Other provisions 95,176 125,952 -- --
------- ------- ------ ------
107,300 125,935 (156) 1,123
======= ======= ====== ======
a) Deferred taxation
Provisions not deductible
until expenditure
incurred
- --effect of acquisition
provisions (53,958) (48,112) -- --
Net operating loss carry-
forwards (54,330) (65,436) -- (5,077)
Excess of book value over
taxation value of fixed
assets 63,474 78,177 -- --
Other timing differences
- --other assets (29,733) (23,400) (156) (172)
- --other liabilities 86,671 58,754 -- 6,372
------- ------- ------ ------
12,124 (17) (156) 1,123
======= ======= ====== ======
The movement on deferred
taxation comprises:
Beginning of the year (17) (41,558) 1,123 1,954
Charged/(credited) to
profit and loss account
--fixed asset timing
differences (14,703) (5,936) -- --
--net operating loss
carry-forwards 11,106 9,526 5,077 (37)
--other timing
differences 2,151 37,923 (6,356) (794)
Eliminated on disposal
of subsidiaries in the
year 15,177 -- -- --
Arising on acquisition
provisions made in the
year (699) (429) -- --
Exchange adjustment (891) 457 -- --
------- ------- ------ ------
End of year 12,124 (17) (156) 1,123
======= ======= ====== ======
Deferred taxation has been calculated on the liability method. Deferred
taxation is provided on timing differences which will probably reverse, at the
rates of tax likely to be in force at the time of reversal. Deferred taxation
is not provided on those timing differences which, in the opinion of the
directors, will probably not reverse.
The retained earnings of certain foreign subsidiary undertakings would be
subject to additional taxation if distributed. In the opinion of the
directors, these retained earnings are required to finance the continuing
operation of these subsidiary undertakings and, accordingly, no provisions for
additional taxation has been made.
b) Other provisions
Group
------------------------
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
The movement on other provisions comprises:
Beginning of the year 125,952 159,967
Provisions associated with acquisitions 337 994
Other operating provisions 11,239 22,021
Provisions associated with divestitures (17,581) --
Amounts utilised (14,265) (29,463)
Transfer to short-term creditors (1,297) (16,459)
Exchange adjustment (9,209) (11,108)
------- -------
End of the year 95,176 125,952
======= =======
A-39
Under the terms of the ISA, Old WMI agreed to pay to the Company, over a
maximum period of 50 years, $285,000,000 as a capital contribution in respect
of certain uninsured and non-capitalised environmental costs and liabilities
including remediation or correction costs and costs of preventative action,
but generally excluding the proportion of such environmental costs and
liabilities attributable to any relevant minority interest. The costs and
liabilities are only those associated with sites and facilities owned, leased,
operated or used by the Group, or to which it transported any material or
substance, on or prior to 31 December 1991, regardless of whether such
liabilities arose before or arise during the term of the covenant. A provision
of that amount was accordingly assumed by Old WMI, the benefit of which was
reflected as an increase in the Group reserves in 1991. Old WMI paid
$9,480,000 for 1997 (1996--$23,667,000) in respect of this provision.
NOTE 17 CALLED-UP EQUITY SHARE CAPITAL
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
AUTHORISED
1,000,000,000 ordinary shares of 10 pence each 100,000 100,000
======= =======
ALLOTTED, CALLED-UP AND FULLY PAID
375,273,456 ordinary shares of 10 pence each (1996--
375,272,288 ordinary shares) 37,527 37,527
======= =======
SHARE OPTIONS
At 31 December 1997, options were outstanding over 10,390,977 shares at
exercise prices ranging from 234.0 pence to 627.8 pence per share.
During the year to 31 December 1997 options covering 1,168 ordinary shares
were exercised at a price of 261.8 pence per share.
A-40
NOTE 18 CAPITAL AND RESERVES
Foreign Total
Share currency Profit equity
Called-up premium Other translation and loss Goodwill shareholders'
share capital account reserves reserve account reserve funds
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
------------- ----------- ----------- ----------- ----------- ----------- -------------
GROUP
At 1 January 1996 37,516 393,924 467,972 56,233 380,664 (1,064,475) 271,834
Exercise of share
options 11 272 -- -- -- -- 283
Foreign currency
translation -- -- -- (8,657) -- -- (8,657)
Retained loss for the
year -- -- -- -- (66,199) -- (66,199)
Goodwill written off -- -- -- -- -- (1,519) (1,519)
Exceptional charge -- -- -- -- -- 109,751 109,751
Writedown of investment -- -- -- -- -- 9,409 9,409
------ ------- ------- ------- ------- ---------- -------
At 31 December 1996 37,527 394,196 467,972 47,576 314,465 (946,834) 314,902
Exercise of share
options -- 3 -- -- -- -- 3
Foreign currency
translation -- -- -- (26,060) -- -- (26,060)
Retained profit for the
year -- -- -- -- 21,298 -- 21,298
Goodwill written off -- -- -- -- -- (5,732) (5,732)
Sale of businesses -- -- -- -- -- 36,828 36,828
Exceptional charge -- -- -- -- -- 4,047 4,047
------ ------- ------- ------- ------- ---------- -------
At 31 December 1997 37,527 394,199 467,972 21,516 335,763 (911,691) 345,286
====== ======= ======= ======= ======= ========== =======
Share Profit
Called-up premium Other and loss
share account reserves account Total
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- ----------- -----------
COMPANY
At 1 January 1996 37,516 393,924 336,119 23,824 791,383
Exercise of share
options 11 272 -- -- 283
Exchange adjustment on
amounts due from other
Group undertakings -- -- (9,957) -- (9,957)
Retained loss for the
year -- -- -- (1,815) (1,815)
------ ------- ------- ------ -------
At 31 December 1996 37,527 394,196 326,162 22,009 779,894
Exercise of share
options -- 3 -- -- 3
Exchange adjustment on
amounts due from other
Group undertakings -- -- (282) -- (282)
Retained profit for the
year -- -- -- 2,978 2,978
------ ------- ------- ------ -------
At 31 December 1997 37,527 394,199 325,880 24,987 782,594
====== ======= ======= ====== =======
NOTE 19 CASH FLOW INFORMATION
a) Purchase of subsidiary undertakings
Businesses Acquired
------------------------
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
Net assets acquired
Fixed assets 4,021 5,270
Other assets 6,288 3,038
Creditors (6,254) (6,282)
Provisions 619 (565)
------ ------
4,674 1,461
Minority interests -- (200)
Goodwill 1,757 7,788
------ ------
6,431 9,049
====== ======
Satisfied by:
Cash 7,737 9,049
Cash at bank acquired (1,306) --
------ ------
6,431 9,049
====== ======
A-41
b) Sale of businesses
Businesses Sold
------------------------
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
Net assets sold:
Property and equipment 45,292 --
Current assets 23,174 --
Creditors (19,482) --
Provisions (4,945) --
------- ----
44,039 --
Minority interest (3,967) --
Goodwill 36,828 --
Foreign exchange rate changes (5,214) --
------- ----
71,686 --
======= ====
Cash proceeds:
Cash 73,254 --
Cash divested (1,568) --
------- ----
71,686 --
======= ====
c) Analysis of changes in net debt
Acquisitions Other non- Exchange
1 January 1997 Cash flow & Disposals cash changes movements 31 December 1997
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
-------------- ----------- ------------ ------------ ----------- ----------------
Cash 40,891 (2,383) -- -- (1,856) 36,652
Debt, short-term (188,583) 188,583 12,488 (83,509) 7,577 (63,444)
Due to Old WMI (90,376) 92,137 -- -- (2,429) (668)
Debt, long-term (362,982) 116,926 1,055 84,102 25,254 (135,645)
-------- ------- ------- ------- ------- --------
(601,050) 395,263 13,543 593 28,546 (163,105)
Liquid resources 3,241 (3,240) -- -- -- 1
-------- ------- ------- ------- ------- --------
Net debt (597,809) 392,023 13,543 593 28,546 (163,104)
======== ======= ======= ======= ======= ========
Liquid resources relate to term deposits only.
NOTE 20 GUARANTEES AND OTHER FINANCIAL COMMITMENTS
a) Capital commitments
Group
-----------------------
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
At the end of the year, capital commitments were:
Contracted but not provided for 9,764 18,670
Authorised but not contracted for 4,565 8,032
In January 1998, the Group completed the sale of its waste-to-energy facility
in Hamm, Germany for approximately (Pounds)83,000,000. No material gain or
loss was recognised on the transaction under UK GAAP (and a gain of
(Pounds)9,000,000 under US GAAP). In 1997, the facility had turnover of
(Pounds)21,087,000 and had no material impact on retained profit.
A-42
b) Contingent liabilities
i) The Company has guaranteed debt and other liabilities of certain subsidiary
undertakings. The amount outstanding at 31 December 1997 was
(Pounds)259,311,000.
ii) Subsidiary undertakings have unsecured guarantees to third parties
outstanding amounting to (Pounds)20,710,000.
iii) The Group had 1,114 performance bonds outstanding at year end totalling
(Pounds)82,111,000 (Company--none).
iv) The Group provides for closure and post-closure monitoring costs over the
operating life of disposal sites as air space is consumed. These costs
include such items as the final cap and cover on the site, methane gas and
leachate management, and groundwater monitoring. The Group has also
established procedures to evaluate potential environmental remediation
liabilities at sites which it owns or operated, including sites acquired
in business combinations. Where the Group concludes that it is probable
that a liability has been incurred, provision is made in the financial
statements for the Group's best estimate of the liability. Such estimates
are subsequently revised as deemed necessary as additional information
becomes available. In connection with acquisitions, a review is made for
potential existing environmental liabilities of the acquired company, and
such liabilities are recognised through acquisition adjustments where they
meet the criteria of being probable and reasonably quantifiable.
At 31 December 1996 and 1997, total environmental provisions on the
accompanying balance sheet, including closure and post-closure but
excluding any reimbursement from Old WMI, were (Pounds)77,161,000 and
(Pounds)55,488,000 respectively.
v) In the ordinary course of conducting its business, the Group becomes
involved in litigation, administrative proceedings and governmental
investigations, including environmental matters. Some of these proceedings
may result in fines, penalties or judgements being assessed against the
Group which, from time to time, may have an impact on earnings for a
financial period. The directors do not believe that these proceedings,
individually or in the aggregate, are material to its business or financial
condition.
During the first quarter of 1995, the Group received an assessment from the
Swedish Tax Authority relating to a transaction completed in 1990. The
assessment is approximately 417 million Krona ((Pounds)32 million) plus
interest accruing on such assessment. The Group believes that all
appropriate tax returns and disclosures were properly filed at the time of
the transaction, and is vigorously contesting the assessment.
c) Lease commitments
The Group has entered into non-cancellable operating leases in respect of
vehicles and equipment, the payments for which extend over a period of up to
six years. The total annual rental for 1997 was (Pounds)7,131,000 (1996--
(Pounds)8,934,000). The lease agreements provide typically that the Group will
pay all insurance, maintenance and repairs.
In addition, the Group leases certain land and buildings on short- and long-
term operating leases. The annual rental on these leases was
(Pounds)12,547,000 (1996--(Pounds)12,756,000). The rents payable under these
leases are subject to renegotiation at various intervals specified in the
leases. The Group typically pays all insurance, maintenance and repairs of
these properties.
A-43
The annual rental commitments under the foregoing leases comprise:
Group
-----------------------
Vehicles
and
Property equipment
----------- -----------
(Pounds)000 (Pounds)000
1997
Operating leases which expire
- --within one year 728 629
- --within two-five years 4,083 3,288
- --after five years 2,966 569
----- -----
7,777 4,486
===== =====
1996
Operating leases which expire
- --within one year 1,005 1,106
- --within two-five years 3,186 1,549
- --after five years 4,623 437
----- -----
8,814 3,092
===== =====
d) Pension arrangements
The Group has defined benefit pension plans for selected eligible employees in
Sweden and the UK. The benefits are generally based on the employee's years of
service and compensation during a period of the employee's highest consecutive
earning years out of a given period of employment. It is the Group's policy to
fund the minimum required amount determined by local law and its actuaries.
The Swedish plan, mandated under a collective bargaining agreement, allows the
Group to retain pension plan fundings within its operations so long as it
contracts with an insurance company to guarantee its future employee pension
commitments. The pension cost is assessed in accordance with the advice of an
independent professionally qualified actuary.
Regular pension cost based on the discount rates of 7.7 per cent. in 1996 and
7.3 per cent. in 1997, included the following components:
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
Service cost-benefits earned during the year 1,469 1,756
Interest cost on projected benefit obligation 1,647 1,413
Expected return on plan assets (1,523) (1,293)
Net amortisation and deferral (130) (135)
------ ------
Net regular pension cost 1,463 1,741
====== ======
Assumptions as of 31 December, which are used to determine the plans' funded
status at the respective dates, are as follows:
1997 1996
% %
---- ----
Discount rate 7.3 7.7
Rate of increase in compensation levels 5.0 5.3
Expected long-term rate of return on assets 8.5 8.5
A-44
The following table sets forth the plans' funded status and the amount
recognised in the Group's Balance Sheets at 31 December 1997 and 1996 for its
pension plans:
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS:
Accumulated benefit obligations (all vested) (23,108) (19,061)
======= =======
Projected benefit obligation (26,115) (22,166)
Plan assets at fair value, primarily equities, bonds
and real estate 21,623 17,285
------- -------
Plan assets less than projected benefit obligation (4,492) (4,881)
Unrecognised net (gain)/loss 257 (120)
Unrecognised overfunding (1,162) (1,328)
------- -------
Pension cost included in accruals (5,397) (6,329)
======= =======
The Netherlands has a pension plan that is fully funded by the purchase of
non-participating annuity contracts. The regular pension cost of this plan for
1997 is (Pounds)388,000 (1996--(Pounds)534,000; 1995--(Pounds)486,000). Except
as noted above, there have been no significant changes in existing plans
during the period. The Group continues to evaluate the governmental, social
and retirement plans which cover its employees in the countries in which it
operates with the objective of implementing a plan or plans so that its
employees ultimately have available retirement benefits which are competitive
in the countries in which it operates. The Group has no post retirement
benefit plans other than the above pension plans. In respect of Mr. Falkman,
the Group maintains an unfunded, unapproved pension plan designed to provide
him with retirement benefits which are substantially the same as those
available under the plans of Old WMI existing in the United States and in
which he participated prior to joining the Group. Payments from such unfunded
plan will be disclosed when paid as a pension. During 1997, the Group accrued
(Pounds)22,200 in respect of Mr. Falkman's unfunded pension plan.
The Group also has eight defined contribution pension plans for selected
eligible employees in the UK, Australia, the Netherlands, Denmark, Sweden and
Hong Kong. These plans cover approximately 4,000 employees. Regular pension
cost was (Pounds)3,982,000 in 1997 (1996--(Pounds)4,202,000; 1995--
(Pounds)4,106,000).
The employees seconded from Old WMI, Chemical Waste Management, Inc. and WTI
are included in those companies' plans. The Group is charged for the costs
related to the seconded employees.
e) Derivatives
From time to time, the Group and certain of its subsidiaries use derivatives
to manage interest rate, currency and commodity (fuel) risk. The Group's
policy is to use derivatives for risk management purposes only, and it does
not enter into such contracts for trading purposes. The Group enters into
derivatives only with counterparties which are financial institutions of at
least A- or A3 credit ratings, to minimise credit risk. The amount of
derivatives outstanding at any one point in time and gains or losses from
their use have not been and are not expected to be material to the Group's
financial statements.
Instruments used as hedges must be effective at managing risk associated with
the exposure being hedged and must be designated as a hedge at the inception
of the contract. Accordingly, changes in market values of hedge instruments
must have a high degree of inverse correlation with changes in market values
or cash flows of underlying hedged items. Derivatives that meet the hedge
criteria are accounted for under the deferral or accrual method, except for
currency agreements as discussed below. If a derivative does not meet or
ceases to meet the aforementioned criteria, or if the designated hedged time
ceases to exist, then the Group subsequently uses fair value accounting for
the derivative, with gains or losses included in sundry income. If a
derivative is terminated early, any gain or loss, including amounts previously
deferred, is deferred and amortised over the remaining life of the terminated
contract or until the anticipated transaction occurs.
A-45
Interest Rate Agreements
Certain of the Group's subsidiaries have entered into interest rate swap
agreements to balance fixed and floating rate debt in accordance with
management's criteria. The agreements are contracts to exchange fixed and
floating interest rate payments periodically over a specified term without the
exchange of the underlying notional amounts. The agreements provide only for
the exchange of interest on the notional amounts at the stated rates, with no
multipliers or leverage. Differences paid or received are accrued in the
financial statements as part of interest expense on the underlying debt over
the life of the agreements and the swap is not recorded on the balance sheet
or marked to market. As of 31 December 1997, interest rate agreements in
notional amounts and with terms set forth in the following table were
outstanding:
Currency Notional Amount Receive Pay Duration of Agreements
- ------------------ --------------- -------- ----- ----------------------
Hong Kong Dollar 100 million Floating Fixed Jan 1996-July 1998
Italian Lira 98 billion Floating Fixed Mar 1996-Mar 1999
German Deutschmark 150 million Floating Fixed Mar 1996-Jan 2000
Dutch Guilder 115 million Floating Fixed Nov 1996-Jan 2000
Currency Agreements
From time to time, the Group uses foreign currency derivatives to mitigate the
impact of translation on foreign earnings. Typically these have taken the form
of put options and offsetting put and call options with different strike
prices. The Group receives or pays, based on the notional amount of the
option, the difference between the average exchange rate of the hedged
currency against the base currency and the average (strike price) contained in
the option. Complex instruments involving multipliers or leverage are not
used. While the Group may incur an expense in connection with these
agreements, it will recognise an offsetting increase in the translation of
foreign earnings or income from foreign investees. Although the purpose for
using such derivatives is to mitigate currency risk, they do not qualify for
hedge accounting under generally accepted accounting principles and
accordingly, must be adjusted to market value at the end of each accounting
period. Gains and losses on currency derivatives to date have not been
material. There were no currency derivatives outstanding at 31 December 1997
of the type listed above. In 1997 the Group entered into a foreign forward
exchange contract in the amount of 60.3 million Dutch Guilders to sell Italian
Lire. This was to hedge certain intercompany loans to Italian subsidiaries
which are expected to be repaid in 1998.
In addition, the Group entered into a contract to sell amounts equivalent to
the amounts expected to be received in 1999, 2000, 2001, and 2002 related to
the interest on certain loan notes received by the Group as part of the
consideration for the sale of the Group's French subsidiaries.
Commodity Agreements
The Group utilises derivatives to seek to mitigate the impact of fluctuations
in the price of fuel used by its vehicles. The primary instrument used is a
zero-cost collar. Quantities hedged do not exceed anticipated fuel purchases.
Gains or losses are recognised in operating expenses, as cost of fuel
purchases, when paid or received. The Group had no contracts outstanding at
31 December 1997.
NOTE 21 FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts have been determined by the Group, using
available market information and commonly accepted valuation methodologies.
However, considerable judgement is necessarily required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Group
or the holders of the instruments could realise in a current market exchange.
The use of different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts. The fair value
estimates presented are based on information available at 31 December 1997 and
1996, and such amounts have not been revalued since those dates.
A-46
31 December 1997 31 December 1996
------------------------ ------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- -----------
Non-derivatives--
Cash at bank and in hand 36,652 36,652 40,891 40,891
Trade debtors 222,700 222,700 300,308 300,308
Other fixed and current
asset investments 1,625 1,625 187,157 187,157
Long-term debt (199,089) (199,089) (551,565) (551,565)
Amounts due to Old WMI (668) (668) (90,376) (90,203)
Derivatives relating to
debt -- (3,259) -- (2,780)
Other derivatives carried
as--
Prepayments -- -- -- --
Accruals and deferred
income -- -- -- (48)
Letters of credit, bonds
and guarantees -- -- -- --
Cash and trade debtors
The carrying amounts of these items are considered a reasonable estimate of
their fair value.
Investments
The quoted market prices or contracted sale price of listed investments were
used as fair value.
Long-term debt
Interest rates currently available to the Group for debt with similar terms
and remaining maturities were used to estimate fair value.
Derivatives
The fair value of derivatives generally reflects the estimated amounts that
the Group would receive or pay to terminate the contracts at 31 December,
thereby taking into account unrealised gains and losses.
Dealer quotes are available for most of the Group's derivatives. Deferred
realised gains and losses are shown as assets and liabilities as offsetting
such amounts against the related non-derivative instruments is permitted only
pursuant to a right of setoff or a master netting agreement.
Off-balance sheet financial instruments
In the normal course of business, the Group is a party to financial
instruments with off-balance sheet risk, such as bank letters of credit,
performance bonds and other guarantees, which are not reflected in the Group
balance sheet. Such instruments are valued based on the amount of exposure
under the instrument and the likelihood of performance being required. The
directors do not expect any material losses to result from these instruments,
and therefore are of the opinion that the fair value is (Pounds)nil.
NOTE 22 EXCEPTIONAL CHARGES
In 1995, the Group recorded an exceptional charge of (Pounds)123,160,000
before income taxes, which reduced retained profit by (Pounds)96,400,000. This
charge was the result of an extensive review of operations to refocus the
Group on its core waste business and to streamline its country management
structure. The charge related to consolidation of country and regional
offices, reduction of office staffing levels and the centralisation of certain
functions in
A-47
the country organisations to improve efficiencies. Certain non-core businesses
and investments were discontinued or sold, as well as core businesses and
investments located in low-potential markets. Certain hazardous waste
treatment technologies and processes were abandoned where the expected returns
did not justify the current market risk. The charge included
(Pounds)22,000,000 of future cash payments for employee severance and rents
under non-cancellable leases. Approximately (Pounds)7,000,000 was paid prior
to 31 December 1995, with (Pounds)8,000,000 paid in 1996 and (Pounds)4,000,000
paid in 1997. The balance is primarily payments on leased facilities that will
continue into the future.
Following a strategic assessment in 1996 of the Group's European markets, the
Group decided to reduce its investment in France, Spain and Austria, through
the sale of various operations in those countries. In addition, the Group
wrote off the investment in its hazardous waste disposal facility in Germany
because regulatory changes had adversely affected its volumes. Substantially
all of these businesses were sold in 1997. These decisions resulted in a 1996
fourth quarter exceptional charge of (Pounds)127,735,000 before and after
taxes, reducing the carrying value of these businesses to their estimated
realised value.
In the fourth quarter of 1997 the Group recorded a charge of
(Pounds)65,456,000 before tax and minority interest (net of residual
provisions no longer required of (Pounds)14,255,000), related to:
(a) abandonment of certain development projects no longer considered feasible
due to economic and competitive conditions;
(b) write down to estimated realisable value of certain businesses to be sold
or closed, primarily in Italy and Germany;
(c) provision for severance, demobilisation and loss on disposition of
operating assets in connection with the loss of the bid for the renewal of the
cleaning contract for the City of Buenos Aires, Argentina; and
(d) severance and other costs related to reorganisation of operations and
legal structure primarily in Italy, Sweden and the United Kingdom.
Approximately (Pounds)9,000,000 of the charge consists of cash costs related
to severance which are expected to be paid in 1998.
NOTE 23 ULTIMATE PARENT COMPANY
The Company's ultimate parent company is Old WMI incorporated in Delaware,
USA.
The only group of which the Company is a member and in which its results are
consolidated is that headed by Old WMI. The consolidated accounts of this
group are available to the public and may be obtained from Old WMI, 3003
Butterfield Road, Oak Brook, Illinois 60521, USA.
The Company has entered into the following contracts of significance with Old
WMI and its affiliates:
i) Third Amended and Restated International Development Agreement, dated 1
January 1993, which provides for the exercise of voting rights by Old WMI,
WTI and Rust in connection with the election of directors to the Board of
the Company and confers subscription rights on each of Rust and WTI to
maintain a 10 per cent. equity interest in the Company and on Old WMI to
maintain, together with its subsidiaries, an aggregate 55 per cent.
interest;
ii) First Amended and Restated International Business Opportunities Agreement
("IBOA"), dated 1 January 1993, whereby business opportunities throughout
the world are allocated amongst the Group and various other subsidiaries
of Old WMI. By an Amendment Agreement dated 10 July 1995, the IBOA was
amended with the approval of the Company's shareholders (other than Old
WMI, WTI and Rust), to modify the allocation of waste-to-energy business
opportunities outside North America, Germany and Italy.
A-48
NOTE 24 US ACCOUNTING PRINCIPLES
Goodwill
US GAAP requires that goodwill be amortised over its estimated useful life not
to exceed 40 years. As permitted under UK GAAP, the cost of goodwill is
written off directly to reserves in the year in which it arises. For the
purposes of the reconciliations shown below, goodwill acquired has been
capitalised and amortised over its estimated useful life of 40 years.
Profit attributable to shareholders, earnings per ordinary share and equity
shareholders' funds
The following is a summary of material adjustments to profit for the financial
year attributable to shareholders, to earnings per ordinary share and to
equity shareholders' funds which would be required if US GAAP had been
applied.
Group
------------------------
1997 1996
(Pounds)000 (Pounds)000
----------- -----------
Profit/(loss) for the financial year attributable
to shareholders 21,298 (66,199)
Adjustment of accumulated goodwill amortisation on
the exceptional charge and the write down of
investment 2,047 8,260
Amortisation of goodwill, net of related minority
interest (19,446) (24,075)
------- ---------
As adjusted to conform with US GAAP 3,899 (82,014)
======= =========
EARNINGS/(LOSS) PER ORDINARY SHARE
Earnings/(loss) per ordinary share as adjusted to
conform with US GAAP 1.0p (21.9)p
======= =========
EQUITY SHAREHOLDERS' FUNDS
Equity shareholders' funds 345,286 314,902
Increase for unamortised goodwill, net of related
minority interest 627,123 742,398
------- ---------
As adjusted to conform with US GAAP 972,409 1,057,300
======= =========
As a result of the sale of the shareholding in Wessex, as discussed in Note
10c, the Company recorded a loss before income tax of (Pounds)18,500,000 and
income taxes of (Pounds)19,030,000. In addition, the 1996 special charge
resulted in a before and after tax loss of (Pounds)127,735,000. These net
losses of (Pounds)165,265,000 were determined under UK GAAP. Under US GAAP,
the loss before income tax would be (Pounds)137,975,000, income taxes would
have been (Pounds)19,030,000, resulting in a net loss of (Pounds)157,005,000.
The difference between the UK GAAP and US GAAP accounting is all related to
the different treatment of historical goodwill amortisation discussed above.
In 1997 the Company recorded an exceptional charge of (Pounds)50,035,000 after
tax determined under UK GAAP. Under US GAAP the exceptional charge would have
been (Pounds)47,988,000 principally reflecting the different treatment of
historical goodwill discussed above.
A-49
Balance sheets
The following is a summary of certain balance sheet captions and the amounts
reported in the Group balance sheet, together with the related amounts as
adjusted to conform with US GAAP.
As reported in the As adjusted to
Group balance sheet conform with US GAAP
------------------------ ------------------------
1997 1996 1997 1996
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
----------- ----------- ----------- -----------
Tangible fixed assets 653,851 766,819 653,851 766,819
Fixed asset investments 6,349 10,442 6,349 10,442
Intangible fixed assets -- -- 748,285 866,642
Current assets 442,618 766,179 442,618 766,179
Creditors falling due
- --within one year (398,389) (529,071) (398,389) (529,071)
- --after one year (136,313) (453,358) (136,313) (453,358)
Provisions for liabilities
and charges (107,300) (125,935) (107,300) (125,935)
-------- -------- --------- ---------
Net assets 460,816 435,076 1,209,101 1,301,718
======== ======== ========= =========
Equity shareholders' funds 345,286 314,902 972,409 1,057,300
Minority interests 115,530 120,174 236,692 244,418
-------- -------- --------- ---------
Total capital employed 460,816 435,076 1,209,101 1,301,718
======== ======== ========= =========
NOTE 25 SUBSEQUENT EVENT
On 11 March 1998, Old WMI entered into a merger agreement with WMI of the
United States. The merger agreement, which is subject to approval by the
shareholders of both companies, provides that upon consummation of the merger
Old WMI's shareholders will receive 0.725 shares of WMI's common stock for
each share of Old WMI common stock held immediately prior to the merger. If
approved by the shareholders, the transaction is expected to close in the
latter part of 1998.
Consummation of the merger agreement may affect certain of the Group's rights
and obligations under contracts containing a change of control provision. The
Group has not yet completed its evaluation of all of its contracts, however,
it is believed that, with the exception of the following contracts, the merger
will not materially affect the Group's rights or obligations under any
significant contract.
The Facility contains certain change of control provisions which may be
triggered by the Old WMI merger. Should the transactions between Old WMI and
WMI be consummated as currently structured and be deemed to constitute a
change of control for the purposes of the Facility, then the lenders under the
Facility will have the right to terminate the agreement on three months'
notice following the change of control. As of 17 March 1998, the Group had
approximately (Pounds)43 million outstanding under the Facility. The Group
believes that its relationships with the banks comprising the lending
consortium are such that, even if the Old WMI transaction constitutes a change
of control, it will be able to negotiate satisfactory credit facilities to
replace the existing Facility in adequate amounts and on commercially
reasonable terms.
The Group's joint venture agreement with Wessex provides that under certain
circumstances generally involving an offer being made for all of the
outstanding shares of Old WMI, Wessex has a right to purchase the Group's
joint venture interest in Wessex Waste Management for the then fair market
value. The proposed merger agreement between Old WMI and WMI, if consummated
as currently structured, may constitute a triggering event under such
provision. In 1997, the Group had turnover of (Pounds)167.8 million and
operating profit (before minority interest) of (Pounds)21.9 million from the
joint venture. The Group's carrying value (including goodwill) was
(Pounds)212.6 million as of 31 December 1997. At this time, it is impossible
to determine whether such a transaction would result in a gain or a loss
because the price for such a sale is currently unknown.
A-50
PART 4
INFORMATION ON WMI
The following combined unaudited pro forma condensed financial statements are
based upon the historical financial statements of WMI and Old WMI. These
combined unaudited pro forma condensed financial statements give effect to the
Merger by combining the balance sheets and results of operations of WMI and
Old WMI using the pooling of interests method of accounting as if the
companies had been combined since their inception and as if Old WMI had issued
20 million shares of Old WMI common stock as of 31 March 1998. The combined
unaudited pro forma condensed financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have been achieved had the Merger
been consummated as of the beginning of the periods presented, nor is it
necessarily indicative of the future operating results or financial position
of WMI. The combined unaudited pro forma condensed financial information does
not give effect to any possible divestitures of business units required by the
US antitrust regulatory authorities or to any cost savings which may result
from the integration of WMI and Old WMI's operations, nor does such
information include the nonrecurring costs directly related to the Merger
which are expected to be included in operations of WMI within 12 months
following the Merger. Such nonrecurring costs have yet to be determined;
however, such costs are expected to be significant.
A-51
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
31 MARCH 1998
The following combined unaudited pro forma condensed balance sheet presents
the combined financial position of WMI and Old WMI as of 31 March 1998. Such
unaudited pro forma combined condensed balance sheet is based on the
historical balance sheets of WMI and Old WMI as of 31 March 1998, after giving
effect to the Merger using the pooling of interests method of accounting and
to the pro forma adjustments as described in the notes to combined pro forma
condensed financial statements.
Pro Forma Combined
WMI Old WMI Adjustments Pro Forma
------------ ------------- ---------------- --------------
(In thousands, except share and par value amounts)
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $ 46,260 $ 311,861 $ -- $ 358,121
Short-term investments -- 3,053 -- 3,053
Accounts receivable,
net 468,619 1,448,797 -- 1,917,416
Notes and other
receivables 56,321 26,577 -- 82,898
Deferred income taxes 46,196 -- -- 46,196
Costs and estimated
earnings in excess of
billings on
uncompleted contracts -- 158,964 -- 158,964
Prepaid expenses and
other 58,891 230,374 -- 289,265
------------ ------------- ----------- -------------
Total current assets 676,287 2,179,626 -- 2,855,913
Notes and other
receivables 22,951 100,044 -- 122,995
Property and equipment,
net 4,601,573 7,126,426 (10,922)(a) 11,617,441
(99,636)(b)
Excess of cost over net
assets of acquired
businesses, net 1,905,285 3,674,333 (66,464)(a) 5,513,154
Other intangible
assets, net 126,526 11,746 -- 138,272
Net assets of
continuing businesses
held for sale -- 137,995 -- 137,995
Other assets 256,783 633,830 (28,124)(c) 862,489
------------ ------------- ----------- -------------
Total assets $ 7,589,405 $ 13,864,000 $(205,146) $ 21,248,259
============ ============= =========== =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 196,735 $ 687,419 $ -- $ 884,154
Accrued liabilities 185,631 1,683,398 -- 1,869,029
Obligation to former
Wheelabrator
Technologies Inc.
shareholders -- 876,232 (614,400)(d) 261,832
Deferred revenues 69,484 236,339 -- 305,823
Current maturities of
long-term debt 46,527 1,025,685 -- 1,072,212
------------ ------------- ----------- -------------
Total current
liabilities 498,377 4,509,073 (614,400)(d) 4,393,050
Long-term debt, less
current maturities 3,584,887 5,398,132 -- 8,983,019
Deferred income taxes 323,320 216,797 (25,029)(a) 520,293
5,205 (b)
Closure, post-closure,
and other liabilities 407,699 1,645,663 (85,557)(b) 1,967,805
------------ ------------- ----------- -------------
Total liabilities 4,814,283 11,769,665 (719,781) 15,864,167
------------ ------------- ----------- -------------
Minority interest in
subsidiaries -- 739,442 -- 739,442
------------ ------------- ----------- -------------
A-52
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET (CONTINUED)
31 MARCH 1998
Pro Forma Combined
WMI Old WMI Adjustments Pro Forma
---------- ----------- ----------- -----------
(In thousands, except share and par value
amounts)
Commitments and contin-
gencies
STOCKHOLDERS' EQUITY:
Preferred stock:
WMI: $.01 par value;
10,000,000 shares
authorized; none issued -- -- -- --
Old WMI: $1 par value;
50,000,000 shares autho-
rized; none outstanding -- -- -- --
Common stock:
WMI: $.01 par value,
500,000,000 shares
authorized; historical
219,834,550 shares
(572,269,938 pro forma
shares) issued 2,198 -- 3,525 (d) 5,723
Old WMI: $1 par value;
1,500,000,000 shares au-
thorized; 507,101,744
shares issued -- 507,102 (507,102)(d) --
Additional paid-in capi-
tal 2,436,447 990,270 (11,250)(c) 3,267,468
(147,999)(d)
Retained earnings 374,459 1,730,516 (34,888)(a) 2,033,929
(19,284)(b)
(16,874)(c)
Accumulated other compre-
hensive income (37,498) -- (278,800)(e) (316,298)
Foreign currency transla-
tion adjustment -- (253,938) (17,469)(a) --
271,407 (c)
TREASURY STOCK:
WMI: 23,485 shares, at
cost (484) -- -- (484)
Old WMI: 40,983,967
shares, at cost -- (1,265,976) 1,265,976 (d) --
Restricted stock unearned
compensation -- (10,252) -- (10,252)
Employee stock benefit
trust; 10,886,361 Old
WMI shares, at market
(7,892,612 pro forma
shares) -- (335,436) -- (335,436)
Minimum pension liability -- (7,393) 7,393 (e) --
---------- ----------- --------- -----------
Total stockholders' eq-
uity 2,775,122 1,354,893 514,635 4,644,650
---------- ----------- --------- -----------
Total liabilities and
stockholders' equity $7,589,405 $13,864,000 $(205,146) $21,248,259
========== =========== ========= ===========
See notes to combined unaudited pro forma condensed financial statements.
A-53
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the three months ended 31 March 1998 was prepared based on the historical
statements of operations of WMI and Old WMI for such period after giving
effect to the Merger using the pooling of interests method of accounting and
to the pro forma adjustments described in the notes to combined unaudited pro
forma condensed financial statements.
Three Months Ended 31 March 1998
------------------------------------------------
Pro Forma Combined
WMI Old WMI Adjustments Pro Forma
-------- ---------- ----------- ----------
(In thousands, except per share amounts)
Operating revenues $769,440 $2,131,621 $ -- $2,901,061
-------- ---------- -------- ----------
COSTS AND EXPENSES:
Operating (exclusive of
depreciation and
amortization shown below) 397,492 1,621,985 3,785 (b) 1,757,707
(265,555)(f)
General and administrative 81,916 263,882 (217)(f) 345,581
Depreciation and
amortization 86,110 -- (424)(a) 351,458
265,772 (f)
Loss from continuing
operations held for sale,
net of minority interest -- 2,416 -- 2,416
-------- ---------- -------- ----------
565,518 1,888,283 3,361 2,457,162
-------- ---------- -------- ----------
Income from operations 203,922 243,338 (3,361) 443,899
-------- ---------- -------- ----------
OTHER INCOME (EXPENSES):
Interest expense (38,368) (115,574) -- (153,942)
Interest income 1,799 4,310 -- 6,109
Minority interests -- (25,302) -- (25,302)
Other income, net 34,251 64,196 (28,124)(c) 70,323
-------- ---------- -------- ----------
(2,318) (72,370) (28,124) (102,812)
-------- ---------- -------- ----------
Income before income taxes 201,604 170,968 (31,485) 341,087
Provision for income taxes 80,642 96,551 170 (a) 161,815
(4,298)(b)
(11,250)(c)
-------- ---------- -------- ----------
Net income $120,962 $ 74,417 $(16,107) $ 179,272
======== ========== ======== ==========
Basic earnings per common
share $ 0.55 $ 0.16 $ 0.33
======== ========== ==========
Diluted earnings per common
share $ 0.52 $ 0.16 $ 0.32
======== ========== ==========
Weighted average number of
common shares outstanding 219,201 455,096 (125,151)(g) 549,146
======== ========== ======== ==========
Weighted average number of
common and dilutive poten-
tial common shares out-
standing 244,250 455,296 (125,206)(g) 574,340
======== ========== ======== ==========
See notes to combined unaudited pro forma condensed financial statements.
A-54
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended 31 December 1997 was prepared based on the historical
statements of operations of WMI and Old WMI for such year after giving effect
to the Merger using the pooling of interests method of accounting and to the
pro forma adjustments described in the notes to combined unaudited pro forma
condensed financial statements.
Year Ended 31 December 1997
----------------------------------------------------
Pro Forma Combined
WMI Old WMI Adjustments Pro Forma
---------- ----------- ----------- -----------
(In thousands, except per share amounts)
Operating revenues $2,613,768 $ 9,188,582 $ -- $11,802,350
---------- ----------- ----------- -----------
COSTS AND EXPENSES:
Operating (exclusive of
depreciation and
amortization shown
below) 1,345,769 7,195,376 17,766 (b) 7,479,745
(1,079,166)(f)
General and
administrative 284,946 1,129,237 (939)(f) 1,413,244
Depreciation and
amortization 303,241 -- (990)(a) 1,382,356
1,080,105 (f)
Merger costs 109,411 -- -- 109,411
Unusual items 24,720 1,626,252 -- 1,650,972
Loss from continuing
operations held for
sale, net of minority
interest -- 9,930 -- 9,930
---------- ----------- ----------- -----------
2,068,087 9,960,795 16,776 12,045,658
---------- ----------- ----------- -----------
Income (loss) from
operations 545,681 (772,213) (16,776) (243,308)
---------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (104,261) (446,888) -- (551,149)
Interest income 7,634 37,580 -- 45,214
Minority interest -- (45,442) -- (45,442)
Other income, net 14,213 173,290 (61,331)(a) 126,172
---------- ----------- ----------- -----------
(82,414) (281,460) (61,331) (425,205)
---------- ----------- ----------- -----------
Income (loss) from
continuing operations
before income taxes 463,267 (1,053,673) (78,107) (668,513)
Provision for income
taxes 189,944 215,667 (25,199)(a) 361,464
(18,948)(b)
---------- ----------- ----------- -----------
Income (loss) from
continuing operations $ 273,323 $(1,269,340) $ (33,960) $(1,029,977)
========== =========== =========== ===========
Basic earnings (loss)
per common share from
continuing operations $ 1.31 $ (2.72) $ (1.88)
========== =========== ===========
Diluted earnings (loss)
per common share from
continuing operations $ 1.26 $ (2.72) $ (1.88)
========== =========== ===========
Weighted average number
of common shares
outstanding 208,246 466,601 (128,315)(g) 546,532
========== =========== =========== ===========
Weighted average number
of common and dilutive
potential common
shares outstanding 233,371 466,601 (153,440)(g) 546,532
========== =========== =========== ===========
See notes to combined unaudited pro forma condensed financial statements.
A-55
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended 31 December 1996 was prepared based on the historical
statements of operations of WMI and Old WMI for such year after giving effect
to the Merger using the pooling of interests method of accounting and to the
pro forma adjustments described in the notes to combined unaudited pro forma
condensed financial statements.
Year Ended 31 December 1996
---------------------------------------------------
Pro Forma Combined
WMI Old WMI Adjustments Pro Forma
---------- ---------- ----------- -----------
(In thousands, except per share amounts)
Operating revenues $1,649,131 $9,225,636 $ -- $10,874,767
---------- ---------- ----------- -----------
COSTS AND EXPENSES:
Operating (exclusive of
depreciation and
amortization shown
below) 881,401 6,660,766 21,135 (b) 6,498,708
(1,064,594)(f)
General and
administrative 200,101 1,095,459 (1,089)(f) 1,294,471
Depreciation and
amortization 191,044 -- 1,065,683 (f) 1,256,727
Merger costs 126,626 -- -- 126,626
Unusual items 63,800 435,464 -- 499,264
Income from continuing
operations held for
sale, net of minority
interest -- (315) -- (315)
---------- ---------- ----------- -----------
1,462,972 8,191,374 21,135 9,675,481
---------- ---------- ----------- -----------
Income from operations 186,159 1,034,262 (21,135) 1,199,286
---------- ---------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (60,497) (462,424) -- (522,921)
Interest income 6,699 27,904 -- 34,603
Minority interest -- (41,289) -- (41,289)
Other income, net 6,376 102,014 -- 108,390
---------- ---------- ----------- -----------
(47,422) (373,795) -- (421,217)
---------- ---------- ----------- -----------
Income from continuing
operations before income
taxes 138,737 660,467 (21,135) 778,069
Provision for income
taxes 70,398 436,473 (20,255)(b) 486,616
---------- ---------- ----------- -----------
Income from continuing
operations $ 68,339 $ 223,994 $ (880) $ 291,453
========== ========== =========== ===========
Basic earnings per common
share from continuing
operations $ 0.39 $ 0.46 $ 0.55
========== ========== ===========
Diluted earnings per
common share from
continuing operations $ 0.37 $ 0.46 $ 0.54
========== ========== ===========
Weighted average number
of common shares
outstanding 173,993 489,171 (134,522)(g) 528,642
========== ========== =========== ===========
Weighted average number
of common and dilutive
potential common shares
outstanding 182,680 490,029 (134,758)(g) 537,951
========== ========== =========== ===========
See notes to combined unaudited pro forma condensed financial statements.
A-56
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of operations
for the year ended 31 December 1995 was prepared based on the historical
statements of operations of WMI and Old WMI for such year after giving effect
to the Merger using the pooling of interests method of accounting and to the
pro forma adjustments described in the notes to combined unaudited pro forma
condensed financial statements.
Year Ended 31 December 1995
---------------------------------------------------
Pro Forma Combined
WMI Old WMI Adjustments Pro Forma
---------- ---------- ----------- -----------
(In thousands, except per share amounts)
Operating revenues $1,216,082 $9,100,225 $ -- $10,316,307
---------- ---------- ----------- -----------
COSTS AND EXPENSES:
Operating (exclusive of
depreciation and
amortization shown
below) 672,117 6,514,932 22,924 (b) 6,176,196
(1,033,777)(f)
General and
administrative 169,686 1,091,747 (1,241)(f) 1,260,192
Depreciation and
amortization 143,878 -- 1,035,018 (f) 1,178,896
Merger costs 26,539 -- -- 26,539
Unusual items 4,733 389,359 -- 394,092
Income from continuing
operations held for
sale, net of minority
interest -- (25,110) -- (25,110)
---------- ---------- ----------- -----------
1,016,953 7,970,928 22,924 9,010,805
---------- ---------- ----------- -----------
Income from operations 199,129 1,129,297 (22,924) 1,305,502
---------- ---------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense:
Nonrecurring (10,994) -- -- (10,994)
Other (58,619) (463,861) -- (522,480)
Interest income 6,682 34,883 -- 41,565
Minority interest -- (81,367) -- (81,367)
Other income, net 4,891 252,695 -- 257,586
---------- ---------- ----------- -----------
(58,040) (257,650) -- (315,690)
---------- ---------- ----------- -----------
Income from continuing
operations before income
taxes 141,089 871,647 (22,924) 989,812
Provision for income
taxes 60,313 451,741 (19,169)(b) 492,885
---------- ---------- ----------- -----------
Income from continuing
operations $ 80,776 $ 419,906 $ (3,755) $ 496,927
========== ========== =========== ===========
Basic earnings per common
share from continuing
operations $ 0.56 $ 0.86 $ 1.00
========== ========== ===========
Diluted earnings per
common share from
continuing operations $ 0.54 $ 0.86 $ 0.99
========== ========== ===========
Weighted average number
of common shares
outstanding 143,346 485,346 (133,470)(g) 495,222
========== ========== =========== ===========
Weighted average number
of common and dilutive
potential common shares
outstanding 150,575 500,312 (137,586)(g) 513,301
========== ========== =========== ===========
See notes to combined unaudited pro forma condensed financial statements.
A-57
NOTES TO COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The combined unaudited pro forma condensed financial statements assume the
issuance of WMI Common Stock in exchange for all outstanding Old WMI Common
Stock. Such financial statements also assume that the Merger will be accounted
for using the pooling of interests method of accounting pursuant to Opinion
No. 16 of the Accounting Principles Board. The pooling of interests method of
accounting assumes that the combining companies have been merged from their
inception, and the historical financial statements for periods prior to
consummation of the Merger are restated as though the companies had been
combined from their inception.
Pursuant to the rules and regulations of the US Securities and Exchange
Commission, the combined unaudited pro forma condensed statements of
operations exclude the results of operations associated with discontinued
businesses, extraordinary items and cumulative effects of accounting changes.
The combined unaudited pro forma condensed financial statements do not give
effect to any cost savings which may result from the integration of WMI's and
Old WMI's operations, nor do they include the nonrecurring costs directly
related to the Merger which are expected to be included in operations of WMI
within twelve months succeeding the Merger. Such nonrecurring costs have yet
to be determined; however, such costs are expected to be significant.
Certain reclassifications have been made to the historical financial
statements of WMI and Old WMI to conform to the pro forma presentation. Such
reclassifications are not material to the combined unaudited pro forma
condensed financial statements
2. PRO FORMA ADJUSTMENTS
(a) In June 1997, Old WMI sold a majority of its Canadian solid waste
businesses to WMI and, as a result of such sale, recorded a pre-tax gain of
approximately $61,331,000. WMI accounted for this transaction as a purchase
business combination and allocated the purchase price to the assets acquired
and liabilities assumed accordingly. Assuming that WMI and Old WMI had been
combined since their inception, the gain recorded by Old WMI in 1997 has been
eliminated and the basis recorded by WMI for assets acquired and liabilities
assumed has been restored to Old WMI's historical book value. In addition, the
Combined Unaudited Pro Forma Condensed Statement of Operations for the year
ended 31 December 1997 and the three months ended 31 March 1998 have been
adjusted for the effect of lower amortization as a result of restoring the
book basis of the assets acquired and liabilities assumed by WMI to the
historical book value of Old WMI.
(b) Adjustments have been made to conform the accounting for certain landfill
related issues as if the companies had been combined since their inception.
The net impact of those adjustments on income (loss) from continuing
operations was an increase of $1,182,000 and $513,000 for the year ended 31
December 1997 and the three months ended 31 March 1998, respectively, and a
decrease of $3,755,000 and $880,000 for the years ended 31 December 1995 and
1996, respectively.
(c) In November 1997, WMI purchased a 49 per cent. limited partner interest in
LJ Water Partners, L.P. ("the Limited Partnership"), which was formed for the
purpose of acquiring shares of Old WMI Common Stock on the open market. The
Limited Partnership purchased shares of Old WMI Common Stock during November
1997 and sold substantially all of such shares in March 1998. For the three
months ended 31 March 1998, WMI recorded other income of $28,124,000 for its
equity in the earnings of the Limited Partnership. An adjustment has been made
to reverse WMI's equity in the earnings of the Limited Partnership to account
for the transaction as if the companies had been combined since their
inception.
A-58
(d) The stockholders' equity accounts have been adjusted to reflect the
assumed issuance of 352,435,388 shares of WMI Common Stock for the 486,117,777
shares of Old WMI Common Stock issued and outstanding based on an exchange
ratio of 0.725 of a share of WMI Common Stock for each outstanding share of
Old WMI Common Stock. The assumed issuance of shares considers the 507,101,744
shares of Old WMI Common Stock issued, the 40,983,967 shares of Old WMI Common
Stock held in treasury that will be cancelled upon consummation of the Merger,
and the 20 million shares of Old WMI Common Stock expected to be issued to
reverse certain share repurchases effected by Old WMI. Assuming that 20
million shares of Old WMI Common Stock are issued through a public sale at an
offering price of $32 per share and net issuance costs of 4 per cent., net
proceeds would be $614,400,000, which would be used to reduce the obligation
to former WTI stockholders. See Note 3 below. The actual number of shares of
WMI Common Stock to be issued pursuant to the Merger will be based upon the
number of shares of Old WMI Common Stock issued and outstanding immediately
prior to the consummation of the Merger.
(e) Adjustments have been made to reclassify Old WMI's foreign currency
translation adjustment and minimum pension liability to accumulated other
comprehensive income to conform to the presentation of WMI as if the companies
had been combined since their inception.
(f) Adjustments have been made to reclassify Old WMI's depreciation and
amortization from operating expenses and general and administrative expenses
to a separate line item to conform to the presentation of WMI as if the
companies had been combined since their inception.
(g) Pro forma basic earnings per common share for each period are based on the
combined weighted average number of common shares outstanding, after giving
effect to the issuance of 0.725 of a share of WMI Common Stock for each share
of Old WMI Common Stock. Pro forma diluted earnings per common share for each
period are based on the combined weighted average number of common and
dilutive potential common shares outstanding, after giving effect to the
issuance of 0.725 of a share of WMI Common Stock for each outstanding share of
Old WMI Common Stock. The combined weighted average shares outstanding used in
the pro forma basic and diluted earnings per share calculations are net of the
shares of Old WMI Common Stock that are held by the Old WMI employee stock
benefit trust and are treated similar to treasury shares for earnings per
share calculation purposes. The combined pro forma diluted earnings per share
for the year ended 31 December 1995 and the three months ended 31 March 1998
have been calculated assuming conversion of certain convertible debt, and
therefore interest, net of taxes, $9,100,000 and $5,014,000, respectively, has
been added back to income from continuing operations for this calculation. The
WMI diluted earnings per common share for the year ended 31 December 1997
includes 25,125,000 dilutive potential common shares that become antidilutive
for purposes of calculating the combined pro forma diluted earnings per common
share.
3. PRO FORMA EFFECT OF OLD WMI EQUITY OFFERING ON RESULTS OF OPERATIONS
As previously discussed, in order for the Merger to qualify as a pooling of
interests, approximately 20 million shares of Old WMI Common Stock must be
issued to reverse certain share repurchases effected by Old WMI, Assuming that
20 million shares were issued at an offering price of $32 per share and net
issuance costs of 4 per cent., net proceeds to Old WMI would be $614,400,000.
The proceeds from the sale of stock, after payment of dividends on such stock
based on the historical dividend rate, are assumed to be used to reduce
outstanding indebtedness at an average borrowing rate of 6 per cent. The
applicable tax rate is assumed to be 42 per cent. The following table
summarizes the pro forma effect of the equity offering as if the offering has
occurred at the beginning of the periods presented in the Combined Unaudited
Pro Forma Condensed Statements of Operations:
A-59
Three Months
Year Ended 31 December Ended 31 March
----------------------------- --------------
1995 1996 1997 1998
-------- -------- ----------- --------------
(In thousands, except per share amounts)
Pro forma income (loss) from
continuing operations $496,927 $291,453 $(1,029,977) $179,272
Decrease in interest expense as
a result of equity offering,
net of tax benefit 20,964 20,943 20,915 5,316
-------- -------- ----------- --------
Pro forma income (loss) from
continuing operations after
equity offering $517,891 $312,396 $(1,009,062) $184,588
======== ======== =========== ========
Pro forma basic earnings per
common share from continuing
operations after equity
offering $ 1.02 $ 0.58 $ (1.80) $ 0.33
======== ======== =========== ========
Pro forma diluted earnings per
common share from continuing
operations after equity
offering $ 1.00 $ 0.57 $ (1.80) $ 0.32
======== ======== =========== ========
Weighted average number of
common shares outstanding after
equity offering 509,722 543,142 561,032 563,646
======== ======== =========== ========
Weighted average number of
common and potential dilutive
shares outstanding after equity
offering 527,801 552,451 561,032 588,840
======== ======== =========== ========
A-60
PART 5
TERMS AND CONDITIONS
The Proposal is conditional upon the Scheme becoming unconditional and
becoming effective by not later than 31 December 1998 or such later date as
the Company and WMII may agree and the Court may approve.
1. The Scheme will become effective following:
(a) the approval by a majority in number, representing 75 per cent. in value,
of the Scheme Shares held by those present and voting, either in person or
by proxy, at the Court Meeting or at any adjournment thereof;
(b) the special resolution set out on pages 80 and 81 of this document being
passed at the Extraordinary General Meeting or at any adjournment thereof;
(c) The Scheme being sanctioned by the Court, with or without modification as
provided for in the Scheme, and confirmation of the reduction of capital
involved therein by the Court, and an office copy of the order of the
Court being delivered for registration to the Registrar of Companies in
England and Wales (and registered by him in relation to the reduction of
capital).
2. The Company and WMII have agreed that, subject as stated in paragraph 3
below, the Proposal will also be conditional upon the following conditions
being satisfied or waived and, accordingly, the necessary action to make the
Scheme effective will not be taken unless such conditions have been so
satisfied or waived by WMII:
(a) no government or governmental, quasi-governmental, supranational,
statutory or regulatory body, trade agency, court or other body or person
in any jurisdiction having instituted, implemented or threatened any
action, proceedings, suit, investigation or enquiry, or having enacted,
made or proposed any statute, regulation or order or taken any measures or
other steps, that would or might make the Scheme or any part of it or the
issue of the Transaction Statement, void, unenforceable or illegal, or
directly or indirectly restrain, restrict, prohibit, delay or otherwise
interfere in a material way with the implementation of, or impose material
additional conditions or obligations with respect to, or otherwise
challenge or in a material way hinder, the Scheme or any part of it or the
Transaction Statement, or (save as fairly disclosed to Old WMI or any of
its subsidiaries other than any member of the Group prior to 29 June 1998)
otherwise materially and adversely affect the business, profits or
prospects of the Group taken as a whole;
(b) all authorisations, orders, grants, recognitions, confirmations, consents,
clearances, permissions and approvals ("authorisations") and
determinations which are material in the context of the Group taken as a
whole or the Scheme necessary or appropriate in any jurisdiction for or in
respect of the Scheme and each part of it being obtained in terms and in a
form reasonably satisfactory to WMII from any persons or bodies
(including, without limitation, any government or governmental, quasi-
governmental, supranational, statutory or regulatory body, trade agency or
court) with whom any member of the Group has entered into contractual
arrangements (other than any such authorisation or determination required
only from Old WMI or any company controlled in relation to any such
authorisation or determination by Old WMI, if any) and such authorisations
and determinations together with all authorisations and determinations
(other than any such authorisation or determination required only from Old
WMI or any company controlled in relation to any such authorisation or
determination by Old WMI, if any) which are material in the context of the
Group taken as a whole or the Scheme necessary or appropriate for any
member of the Group to carry on its business remaining in full force and
effect and there being no indication of any intention to revoke, suspend,
restrict, modify or not renew any of the same and all appropriate waiting
periods under any applicable legislation and regulations in any
jurisdiction which are material in the context of the Group taken as a
whole or the Scheme and all necessary statutory or regulatory obligations
in any jurisdiction which are material in the context of the Group taken
as a whole or the Scheme having been complied with;
A-61
(c) there being no provision of any arrangement, agreement, licence or other
instrument to which any member of the Group is a party or by or to which
any member of the Group or any part of its assets may be bound, entitled
or subject which would or might, as a result of the Scheme or any part of
it, to an extent which is material in the context of the Group taken as a
whole or the Scheme, result in (i) any moneys borrowed or other
indebtedness (actual or contingent) of any member of the Group being or
becoming repayable or capable of being declared repayable prior to its
stated maturity or the ability of any such member to borrow moneys or
incur any indebtedness being withdrawn or inhibited; (ii) any such
arrangement, agreement, licence or instrument being breached, terminated
or materially modified or any onerous obligation or liability arising or
any material action being taken or right to take the same arising
thereunder; or (iii) the interests of any member of the Group with any
person under any such arrangement, agreement, licence or instrument or the
interests or business of any such member in or with any other person or
body (or any arrangements relating to such interests or business) being
terminated, modified or materially adversely affected or any right to so
terminate, modify or affect arising, and there being no indication of any
intention to so terminate, modify or affect; or (iv) the respective
financial or trading position or prospects of any such member being
prejudiced or adversely affected; and
(d) since 31 March 1998 and save for any matter fairly disclosed to Old WMI or
any of its subsidiaries other than any member of the Group prior to 29
June 1998 (i) no adverse change or deterioration having occurred in the
business, assets, financial or trading position or profits or prospects of
the Company or any other member of the Group which is material in the
context of the Group taken as a whole; (ii) no litigation or arbitration,
prosecution or other legal proceedings having been instituted or
threatened by or against or otherwise involving any member of the Group
and no investigation by any relevant authority against or in respect of
any member of the Group having been threatened in writing, announced or
instituted or remaining outstanding by, against or in respect of any such
member and which in any such case might materially and adversely affect
the Group taken as a whole; and (iii) no contingent or other liability
having arisen which is likely materially and adversely to affect the Group
taken as a whole.
3. WMII reserves the right, in its absolute discretion, to waive all or any of
the conditions in paragraph 2 above, in whole or in part.
WMII shall be under no obligation to waive or treat as fulfilled any of the
above conditions by a date earlier than the latest date specified above for
the fulfilment thereof notwithstanding that any such condition or the other
conditions of the Proposal may at such earlier date have been fulfilled and
that there are at such earlier date no circumstances indicating that any of
such conditions may not be capable of fulfilment.
A-62
PART 6
TAXATION INFORMATION FOR UK AND US HOLDERS OF ORDINARY SHARES OR ADRS
1. UNITED KINGDOM TAXATION
The following paragraphs, which are intended as a general guide only, are
based on current legislation and Inland Revenue practice. They summarise
certain limited aspects of the UK taxation treatment of the Scheme, as they
relate (except insofar as express reference is made to the treatment of non-UK
residents) to the holders of Scheme Shares who are the beneficial owners of
their Scheme Shares, who hold their Scheme Shares as an investment, and who
are resident in the UK for tax purposes. SHAREHOLDERS WHO ARE IN ANY DOUBT AS
TO THEIR TAXATION POSITION OR WHO ARE SUBJECT TO TAXATION IN ANY JURISDICTION
OTHER THAN THE UK OR THE US, SHOULD CONSULT AN APPROPRIATE PROFESSIONAL
ADVISER.
(A) TAXATION OF CHARGEABLE GAINS
Liability to UK taxation on chargeable gains ("CGT") will depend on the
particular circumstances of holders of Scheme Shares. The receipt by a holder
of Scheme Shares of cash pursuant to the Scheme, will constitute a disposal of
his Scheme Shares for CGT purposes. Such a disposal may, depending on that
shareholder's individual circumstances, give rise to a liability to CGT.
Shareholders whose base cost for UK capital gains purposes, ignoring
indexation, exceeds the consideration received will realise an allowable loss
which can be set against chargeable gains of that Shareholder in the same or
any later tax year.
Non-resident holders of Scheme Shares or ADRs
Holders of Scheme Shares or ADRs who are not resident or ordinarily resident
for tax purposes in the UK may be liable for UK tax on capital gains realised
on the disposal of their Scheme Shares or ADRs if such securities are used,
held or acquired for the purpose of a trade, profession or vocation carried on
in the UK through a branch or agency or for the purposes of such branch or
agency. Such holders may be subject to foreign taxation on any gain under
local law.
Such holders should also note that if they have earlier been UK resident for
tax purposes and their disposal of Scheme Shares or ADRs is of shares or ADRs
that they held when they ceased to be a UK resident, and they then resume
residence in the UK within five years of the year of their departure, gains or
losses arising on the disposal of the Scheme Shares or ADRs during the period
of non-residence will be treated as accruing in the year of resumption of
residence in the UK (thereby being potentially taxable or allowable).
(B) SHARES ACQUIRED UNDER SHARE OPTION PLANS
Special tax provisions may apply to holders of Scheme Shares who have acquired
or acquire their Scheme Shares by exercising options under the Share Option
Plans, including provisions imposing a charge to income tax.
(C) STAMP DUTY AND STAMP DUTY RESERVE TAX ("SDRT")
No stamp duty or SDRT will be payable by holders of Scheme Shares as a result
of the Scheme.
2. UNITED STATES FEDERAL INCOME TAXATION
(A) US HOLDERS
The following paragraphs address certain United States federal income tax
consequences applicable to Scheme Shareholders and ADR holders that are US
Holders. The term "US Holder" means a beneficial owner of Scheme Shares or
ADRs that is for US federal income tax purposes (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized under the laws of the US or any political subdivision thereof or
therein, (iii) any estate or trust defined in Section 7701(a)(30) of the
Internal Revenue Code of 1986, as amended (the "IRC"), or (iv) a person whose
worldwide income or gain is otherwise taxable
A-63
in the United States on a net income basis. This summary is based on the IRC,
administrative pronouncements, judicial decisions and regulations, changes to
any of which (which may be retroactive) may affect the tax consequences
described herein. This summary assumes that the Scheme Shares and ADRs have
been held as capital assets. It does not address the tax treatment of
individuals who have received Scheme Shares and ADRs in connection with
employment such as by the exercise of options granted to employees, and it is
not addressed to holders owning at least 10 per cent. (after applying the
constructive ownership rules of Section 958(b) of the IRC) of the voting power
of the Company. This summary also assumes that the Company is not and has
never been a passive foreign investment company for US federal income tax
purposes. This summary does not discuss all tax consequences that may be
relevant to a US Holder of Scheme Shares or ADRs in the light of such holder's
particular circumstances or to holders subject to special rules, such as
certain financial institutions, regulated investment companies, insurance
companies, dealers in securities, exempt organizations, US Holders whose
functional currency is not the United States dollar or US Holders engaged in
straddle or "hedging" transactions.
The cancellation by a US Holder of ADRs so that they become Ordinary Shares is
not a taxable event.
In general, a US Holder of Scheme Shares or ADRs will, for United States
federal income tax purposes, recognize a gain or loss equal to the difference
between such holder's adjusted tax basis in the Scheme Shares or ADRs
cancelled and the amount of cash received in exchange therefor. Such gain or
loss will generally be capital gain or loss. In general, any capital loss
would be currently deductible only to the extent of the holder's capital gains
plus, in the case of a non-corporate holder, ordinary income of up to $3,000
(assuming a joint tax return is filed). A corporation may carryback unused
capital losses to the preceding three years and carryforward unused capital
losses to the next five years; an individual may carryforward such losses
indefinitely. In addition, an accrual basis holder of Scheme Shares or ADRs
that does not elect to be treated as a cash basis taxpayer pursuant to the
foreign currency exchange regulations may have a foreign currency exchange
gain or loss for United States federal income tax purposes because of
differences between the US dollars/pounds sterling exchange rates prevailing
on the Effective Date and on the date of payment. Any such currency gain or
loss would be treated as ordinary income or loss and would be in addition to
the gain or loss realised by the holder as a result of the Scheme.
(B) NON-US HOLDERS
Any gain realised by a person other than a US Holder (a "Non-US Holder") on
the sale of Scheme Shares or ADRs generally will not be subject to US federal
income taxation, unless (i) such gain is effectively connected with the
conduct by the Non-US Holder of a US trade or business, (ii) the Non-US Holder
is present in the US for 183 days or more in the year of disposition and
certain other requirements are met, or (iii) the Non-US Holder is subject to
US tax law provisions applicable to certain US expatriates.
The foregoing discussion is for general information only and is intended to be
a summary of the principal United States federal income tax considerations of
the Proposal. EACH UNITED STATES HOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISER CONCERNING THE UNITED STATES FEDERAL AND APPLICABLE STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF THE PROPOSAL.
A-64
PART 7
ADDITIONAL INFORMATION
1. RESPONSIBILITY
With the exception of the expressions of opinion and the recommendation of the
Independent Directors contained in the letter from Sir William Barlow set out
on pages 7 to 10 (for which the Independent Directors alone accept
responsibility) the Directors, whose names are set out below, accept
responsibility for the information contained in this document relating to the
Company, the Directors and their immediate families. To the best of the
knowledge and belief of the Directors (each of whom has taken all reasonable
care to ensure that such is the case) the information contained in this
document for which they accept responsibility is in accordance with the facts
and does not omit anything likely to affect the import of such information.
The officers and directors of WMI whose names are set out below accept
responsibility for the information contained in this document (other than that
relating to the Company, the Directors and their immediate families). To the
best of the knowledge and belief of such officers and directors (each of whom
has taken all reasonable care to ensure that such is the case) the information
contained in this document for which they accept responsibility is in
accordance with the facts and does not omit anything likely to affect the
import of such information.
2. DIRECTORS AND OFFICERS
(A) The names of the Directors and their functions are set out below:
EXECUTIVE DIRECTORS FUNCTION
Edwin G.
Falkman Chairman
Bo G.A.
Gabrielson Chief Executive
Peter B.
Dessing Finance Director
Donald F. Flynn
Joseph M.
Holsten
Robert "Steve'
Miller
NON-EXECUTIVE
Sir William
Barlow
Jan Ekman
Giorgio Porta
Dr. Manfred
Scholz
(B) The officers and directors of WMI who accept responsibility for the
information contained in this document (other than relating to the
Company, the Directors and their immediate families) and their functions
are set out below:
DIRECTORS FUNCTION
Robert "Steve'
Miller Chairman
John Drury Chief Executive Officer
Rodney Proto President and Chief Operating Officer
Earl DeFrates Chief Financial Officer
Donald Chappel Senior Vice President, Operations/Administration
Gregory
Sangalis Senior Vice President, General Counsel and Secretary
A-65
3.MARKET QUOTATIONS
The following table sets out the middle market quotation for Ordinary Shares
as derived from the London Stock Exchange Daily Official List for the first
dealing day for each of the six months immediately prior to the date of this
document, on 26 June 1998 (being the last dealing day prior to the
announcement of the Proposal) and on . September 1998 (being the latest
practicable date prior to the posting of this document):
Pence
2 March 1998 183.5p
1 April 1998 227.5p
1 May 1998 228.0p
1 June 1998 242.0p
26 June 1998 247.5p
1 July 1998 329.0p
3 August 1998 331.0p
. September 1998 . p
. September 1998 . p
4. DISCLOSURE OF INTERESTS AND DEALINGS
(A) For the purposes of this paragraph 4, "disclosure period" means the period
commencing on 29 June 1997 (being the date 12 months prior to the date on
which the Proposal was announced) and ending on . September 1998 (being
the latest practicable date prior to the posting of this document) and
"offer disclosure period" means the period commencing on 29 June 1998
(being the date on which the Proposal was announced) and ending on .
September 1998 (being the latest practicable date prior to the posting of
this document).
References in this paragraph 4 to:
(i) "relevant securities" are to Ordinary Shares and securities convertible
into, rights to subscribe for, options (including traded options) in
respect of and derivatives referenced to, Ordinary Shares;
(ii) an "associate" are to:
(a) subsidiaries and associated companies of WMI or the Company and
companies of which any such subsidiaries or associated companies
are associated companies;
(b) banks and financial and other professional advisers (including
stockbrokers) to any company covered in (ii)(a) above, including
persons controlling, controlled by or under the same control as,
such banks or financial or other professional advisers;
(c) the directors of any company covered in (ii)(a) above (together in
each case with their close relatives and related trusts); and
(d) the pension funds of any company covered in (ii)(a) above.
Ownership or control of 20 per cent. or more of the equity share
capital of a company is regarded as the test of associated company
status and "control" means a holding, or aggregate holdings, of shares
carrying 30 per cent. or more of the voting rights attributable to the
share capital of the company which are currently exercisable at a
general meeting, irrespective of whether the holding gives de facto
control.
(iii) a "bank" does not apply to a bank whose sole relationship with any
company covered in (ii)(a) above is the provision of normal commercial
banking services or such activities in connection with the Proposal as
confirming that cash is available, handling acceptances and other
registration work; and
A-66
iv) "arrangement" includes any indemnity or option arrangement and any
agreement or understanding, formal or informal, of whatever nature
which may be an inducement to deal or refrain from dealing.
(B) In the Company
(i) As at . September 1998 (the latest practicable date prior to the
posting of this document), the interests of the Directors in the share
capital of the Company (all of which are beneficial unless otherwise
stated) and as shown in the register required to be kept under section
325 of the Act, were as follows:
Exercise
Number of Number of price per Original
Ordinary Ordinary Shares Ordinary exercise period
Shares subject to option Date of grant Share (p) (from--to)
--------- ----------------- ------------- --------- ---------------
Sir William Bar-
low 3,100 25,000 18 Mar 92 526.5 Mar 93--Mar 99
P.B. Dessing (see
also the addi-
tional
options in the
table below) 14,000 100,000 10 Mar 97 234.0 Mar 98--Mar 04
100,000 16 Mar 98 201.9 Mar 99--Mar 05
J. Ekman -- 25,000 31 Mar 92 526.5 Mar 93--Mar 02
E.G. Falkman 5,000 300,000 31 Mar 92 526.5 Mar 93--Mar 99
143,397 27 Apr 93 588.4 Apr 94--Apr 00
140,625 26 Apr 94 536.6 Apr 95--Apr 01
155,000 25 Apr 95 261.8 Apr 96--Apr 02
160,000 1 May 96 365.0 May 97--May 03
200,000 10 Mar 97 234.0 Mar 98--Mar 04
200,000 16 Mar 98 201.9 Mar 99--Mar 05
D.F. Flynn 100,000 200,000 31 Mar 92 526.5 Mar 93--Mar 02
B.G. Gabrielson 7,100 25,000 31 Mar 92 526.5 Mar 93--Mar 99
28,042 27 Apr 93 588.4 Apr 94--Apr 00
42,188 26 Apr 94 536.6 Apr 95--Apr 01
46,500 25 Apr 95 261.8 Apr 96--Apr 02
15,000 25 Jul 95 296.0 Jul 96--Jul 02
80,000 1 May 96 365.0 May 97--May 03
200,000 10 Mar 97 234.0 Mar 98--Mar 04
200,000 16 Mar 98 201.9 Mar 99--Mar 05
J.M. Holsten 2,000 100,000 31 Mar 92 526.5 Mar 93--Mar 99
60,000 27 Apr 93 588.4 Apr 94--Apr 00
140,000 25 Jul 95 296.0 Jul 96--Jul 02
160,000 1 May 96 365.0 May 97--May 03
G. Porta -- 25,000 31 Mar 92 526.5 Mar 93--Mar 02
Dr. M. Scholz -- 25,000 27 Apr 93 588.4 Apr 94--Apr 03
As a result of the Merger, options (including the additional options of
P.B. Dessing referred to below) which were granted before 16 March 1998
became exercisable on 16 July 1998 (if their exercise period had not
yet commenced) and will lapse, if they have not been previously
exercised, on 16 July 1999, and upon consummation of the Merger a
holder of such options acquired the right to exchange such options for
a cash sum per option equal to the difference between (a) the average
price of the Ordinary Shares for the five trading days preceding the
date on which the right is exercised (or, if higher, 329.4p) and (b)
the exercise price of the option. Options granted on or after 16 March
1998 are unaffected by the Merger.
A-67
Prior to his relocation to the London office of the Company, Mr Dessing
was employed by Waste Management Nederland BV in the Netherlands. He was
granted options over Ordinary Shares pursuant to an Annex to the Waste
Management International plc Share Option Plan approved by the Share
Option and Compensation Committee on 25 April 1995. With respect to such
options, Waste Management Nederland BV lent Mr Dessing a total of NLG
78,944 (approximately (Pounds)23,600) to facilitate his purchase of the
options as they vested. The relevant amount will be repaid to the
company at the time the options are exercised. No interest is levied by
the company with respect to this loan. Details of these options are as
follows:
Number of Ordinary Exercise price per
Date of Grant Shares subject to option Original exercise period (from -- to) Ordinary Share (p)
------------- ------------------------ ------------------------------------- ------------------
31 March 1992 25,000 Tranche 1: Mar 93--Mar 98 lapsed
Tranche 2: Mar 94--Mar 99 539.0
Tranche 3: Mar 95--Mar 00 262.4
27 April 1993 20,000 Tranche 1: Apr 94--Apr 99 538.0
Tranche 2: Apr 95--Apr 00 260.4
Tranche 3: Apr 96--Apr 01 359.2
26 April 1994 20,000 Tranche 1: Apr 95--Apr 00 261.8
Tranche 2: Apr 96--Apr 01 356.0
Tranche 3: Apr 97--Apr 02 240.2
25 April 1995 20,000 Tranche 1: Apr 96--Apr 01 350.6
Tranche 2: Apr 97--Apr 02 237.7
Tranche 3: Apr 98--Apr 03 228.2
1 May 1996 25,000 Tranche 1: May 97--May 02 244.7
Tranche 2: May 98--May 03 228.0
Tranche 3: May 99--May 04 329.4
(ii) The following Directors have dealt for value in Ordinary Shares during
the disclosure period.
Nature of Number of Number of
Date Transaction Ordinary Shares ADRs Price
--------- ----------- --------------- --------- ------------
P.B.
Dessing 5 Nov 97 Purchase -- 2,000 US$6.63
16 Mar 98 Purchase -- 2,100 US$7.25
1 Apr 98 Purchase -- 2,900 US$7.25
B.G.
Gabrielson 13 Nov 97 Purchase 3,000 -- (Pounds)2.21
(iii) As at . September 1998 (the latest practicable date prior to the
posting of this document), the WMI Group was beneficially interested
in 300 million Ordinary Shares.
(iv) As at . September 1998 (the latest practicable date prior to the
posting of this document), the interests of the directors of WMI and
the directors of WMII in the share capital of the Company (all of
which are beneficial unless otherwise stated), were as follows:
Number of
ADRs
---------
Robert
P.
Damico 6,000
(v) Save as disclosed in this paragraph 4, none of the Directors or the
directors of WMI or of WMII, or any member of their immediate families
or related trusts owns, controls or is interested in any relevant
securities, nor has any such person dealt for value therein during the
disclosure period.
(vi) Save as disclosed in this paragraph 4, neither:
(a) WMI or WMII; nor
(b) any person acting in concert with WMI or WMII; nor
A-68
(c) any subsidiary of the Company, nor any pension fund of any member
of the Group, nor any bank or financial or other professional
adviser of the Company (including stockbrokers but excluding exempt
market-makers) including any person controlling, controlled by or
under the same control as any such bank or financial or other
professional adviser; nor
(d) any discretionary fund manager (other than an exempt fund manager)
connected with the Company;
owns or controls any relevant securities, nor has any such person as is
mentioned in sub-paragraph (vi)(a) or (b) above dealt for value therein
during the disclosure period, nor has any such person as is mentioned
in sub-paragraph (vi)(c) or (d) above dealt for value therein during
the offer disclosure period.
(vii) Save as disclosed in this paragraph 4, neither WMI or WMII nor any
person acting in concert with WMI or WMII nor the Company nor any
associate of the Company, has any arrangement in relation to
relevant securities.
(C) In WMI
(i) As at . September 1998 (the latest practicable date prior to the
posting of this document), the interests in the share capital of WMI of
the Directors (all of which are beneficial unless otherwise stated) and
as shown in the register required to be kept under section 325 of the
Act, were as follows:
Number of
Number of shares of
shares of common stock Exercise price Original
common stock of WMI subject per share exercise period
Director of WMI to option Date of grant (US$) (from-to)
-------- ------------ -------------- ------------- -------------- --------------------
Sir William Barlow 652 -- -- -- --
P.B. Dessing -- 1,132 2 Jul 90 57.42 2 Jul 91--2 Jul 00
2,872 2 Jan 91 48.88 2 Jan 92--2 Jan 01
E.G. Falkman 18,849 8,049 2 Jan 90 48.45 2 Jan 91--2 Jan 00
9,206 2 Jan 91 48.88 2 Jan 92--2 Jan 01
9,179 3 Apr 95 37.59 3 Apr 96--3 Apr 05
D.F. Flynn 368,479 -- -- -- --
J.M. Holsten 48,950* 4,179 2 Jan 90 48.45 2 Jan 91--2 Jan 00
4,603 2 Jan 91 48.88 2 Jan 92--2 Jan 01
8,135 3 Mar 93 41.21 3 Mar 94--3 Mar 03
8,626 3 Jan 94 36.52 3 Jan 95--3 Jan 04
25,940 3 Apr 95 37.59 3 Apr 96--3 Apr 05
9,608 1 Apr 96 43.72 1 Apr 97--1 Apr 06
48,253 9 May 97 41.45 9 May 98--9 May 07
72,500 20 Jun 97 46.69 20 Jun 98--20 Jun 07
77,293 10 Mar 98 33.64 10 Mar 99--10 Mar 08
R.S. Miller 2,575 2,175 9 May 97 41.45 9 May 98--9 May 07
54,375 4 Nov 97 32.24 4 Nov 98--4 Nov 07
160,533 10 Mar 98 33.64 10 Mar 99--10 Mar 08
*Includes 600 shares owned by minor children of which Mr. Holsten has
custodial responsibility.
As a result of the Merger, certain options, based upon their date of grant
and the plan under which they were issued, became immediately exercisable
without regard to any vesting period; certain options became exchangeable
at the option of the holders for payment in WMI common stock equal in value
to the difference between the respective exercise prices of those options
and the value of the consideration being paid in the Merger for shares of
common stock of WMI; and the holders of certain options became entitled to
retain their options until their stated exercise date notwithstanding the
severance of employment with WMI.
A-69
(ii) Save as disclosed above, neither the Company nor any of the Directors
or any person connected with them owns, controls or is interested in
any shares of WMI or in any securities convertible into, rights to
subscribe for, or options in respect thereof, nor has any such person
dealt for value therein during the disclosure period.
(D) Substantial shareholdings
Save for the WMI Group as disclosed in paragraph 4 (B)(iii) above, the
Company is not aware of any person who is interested, directly or
indirectly, in three per cent. or more of the Company's issued share
capital.
5. DIRECTORS' SERVICE CONTRACTS
(A) E.G. Falkman and B.G.A. Gabrielson each have service contracts which
may terminate on three years' notice. Pursuant to a liquidated damages
clause which was negotiated with each such Director in January 1998,
however, the Company's liability for severance pay is capped at two
years salary plus non-discretionary bonuses and benefits.
(B) Mr. Dessing has a service contract with a subsidiary of WMI which
provides for severance terms identical to those granted to Messrs.
Falkman and Gabrielson. In the event of termination of Mr. Dessing's
employment, the Company would be liable to reimburse such subsidiary of
WMI for any amounts paid.
Save as disclosed above, there are no service contracts between any
current or proposed Director and any member of the Group having more
than twelve months to run and no such contract has been entered into or
amended within the six months preceding the date of this document.
6. MATERIAL CONTRACTS
(A) The Company
The following contracts, which are or may be material, not being contracts
entered into in the ordinary course of business, have been entered into by
the Group since 29 June 1996 (being two years prior to the date on which
the Proposal was announced):
(a)Amendment of Wessex Waste Management Limited Shareholders' Agreement
Under an agreement dated 18 December 1996 between Waste Management
International B.V. ("BV"), the Company, UK Waste Management Holdings
("UKWMH"), Wessex and Wessex Waste Management Limited ("WWM") certain
agreements between the Company and Wessex relating either to the
Company's investment in Wessex or the ownership of WWM were amended or
terminated.
The parties to the agreement also agreed in principle on the terms
under which Wessex would purchase certain of its shares held by the
Company. This transaction is more fully described in item (b) below.
The agreement also permitted the Company to sell on the market the
remaining shares in Wessex not being repurchased by Wessex. Such shares
were subsequently sold for a total consideration of approximately
(Pounds)23 million.
In addition, the agreement provided for the termination of the
Standstill Agreement between Wessex and UKWMH dated 28 February 1991
(as amended) under which UKWMH was prohibited from acquiring more than
25 per cent. of Wessex or selling any Wessex shares without the
approval of Wessex. The agreement also terminated the Option Instrument
pursuant to which the Company had been issued with certain options to
acquire additional shares in Wessex. As a result of this termination,
the Company's options to acquire 10,605,303 ordinary shares in Wessex
were cancelled.
Finally, the agreement amended the Shareholders' Agreement between BV,
the Company, Wessex and WWM dated 30 January 1991 (as amended) (the
"Shareholders' Agreement") such that, among other things, the right of
Wessex to put its interest in WWM to the Company was deferred until
after 28 February 1998 and the price at which such interest would be
sold was amended to reflect fair market value of WWM.
A-70
The Shareholders' Agreement provides that under certain circumstances
generally involving an offer being made for all of the outstanding
shares of Old WMI, Wessex has a right to purchase the Group's joint
venture interest in WWM for the then fair market value. Following
completion of the Merger, the Company received notice from Wessex that
the Merger constituted an "Event of Default" under the Shareholders'
Agreement. Wessex's notice does not indicate an intention to exercise
such right and Wessex has publicly stated that it has not decided
whether to exercise such right. In 1997, the Group had turnover of
(Pounds)167.8 million and operating profit (before minority interest)
of (Pounds)21.9 million from the joint venture. The Group's carrying
value (including goodwill) was (Pounds)212.6 million as of 31 December
1997. At this time, it is impossible to determine whether such a
transaction would result in a gain or a loss because the price for such
a sale is currently unknown.
The Shareholders' Agreement grants a similar right to the Company to
acquire Wessex's interest in WWM in the event of a change of control of
Wessex. On 24 July 1998, the board of Wessex announced the terms of a
recommended offer for all the issued shares of Wessex by Enron Corp. If
such a transaction occurs, the Company would have the right to acquire
Wessex's 49 per cent. interest in WWM for its then fair market value.
(b)Sale of investment in Wessex
Under the terms of a Share Purchase Agreement dated 14 February 1997
between UKWMH, the Company and Wessex, Wessex agreed to redeem
approximately 87 per cent. of the Company's 19.5 per cent. interest in
Wessex's share capital for a total consideration of (Pounds)157 million
in cash. The following shares were purchased by Wessex:
(i) 722,771 of the 7,227,709 ordinary shares held by the Company;
(ii) 30,225,106 "B" ordinary shares; and
(iii) 13,285,088 "C" ordinary shares.
In the case of the "B" and "C" ordinary shares, the number purchased by
Wessex reflected the total holding of such shares held by the Company.
(c)Sale of operations in France and Spain
Under an agreement dated 23 June 1997, the Company sold substantially
all of its remaining operations in France to SITA S.A. for FF270
million in cash and deferred consideration consisting of cash and notes
to be paid over a five year period. The transaction resulted in no gain
or loss to the Company on a consolidated basis. On 30 September 1997,
the Company sold the notes received in the transaction for an aggregate
price of FF311 million. Under an agreement dated 31 July 1997, the
Company sold its 60 per cent. interest in Ingenieria Urbana, S.A. to
Segema Servicios Generales de Medio Ambiente, S.A ("SEGEMA") for a cash
purchase price of Pta 2.515 billion. SEGEMA is an affiliate of SITA
S.A.
(d)Sale of German waste-to-energy facility
Under an agreement dated 9 April 1997 between the Company and VEW AG (a
German energy utility), VEW AG was granted an option to purchase the
Company's waste-to-energy plant located in Hamm, Germany for DM245
million. In addition, the Company had the right to require VEW to
purchase the facility for a price of DM210 million. The agreement was
structured as an option to enable VEW to work with the City of Hamm,
the principal supplier of waste to the plant, to modify the terms of
the existing waste supply agreement.
On 22 December 1997, a subsidiary of VEW AG formally exercised the
option to purchase the Hamm facility. The sale was completed on 2
January 1998. The sale of the facility resulted in no significant gain
or loss to the Company.
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(B) WMI
The following contracts, which are or may be material, not being contracts
entered into in the ordinary course of business have been entered into by
the WMI Group (excluding the Group) since 29 June 1996 (being two years
prior to the date on which the Proposal was announced):
(a)Merger between Old WMI and WTI
On 8 December 1997, Old WMI and WTI entered into a definitive merger
agreement pursuant to which, upon consummation of the merger, Old WMI
would become the holder of all the outstanding equity securities of WTI
and all the outstanding common stock of WTI held by stockholders other
than Old WMI and its affiliates (other than common stock held by public
stockholders who perfected their dissenters' appraisal rights) would be
converted into the right to receive $16.50 in cash per share of common
stock.
(b)Merger between Old WMI and WMI
On 10 March 1998, Old WMI entered into a definitive merger agreement
with WMI (then known as USA Waste Services, Inc.) relating to the
Merger which provided, subject to the satisfaction of the conditions
contained therein, that Old WMI would be merged with and into a wholly
owned subsidiary of WMI and that upon consummation of the Merger, Old
WMI's shareholders would receive 0.725 shares of WMI's common stock for
each share of Old WMI common stock held immediately prior to the
Merger. On 16 July 1998, the Merger was consummated. Upon consummation
of the Merger, Old WMI became a wholly owned subsidiary of WMI and
changed its name to Waste Management Holdings, Inc.
7.LITIGATION
In June 1998, an alleged holder of ADRs filed a putative class action
complaint in the Circuit Court of Cook County, Chicago, Illinois, naming Old
WMI, the Company and several directors of the Company as defendants. The
complaint seeks to enjoin the completion of the Scheme or, in the alternative,
rescission or compensatory damages in the event the Scheme is completed. Among
other things, the complaint asserts that the completion of the Scheme will
constitute a breach of defendants' fiduciary duties to the holders of ADRs
and, if the Scheme is completed, the holders of ADRs will be denied a proper
premium for their ADRs. WMI, on behalf of Old WMI, the Company and the named
directors intend to contest this litigation vigorously.
In July 1998, a putative class of alleged holders of Ordinary Shares filed a
complaint in the Circuit Court of Cook County, Chicago, Illinois, naming
Donald F. Flynn and Old WMI as defendants. The complaint seeks to enjoin the
completion of the Scheme or, in the alternative, rescission or compensatory
damages in the event the Scheme is completed. Among other things, the
complaint asserts that the completion of the Scheme will constitute a breach
of defendants' fiduciary duties to the shareholders of the Company (Mr. Flynn
is a director of the Company, and Old WMI is its controlling shareholder) and
that, if the Scheme is completed, the shareholders of the Company will be
denied a proper premium for their Ordinary Shares. WMI, on behalf of Old WMI,
and Mr. Flynn intend to contest this litigation vigorously.
8.FINANCING ARRANGEMENTS
(i) The Proposal will be financed from the WMI Group's existing resources and
facilities. Neither the payment of interest on, nor repayment of, nor
security for, any liability (contingent or otherwise) of the WMI Group
will depend to any significant extent on the business of the Company.
(ii) Merrill Lynch is satisfied that the WMI Group has the necessary financial
resources available to it to satisfy full implementation of the Scheme.
A-72
9. MISCELLANEOUS
(A) There is no agreement, arrangement or understanding including any
compensation arrangement between (i) WMI, WMII or any person acting in
concert with WMI and WMII and (ii) any of the recent or current
Shareholders (other than members of the WMI Group) or any Director or
recent director of the Company having any connection with or dependence on
the Scheme.
(B) KPMG Corporate Finance is a division of KPMG which is authorised to carry
on investment business by the Institute of Chartered Accountants in
England and Wales. The principal place of business of KPMG Corporate
Finance is 8 Salisbury Square, London EC4Y 8BB, where a list of the
partners' names is open to inspection.
(C) Merrill Lynch is regulated in the UK by the Securities and Futures
Authority Limited and its registered office is at Ropemaker Place, 25
Ropemaker Street, London EC2Y 9LY.
(D) Each of KPMG Corporate Finance and Merrill Lynch has given and has not
withdrawn its written consent to the inclusion in this document of its
name in the form and context in which it is included.
(E) There is no agreement, arrangement or understanding whereby the beneficial
ownership of any of the Ordinary Shares to be acquired by WMII and/or its
nominee(s) following the implementation of the Scheme will be transferred
to any other person.
(F) Settlement of the consideration to which each Scheme Shareholder is
entitled under the Scheme will be implemented in full in accordance with
the terms of the Scheme without regard to any lien, right of set-off,
counter claim or other analogous right to which WMII may otherwise be, or
claim to be, entitled against such shareholder.
(G) The effect of the Scheme on the interests of the Directors does not differ
from its effect on the like interests of other persons.
(H) Each of the Directors intends to vote in favour of all resolutions on
which he is entitled to vote at the Meetings.
(I) Save as disclosed herein, there has been no material change in the
financial or trading position of WMI since 31 March 1998, the date as of
which the combined unaudited pro forma condensed financial statements of
WMI and Old WMI were prepared.
(J) Save as disclosed herein, there has been no material change in the
financial or trading position of the Company since 31 December 1997, the
date to which the latest published audited accounts of the Company were
prepared.
10. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at the
offices of Slaughter and May, 35 Basinghall Street, London EC2V 5DB, during
usual business hours on any weekday (Saturdays excepted) until the Effective
Date or the date that the Scheme lapses, whichever is the earlier:
(A) the Memorandum and Articles of Association of the Company and the
equivalent constitutional documents of WMI;
(B) the audited consolidated accounts of WMI, Old WMI, and the Company for the
two years ended 31 December 1997;
(C) the unaudited interim reports of WMI and the Company for the six months
ended 30 June 1998;
A-73
(D) the material contracts referred to in paragraph 6 above;
(E) the consents referred to in paragraph 9(D) above;
(F) the Transaction Statement;
(G) the Joint Proxy Statement/Prospectus dated 9 June 1998 in respect of the
Merger as filed with the US Securities and Exchange Commission and sent to
shareholders of Old WMI and USA Waste Services, Inc.; and
(H) the Directors' service contracts referred to in paragraph 5 above.
Dated . September 1998.
A-74
SCHEME OF ARRANGEMENT
IN THE HIGH COURT OF JUSTICE No. [ ] of 1998
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF
WASTE MANAGEMENT INTERNATIONAL plc
- and -
IN THE MATTER OF
THE COMPANIES ACT 1985
SCHEME OF ARRANGEMENT
(UNDER SECTION 425 OF THE COMPANIES ACT 1985)
BETWEEN:
WASTE MANAGEMENT INTERNATIONAL plc
- and -
THE HOLDERS OF THE SCHEME SHARES
(as hereinafter defined)
PRELIMINARY
(A) In this Scheme, unless inconsistent with the subject or context, the
following expressions shall bear the following meanings:
"CREST" a relevant system (as defined in the CREST
Regulations) in respect of which CRESTCo
Limited is the Operator (as defined in the
CREST Regulations)
"CREST Manual" the CREST manual referred to in the agreements
entered into by CRESTCo Limited
"CREST Regulations" the Uncertificated Securities Regulations 1995
(SI 1995 No. 3272)
"Dollar Election" the election under which Scheme Shareholders
may elect to receive all, but not part, of
their cash entitlement under the Scheme in US
dollars
"Dollar Exchange Rate" the mid-point spot rate for conversion of
pounds sterling into US dollars at 4.00 pm on
the Effective Date, as derived from the WM
Reuters page showing such rate
"Effective Date"
the day on which this Scheme becomes effective
in accordance with clause 5(A)
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"Hearing Date" the date of the hearing by the Court of the
Petition to sanction this Scheme
"holder" includes any person entitled by transmission
"New Ordinary Shares"
the "A" ordinary shares of 5p each in the
capital of the Company to be created in
accordance with clause 2(A) of this Scheme
which shares shall rank pari passu with the
existing Ordinary Shares
"Ordinary Shares" ordinary shares of 10p each in the capital of
the Company
"Record Date" the business day immediately preceding the
Effective Date
"Relevant Holder" each person who appears as a holder of Scheme
Shares in the Register of Members of the
Company at 5.30 pm on the Record Date
"Scheme Shares" the Ordinary Shares in issue at the date of
this document, other than WMI Group Shares,
together with:
(i) any additional Ordinary Shares which may be
issued after the date of this document but
before 5.30 pm on the business day
immediately before the date of the meeting
of members of the Company convened by order
of the Court to consider the Scheme; and
(ii) any further Ordinary Shares which may be
issued after the period referred to in
paragraph (i) above but before 5.30 pm on
the business day immediately before the
Hearing Date and on terms that they are
bound by the Scheme
"uncertificated" or "in recorded on the relevant register as "in
uncertificated form" uncertificated form" being held in
uncertificated form in CREST and title to which
by virtue of the CREST Regulations may be
transferred by CREST
"the Company" Waste Management International plc, a company
registered in England and Wales under number
2669336
"WMI" Waste Management, Inc., a corporation organised
under the laws of the State of Delaware, United
States of America
"WMI Group" WMI and its subsidiaries (excluding the Company
and its subsidiaries)
"WMI Group Shares" those issued Ordinary Shares in which any
member of the WMI Group is beneficially
interested as at the date of this document
"WMII" Waste Management International, Inc., a
corporation organised under the laws of the
State of Delaware, United States of America
"this Scheme"
this Scheme in its present form or with any
modification, addition or condition approved or
imposed by the Court
A-76
(B) The authorised share capital of the Company is (Pounds)100,000,000 divided
into 1,000,000,000 Ordinary Shares of 10p each of which 375,273,456 have
been issued and are fully paid and the remainder are unissued.
(C) The WMI Group Shares number 300,000,000 Ordinary Shares.
(D) WMII has agreed to appear by Counsel on the hearing of the petition to
sanction this Scheme and to undertake to the Court to be bound thereby and
to execute all documents and do all such acts and things as may be
necessary or desirable to be executed or done by it for the purpose of
giving effect to this Scheme.
THE SCHEME
1. The capital of the Company shall be reduced by cancelling and
extinguishing the Scheme Shares.
2. Forthwith and contingently upon the said reduction of capital taking
effect:
(A) the capital of the Company shall be increased to its former amount by
the creation of that number of New Ordinary Shares whose aggregate
nominal amount shall equal the amount of capital so cancelled; and
(B) the credit arising in the books of account of the Company as a result
of such reduction of capital shall be capitalised and applied in paying
up in full at par the New Ordinary Shares, which shall be allotted and
issued, credited as fully paid up, to WMII and/or its nominee(s).
3.(A) In consideration of the cancellation of the Scheme Shares and the issue
to WMII and/or its nominee(s) of the New Ordinary Shares, WMII shall
not later than 14 days after the Effective Date pay (i) to each
Relevant Holder who has not made a Dollar Election, the sum of 345p in
respect of each Scheme Share held by him at 5.30 pm on the Record Date
and (ii) to each Relevant Holder who has made a Dollar Election, the US
dollar equivalent of the sum of 345p in respect of each Scheme Share
held by him at 5.30 pm on the Record Date, such US dollar equivalent to
be calculated using the Dollar Exchange Rate. The aggregate US dollar
amount due under the Scheme to a Relevant Holder who has made a Dollar
Election shall be rounded down to the nearest whole cent.
(B) Elections to receive US dollars shall be valid only by due completion
of the form of election sent to holders of Scheme Shares with the
Scheme and which form shall have been signed by the Relevant Holder or
his duly authorised agent and, in the case of joint holders, in like
manner by or on behalf of such holders and shall have been completed
and returned in accordance with the instructions thereon so as to
arrive at Computershare Services PLC, PO Box 82, Caxton House,
Redcliffe Way, Bristol BS99 7YA, not later than 5.30 pm on 2 November
1998.
(C) Not more than 14 days after the Effective Date, WMII shall deliver, or
procure to be delivered, to each Relevant Holder holding Scheme Shares
in certificated form or who has made a Dollar Election a cheque for the
amount due to him by duly posting the same in a pre-paid envelope
addressed to him at his address as appearing in the register of members
of the Company at 5.30 pm on the Record Date and neither WMII nor the
Company shall be responsible for any loss or delay in transmission. In
the case of joint holders the cheque shall be made payable to, and
posted to the registered address of, the holder whose name appears
first in the register of members of the Company in respect of the joint
holding. The encashment of any such cheque shall be a complete
discharge to WMII for the money represented thereby.
(D) Not more than 14 days after the Effective Date, WMII shall arrange for
the creation of an assured payment obligation in accordance with the
CREST assured payment arrangements (as set out in the CREST Manual) in
favour of the payment bank of each Relevant Holder who holds Scheme
Shares in uncertificated form and who has not made a Dollar Election in
respect of the amount due to such
A-77
Relevant Holder, provided that WMII may (if, for any reason, it wishes
to do so) determine that all or part of the amounts due to Relevant
Holders who hold Scheme Shares in uncertificated form shall be paid by
cheque despatched by post in the manner provided by clause 3(C) of this
Scheme.
(E)The provisions of this clause shall be subject to any prohibition or
condition imposed by law.
4. As from and including the Effective Date, all certificates representing
holdings of Scheme Shares shall cease to be valid for any purpose and each
former holder of Scheme Shares shall be bound on request to deliver up to
the Company the certificate for his holding thereof.
5.(A) This Scheme shall become effective as soon as an office copy of the
Order of the Court sanctioning this Scheme under section 425 of the
Companies Act 1985 and confirming under section 137 of such Act the
reduction of the capital of the Company provided for by clause 1 of
this Scheme shall have been duly registered by the Registrar of
Companies.
(B) Unless the Scheme shall have become effective on or before 31 December
1998 or such later date, if any, as the Company and WMII may agree and
the Court may allow, this Scheme shall never become effective.
6. The Company and WMII may jointly consent, on behalf of all persons
affected, to modification of or addition to this Scheme, or to any
condition thereto, in each case approved or imposed by the Court.
Dated . September 1998
A-78
WASTE MANAGEMENT INTERNATIONAL PLC
NOTICE OF COURT MEETING
IN THE HIGH COURT OF JUSTICE No. [ ] of 1998
CHANCERY DIVISION
COMPANIES COURT
MR. REGISTRAR .
IN THE MATTER OF WASTE MANAGEMENT INTERNATIONAL plc
and
IN THE MATTER OF THE COMPANIES ACT 1985
NOTICE IS HEREBY GIVEN that, by an Order dated [ ] made in the above
matters, the Court has directed a Meeting to be convened of the holders of the
Scheme Shares (as defined in the Scheme of Arrangement hereinafter referred
to) for the purpose of considering and, if thought fit, approving (with or
without modification) a Scheme of Arrangement proposed to be made between
Waste Management International plc (the "Company") and the said holders of
Scheme Shares and that such Meeting be held at 10.00 am on 7 October 1998 at
the offices of Slaughter and May, 4 Coleman Street, London EC2V 5DB, at which
place and time all the said holders of the Scheme Shares are requested to
attend.
A copy of the said Scheme of Arrangement and a copy of the Statement required
to be furnished pursuant to section 426 of the above-mentioned Act are
incorporated in the document of which this Notice forms part.
THE SAID SHAREHOLDERS MAY VOTE IN PERSON AT THE SAID MEETING OR THEY MAY
APPOINT ANOTHER PERSON, WHETHER A MEMBER OF THE COMPANY OR NOT, AS THEIR PROXY
TO ATTEND AND VOTE IN THEIR STEAD.
A pink form of proxy for use at the Meeting is enclosed herewith.
In the case of joint holders, the vote of the senior who tenders a vote,
whether in person or by proxy, will be accepted to the exclusion of the votes
of the other joint holders and for this purpose seniority will be determined
by the order in which the names stand in the Register of Members of the
Company in respect of the joint holding.
It is requested that forms appointing proxies be lodged with the Company's
Registrar, Computershare Services PLC, P.O. Box 82, Caxton House, Redcliffe
Way, Bristol BS99 7YA, not less than 48 hours before the time appointed for
the said Meeting, but if forms are not so lodged they may be handed to the
Chairman at the Meeting.
Entitlement to attend and vote at the Meeting and the number of votes which
may be cast thereat will be determined by reference to the register of members
of the Company at 5.30 pm on the day prior to the day immediately before the
Meeting or any adjourned Meeting (as the case may be). Changes to entries in
the register of members after that time will be disregarded in determining the
rights of any person to attend and vote at the Meeting.
By the said Order the Court has appointed Sir William Barlow or failing him
Mr. Jan Ekman or failing him Mr. Giorgio Porta or failing him Dr. Manfred
Scholz to act as Chairman of the said Meeting and has directed the Chairman to
report the result thereof to the Court.
The said Scheme of Arrangement will be subject to the subsequent approval of
the Court.
Slaughter and May
35 Basinghall Street
London EC2V 5DB Dated . September 1998
A-79
WASTE MANAGEMENT INTERNATIONAL PLC
NOTICE OF EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of Waste
Management International plc (the "Company") will be held at 10.30 am on 7
October 1998 at the offices of Slaughter and May, 4 Coleman Street, London,
EC2V 5DB (or as soon thereafter as the Court Meeting (as such term is defined
in the document of which this Notice of Meeting forms part) shall have
concluded or been adjourned) for the purpose of considering and, if thought
fit, passing the following resolution which will be proposed as a special
resolution:
SPECIAL RESOLUTION
THAT:
(A) the scheme of arrangement dated . September 1998 (the "Scheme") between
the Company and the holders of the Scheme Shares (as defined in the
Scheme) (a print of which Scheme is set out in the document of which this
Notice of Meeting forms part and which for the purpose of identification
has been signed by the Chairman of this Meeting), be hereby approved;
(B) subject to the Scheme being duly approved by the said holders of the
Scheme Shares:
(i) for the purpose of giving effect to the Scheme, the capital of the
Company be reduced by cancelling and extinguishing all the Scheme
Shares;
(ii) forthwith and contingently upon the said reduction of capital taking
effect:
(a) the capital of the Company be increased to its former amount by
the creation of that number of new "A" ordinary shares of 5p each
whose aggregate nominal amount shall equal the amount of capital
so cancelled and which "A" ordinary shares shall rank pari passu
with the existing ordinary shares; and
(b) the credit arising in the books of account of the Company as a
result of such reduction of capital be capitalised and applied in
paying up in full at par the said new "A" ordinary shares, which
shall be allotted and issued, credited as fully paid up, to Waste
Management International, Inc. and/or its nominee(s);
(iii) the Board of Directors of the Company be and is hereby generally and
unconditionally authorised for the purpose of section 80 of the
Companies Act 1985 to exercise all powers of the Company to allot
new ordinary shares to Waste Management International, Inc. and/or
its nominee(s) up to an aggregate nominal amount of
(Pounds)50,000,000, such authority to expire on . September 2003;
and
(iv) the Articles of Association of the Company be amended by the adoption
of the following new Article 1(J):
"Scheme of Arrangement
1(J) (i) In this article references to the "Scheme" are to the scheme
of arrangement of the company dated . September 1998 proposed
by the company under section 425 of the Companies Act 1985 and
expressions defined in the Scheme shall have the same meanings
when used in this article.
(ii) If any ordinary shares shall be allotted on or after .
October 1998 but before 5.30 pm on the business day immediately
preceding the Hearing Date such ordinary shares shall be
allotted and issued subject to the terms of the Scheme and
shall constitute Scheme Shares and the holders thereof shall be
bound by the Scheme accordingly.
A-80
(iii) If any ordinary shares shall be allotted after 5.30 pm on the
business day immediately preceding the Hearing Date such
ordinary shares shall be allotted and issued on terms that the
relevant allottees and any subsequent holders thereof shall be
obliged forthwith upon the written request of Waste Management
International, Inc. to transfer them to Waste Management
International, Inc. or its nominee(s) in consideration for the
payment by Waste Management International, Inc. to such
allottee or subsequent holder of 345p for each such ordinary
share.
(iv) In order to give effect to any transfer required by paragraph
(iii) above the company may appoint any person to execute and
deliver on behalf of the relevant allottee or subsequent holder
a form of transfer in favour of Waste Management International,
Inc. or its nominee(s) and a cheque in respect of the amount to
be paid to the relevant allottee or subsequent holder will be
despatched to such allottee or subsequent holder at his
registered address at his risk by or on behalf of Waste
Management International, Inc. within 21 days of the issue of
the ordinary shares to the relevant allottee. Encashment of any
such cheque shall be a complete discharge to Waste Management
International, Inc. for the money represented thereby.
(v) If the Scheme shall not have become effective on or before the
date referred to in clause 5(B) of the Scheme this article shall
be of no effect."
. September 1998
Registered office: 3 Shortlands Hammersmith International Centre London W6 8RX
By Order of the Board S. P. Stanczak Secretary
Notes:
1. A member entitled to attend and to vote at the above meeting may appoint
one or more persons as his proxy to attend and on a poll to vote in his
place. A proxy need not be a member of the Company.
2. Valid forms of proxy must be lodged with the Company's registrar,
Computershare Services PLC, P.O. Box 82, Caxton House, Redcliffe Way,
Bristol BS99 7YA, not less than 48 hours before the time appointed for the
above meeting.
3. Only holders of ordinary shares on the register at 5.30 pm on the day prior
to the day immediately before the meeting or any adjourned meeting (as the
case may be) shall be entitled to attend and/or vote at the meeting. They
shall be entitled to vote in respect of the number of ordinary shares
registered in their names at the above time and any subsequent changes to
the register shall be disregarded in determining rights to attend and vote.
A-81
SCHEDULE B
DIRECTORS AND OFFICERS OF WMI
DIRECTORS OF WMI
Set forth below are the name and business address of each person who is a
director of WMI and: (i) the present principal occupation or employment of
each such person and the name, principal business and address of the
corporation or other organization in which such occupation or employment of
each such person is conducted and (ii) the material occupations, positions,
offices and employment and the name, principal business and address of any
corporation or other organization in which any material occupation, position,
office or employment of each such person was held during the last five years.
Each person listed below is a citizen of the United States.
NAME AND ADDRESS PRINCIPAL OCCUPATIONS
H. Jesse Arnelle................ Mr. Arnelle has been a director of WMI since the
c/o WMI consummation of the Merger. Mr. Arnelle was a di-
1001Fannin rector of Old WMI from 1992 until the consumma-
Suite 4000 tion of the Merger. In October 1997, he became
Houston, Texas 77002 counsel to Womble, Carlyle, Sandridge and Rice, a
law firm in Winston-Salem, North Carolina. For
more than ten years prior thereto, Mr. Arnelle
was a senior partner of Arnelle, Hastie, McGee,
Wilis and Greene, a San Francisco-based law firm.
From 1993 to 1998, he served as Vice Chairman and
the Chairman of the Pennsylvania State University
Board of Trustees. Mr. Arnelle is also a director
of Florida Power & Light (FPL Group), Eastman
Chemical Co., Textron Corporation, Wells Fargo &
Company and Wells Fargo Bank N.A., Armstrong
World Industries and Union Pacific Resources,
Inc.
Dr. Pastora San Juan Cafferty... Dr. Cafferty has been a director of WMI since the
The University of Chicago consummation of the Merger. Dr. Cafferty was a
The School of Social Service director of Old WMI from July 1994 until the con-
Administration summation of the Merger. She has been a Professor
969 East 60th Street since 1985 at the University of Chicago, where
Chicago, Illinois 60637 she has been a member of the faculty since 1971.
Dr. Cafferty also serves as a director of Kimber-
ly-Clark Corporation, Harris Bankcorp and its
subsidiary, Harris Trust and Savings Bank, and
People's Energy Corporation and on the Boards of
the Rush-Presbyterian-St. Luke's Medical Center
and the Lyric Opera Association, both in Chicago.
Ralph F. Cox.................... Mr. Cox has been a director of WMI since the con-
c/o WMI summation of the Merger. Mr. Cox was a director
1001Fannin of USA Waste from 1996 until the consummation of
Suite 4000 the Merger. He served as a director of Sanifill
Houston, Texas 77002 from September 1993 until December 1996. Since
February 1, 1994, Mr. Cox has been a management
consultant. For four years prior thereto, Mr. Cox
was President of Greenhill Petroleum Corporation,
a subsidiary of Western Mining Corporation. From
1985 through 1990, he served as President and
Chief Operating Officer of Union Pacific Re-
sources Company, a petroleum exploration and pro-
duction company. Before 1985, Mr. Cox spent 31
years with Atlantic Richfield Company ("ARCO"),
joining the ARCO board in 1978, assuming respon-
sibility for ARCO's worldwide petroleum explora-
tion and production activities and minerals ex-
ploration and production activities in 1984, and
culminating with his election as Vice Chairman of
ARCO in 1985. Mr. Cox serves as a
B-1
director of Bonneville Pacific Corporation, an
independent power company; Daniel Industries,
Inc., which manufactures oil and gas measurement
and flow control equipment; Rio Grande, Inc., a
petroleum exploration and production company; and
CH2M Hill, a consulting engineering firm. He also
serves as an Independent Trustee for The Fidelity
Group of funds.
John E. Drury............... Mr. Drury has served as a director and Chief Ex-
c/o WMI ecutive Officer of WMI since the consummation of
1001Fannin the Merger. Until the consummation of the Merger,
Suite 4000 he served as Chairman of the Board of USA Waste
Houston, Texas 77002 from June 30, 1995, and Chief Executive Officer
and a director from May 27, 1994. From 1991 to
May 1994, Mr. Drury served as a Managing Director
of Sanders Morris Mundy Inc., a Houston-based in-
vestment banking firm. Prior thereto, Mr. Drury
served in various management capacities at BFI,
including President and Chief Operating Officer
of BFI from 1982 to 1991.
Richard J. Heckmann......... Mr. Heckmann has been a director of WMI since the
c/o WMI consummation of the Merger. Mr. Heckmann was a
1001Fannin director of USA Waste from 1994 until the consum-
Suite 4000 mation of the Merger. Mr. Heckmann is Chairman,
Houston, Texas 77002 President and Chief Executive Officer of United
States Filter Corporation ("U.S. Filter"), a po-
sition he assumed in July 1990. Prior to joining
U.S. Filter, Mr. Heckmann was a Senior Vice Pres-
ident--Investments and Branch Manager of Pruden-
tial-Bache Securities in Rancho Mirage, Califor-
nia. Mr. Heckmann is also a director of K2 Inc.
and United Rentals, Inc.
Roderick M. Hills........... Mr. Hills has been a director of WMI since the
c/o WMI consummation of the Merger. Mr. Hills was a di-
1001Fannin rector of Old WMI from November 1997 until the
Suite 4000 consummation of the Merger. He served as Presi-
Houston, Texas 77002 dent of Hills Enterprises, Ltd. (formerly The
Manchester Group Ltd.), a consulting firm, since
1987 and as a Partner in Hills & Hills, a law
firm, since 1994. Mr. Hills has also served as
Vice Chairman of Oak Industries, Inc., a manufac-
turing firm, since 1989. Mr. Hills served from
September to November 1996 as Chairman of Feder-
al-Mogul Corporation ("Federal-Mogul"), an auto-
motive parts manufacturing firm. Mr. Hills served
as Chairman of the SEC from 1975 to 1977 and as
counsel to the President of the United States in
1975. Mr. Hills is also a director of Federal-Mo-
gul and Oak Industries, Inc.
Richard D. Kinder........... Mr. Kinder has been a director of WMI since the
c/o WMI consummation of the Merger. Mr. Kinder was a di-
1001Fannin rector of USA Waste from 1997 until the consumma-
Suite 4000 tion of the Merger. He has been Chairman and
Houston, Texas 77002 Chief Executive Officer of Kinder Morgan Energy
Partners, L.P., a master limited partnership
headquartered in Houston, Texas since February
1997. From 1990 through December 1996, he was
President and Chief Operating Officer of Enron
Corp. Prior thereto, Mr. Kinder served in various
management and legal positions with Enron Corp.
and its affiliates commencing in 1980. Mr. Kinder
is also a director of Baker Hughes Incorporated,
KN Energy, Inc. and Transocean Offshore Inc. He
is past Chairman of the Interstate Natural Gas
Association of America and is a Trustee of the
Museum of Fine Arts, Houston.
B-2
Robert S. Miller....................... Mr. Miller was elected to a 12-month term as non-
c/o WMI executive Chairman of the Board of WMI upon the
1001Fannin consummation of the Merger. Mr. Miller was a di-
Suite 4000 rector of Old WMI from May 1997 until the consum-
Houston, Texas 77002 mation of the Merger. He was elected Chairman of
the Board and named Acting Chief Executive Offi-
cer of Old WMI in October 1997. On March 10,
1998, Mr. Miller was named Chief Executive Offi-
cer of Old WMI and served in that capacity until
the consummation of the Merger. Mr. Miller is
also serving as Vice Chairman of Morrison Knudsen
Corporation, an engineering and construction
firm. He served as Chief Executive Officer of
Federal Mogul from September until November 1996
and as Chairman of Morrison Knudsen Corporation
from April 1995 until September 1996. In addi-
tion, since 1993 he has served as Vice President
and Treasurer of Moore Mill and Lumber, a pri-
vately-held forest products firm, and from 1992
to 1993, he served as Senior Partner of James D.
Wolfensohn, Inc., an investment banking firm.
From 1979 to 1992, Mr. Miller worked at Chrysler
Corporation ("Chrysler"), an automobile and truck
manufacturing firm, rising to become Vice Chair-
man of the Board after serving as the company's
Chief Financial Officer. Mr. Miller is a director
of the Company, Federal Mogul, Morrison Knudsen
Corporation, Pope & Talbot, Inc. and Symantec
Corporation.
Mr. Montrone has been a director of WMI since the
Paul M. Montrone....................... consummation of the Merger. Mr. Montrone was a
Fisher Scientific International Inc. director of Old WMI from January 1997 until the
Liberty Lane consummation of the Merger. Mr. Montrone has been
Hampton, New Hampshire 03842 Chairman of the Board since January 1998 and
President, Chief Executive Officer and a director
since December 1991, of Fisher Scientific Inter-
national Inc., a distributor of laboratory equip-
ment and supplies. Since May 1995, Mr. Montrone
has served as Chairman of the General Chemical
Group, Inc., a manufacturer and distributor of
chemicals ("General Chemical") and from prior to
1992 to May 1995 as President and a director of
General Chemical. He also served as Vice Chairman
of the Board of Abex, Inc., a designer and manu-
facturer of engineered components for aerospace,
defense, industrial and commercial markets, or
its predecessors, from 1992 to 1995. Mr. Montrone
was a director of WTI or a predecessor thereof
from 1989 until January 1997.
John C. Pope........................... Mr. Pope has been a director of WMI since the
c/o WMI consummation of the Merger. Mr. Pope was a direc-
1001Fannin tor of Old WMI from November 1997 until the con-
Suite 4000 summation of the Merger. Since January 1996, he
Houston, Texas 77002 has been Chairman of the Board of MotivePower In-
dustries, Inc., a manufacturer and remanufacturer
of locomotives and locomotive components. Mr.
Pope served as President and Chief Operating Of-
ficer of United Airlines and its parent corpora-
tion UAL Corporation, from April 1992 to July
1994. Prior thereto he served as Vice Chairman of
both companies beginning in November 1990, and as
Executive Vice President, Marketing and Finance
beginning in October 1990, as Executive Vice
President, Marketing and Planning from May 1989
to September 1990 and as Chief Financial Officer
beginning in January 1988. Mr. Pope is also a di-
rector of Federal Mogul, Wallace Computer Servic-
es, Inc., Medaphis Corporation, MotivePower In-
dustries, Inc., Lamalie Associates, Inc. and Dol-
lar Thrifty Automotive Group, Inc.
B-3
Rodney R. Proto............. Mr. Proto has been a director, President and
c/o WMI Chief Operating Officer of WMI since the consum-
1001Fannin mation of the Merger. Mr. Proto was President,
Suite 4000 Chief Operating Officer and a director of USA
Houston, Texas 77002 Waste since joining USA Waste in August 1996 un-
til the consummation of the Merger. From February
1992 to August 1996, he was President, Chief Op-
erating Officer and a director of Sanifill. Be-
fore joining Sanifill, Mr. Proto was employed by
BFI for 12 years where he served, among other po-
sitions, as President of Browning-Ferris Indus-
tries Europe, Inc. from 1987 through 1991 and
Chairman of Browning-Ferris Industries Overseas
from 1985 to 1987.
Steven G. Rothmeier......... Mr. Rothmeier has been a director of WMI since
Great Northern Capital the consummation of the Merger. Mr. Rothmeier was
332 Minnesota Street a director of Old WMI from March 1997 until the
Suite W2900 consummation of the Merger. He has been Chairman
St. Paul, Minnesota 55101 and Chief Executive Officer of Great Northern
Capital, a private investment management, con-
sulting and merchant banking firm since March
1993. From November 1989 until March 1993, he was
President of IAI Capital Group, a venture capital
and merchant banking firm. For more than ten
years prior thereto, he served Northwest Air-
lines, Inc. or its parent corporation, NWA, Inc.,
in various executive capacities, including Chair-
man and Chief Executive Officer from 1986 to
1989. Mr. Rothmeier is also a director of Honey-
well, Inc., Department 56, Inc., EW Blanch Hold-
ings, Inc. and Precision Castparts Corp.
Ralph V. Whitworth.......... Mr. Whitworth has been a director of WMI since
c/o WMI the consummation of the Merger. Mr. Whitworth is
1001Fannin a principal and managing member of Relational In-
Suite 4000 vestors LLC, a private investment company. He is
Houston, Texas 77002 also a partner in Batchelder & Partners, Inc., a
financial advisory and investment-banking firm
based in La Jolla, California. From 1988 until
1996, Mr. Whitworth was president of Whitworth
and Associates, a corporate advisory firm. Mr.
Whitworth has served as Chairman of the Board of
Directors of Apria Healthcare Group Inc. since
April 28, 1998 and as a director of Apria
Healthcare Group Inc. since January 1998 and is a
director of CD Radio, Inc. and Wilshire Technolo-
gies, Inc.
Jerome B. York.............. Mr. York has been a director of WMI since the
c/o WMI consummation of the Merger. Mr. York served as a
1001Fannin director of USA Waste from 1997 until the consum-
Suite 4000 mation of the Merger. He has been Vice Chairman
Houston, Texas 77002 of Tracinda Corporation since September 1995.
From 1993 to 1995, he was Senior Vice President
and Chief Financial Officer of IBM Corporation
and was elected to the Board of Directors of IBM
in January 1995. From 1979 to 1993, Mr. York
served in various management positions with
Chrysler, including Executive Vice President--Fi-
nance and Chief Financial Officer, and he was a
director of Chrysler in 1992 and 1993. Mr. York
also serves as a director of MGM Grand, Inc.,
Metro-Goldwyn-Mayer, Inc. and Apple Computer,
Inc.
EXECUTIVE OFFICERS OF WMI
Set forth below are the name and business address, if different than WMI's
address, of each executive officer of WMI who is not also a director of WMI
and: (i) the present principal occupation or employment of each such person
and the name, principal business and address of the corporation or other
organization in which such occupation or employment of each such person is
conducted and (ii) the material occupations, positions, offices
B-4
and employment and the name, principal business and address of any corporation
or other organization in which such occupation, position, office or employment
of each such person was held during the last five years. Unless otherwise
indicated, each person listed below is a citizen of the United States.
NAME AND ADDRESS PRINCIPAL OCCUPATIONS
Earl E. DeFrates........... Mr. DeFrates has been the Executive Vice Presi-
dent and Chief Financial Officer of WMI since the
consummation of the Merger. Mr. DeFrates served
as Executive Vice President and Chief Financial
Officer of USA Waste from May 1994 until the con-
summation of the Merger. From October 1990 to
April 1995, he was also Secretary of USA Waste.
Mr. DeFrates joined USA Waste as Vice-President--
Finance in October 1990 and was elected Executive
Vice President in May 1994. Prior thereto, Mr.
DeFrates was employed by Acadiana Energy Inc.
(formerly Tatham Oil & Gas, Inc.) serving in var-
ious officer capacities including the company's
Chief Financial Officer, since 1980.
Donald R. Chappel.......... Mr. Chappel has been Senior Vice President, Oper-
ations/ Administration of WMI since the consumma-
tion of the Merger. Until the consummation of the
Merger, Mr. Chappel was Acting Chief Financial
Officer of Old WMI from October 1997, and its
Vice President-Financial Services from November
1996 and Vice President and Controller (North
American operations) from August 1995. From 1991
to July 1995, Mr. Chappel was Vice President and
Controller-West and Mountain Areas of WMNA, and
from July to August 1995 Vice President and Con-
troller of CWM. Prior thereto he had served as
Vice President and Controller-WMI Urban Services,
Inc., beginning in June 1987 when he joined Old
WMI.
Susan J. Piller............ Ms. Piller has been Senior Vice President-Em-
ployee Relations of WMI since the consummation of
the Merger. Ms. Piller was Senior Vice President-
Employee Relations of USA Waste from May 1996 un-
til the consummation of the Merger. Prior to
joining USA Waste, Ms. Piller was at BFI from
1984 until 1996, where she held various labor and
employment positions, including Vice President-
Employee Relations. Prior thereto, Ms. Piller was
employed by the Houston law firm of Fulbright &
Jaworski.
William A. Rothrock IV..... Mr. Rothrock has been Senior Vice President-Busi-
ness Development of WMI since the consummation of
the Merger. Mr. Rothrock was Senior Vice Presi-
dent-Business Development of USA Waste from Au-
gust 1996 until the consummation of the Merger.
Mr. Rothrock held similar business development
positions with Sanifill from 1990 to 1996 and BFI
from 1985 to 1990.
Gregory T. Sangalis........ Mr. Sangalis has been Senior Vice President, Gen-
eral Counsel and Secretary of WMI since the con-
summation of the Merger. Mr. Sangalis was Vice
President, General Counsel and Secretary of USA
Waste from April 4, 1995 until the consummation
of the Merger. Prior to joining USA Waste, Mr.
Sangalis was employed by a solid waste subsidiary
of Old WMI serving in various legal capacities
since 1986 and including Group Vice President and
General Counsel from August 1992 to April 1995.
Prior to joining Old WMI, he was General Counsel
of Peavey Company and had been engaged in the
private practice of law in Minnesota.
B-5
Robert P. Damico........... Mr. Damico has been Senior Vice President-Midwest
Area of WMI since the consummation of the Merger.
Mr. Damico was Region Vice President--Mountain
Region of Old WMI from January 1998 until the
consummation of the Merger. Mr. Damico served as
Group President--Mountain Group of Old WMI from
1993 to 1997.
Miller J. Mathews, Jr......
Mr. Mathews has been Senior Vice President-South-
ern Area of WMI since the consummation of the
Merger. Mr. Mathews served as the Southern Region
Vice President for USA Waste from August 1995 un-
til the consummation of the Merger. Mr. Mathews
assumed the position with USA Waste after USA
Waste acquired Sunray Services, Inc. in August
1995, a company which Mr. Mathews formed.
Douglas G. Sobey...........
Mr. Sobey has been Senior Vice President-Western
Area of WMI since the consummation of the Merger.
Mr. Sobey served as Regional Vice-President for
USA Waste from March 1990 until the consummation
of the Merger.
David Sutherland-Yoest..... Mr. Sutherland-Yoest has been Senior Vice Presi-
dent-Atlantic Area of WMI since the consummation
of the Merger. Mr. Sutherland-Yoest was Vice
Chairman of the Board and Vice President--Atlan-
tic Region and President of Canadian Waste Serv-
ices, Inc. from August 1996 until the consumma-
tion of the Merger. He was President, Chief Oper-
ating Officer and a director of USA Waste from
May 1994 until August 1996. Prior to joining USA
Waste, he was President, Chief Executive Officer
and a director of Envirofil, Inc. ("Envirofil").
He joined Envirofil in January 1993 and was
elected a director in March 1993. From September
1989 to June 1992, Mr. Sutherland-Yoest served as
President of Browning-Ferris Industries, Ltd.
("BFI Ltd."), the Canadian subsidiary of BFI.
From January through September 1989, Mr. Suther-
land-Yoest served as Vice President, Corporate
Development, for Laidlaw Waste Systems, Inc.
("Laidlaw"). From 1987 to September 1989, Mr.
Sutherland-Yoest was Laidlaw's Regional Vice-
President--Atlantic Region, located in Columbus,
Ohio. From 1981 to 1987, Mr. Sutherland-Yoest
served as District Manager--Vancouver and Dis-
trict Manager--Calgary for BFI Ltd.
Charles A. Wilcox.......... Mr. Wilcox has been Senior Vice President-Eastern
Area of WMI since the consummation of the Merger.
Mr. Wilcox joined USA Waste in December 1994 and
served as Central Region Vice President immedi-
ately prior to the consummation of the Merger.
Prior to joining USA Waste, Mr. Wilcox was em-
ployed with BFI from 1981 to 1994. He held vari-
ous positions with BFI including Managing Direc-
tor of B.F.S.A. in Riyadh, Saudi Arabia (October
1984 to December 1987) and Regional Vice Presi-
dent--Pacific Region (October 1988 to June 1993).
Other assignments with BFI included President--
Special Services, Corporate; and Division Vice
President--Northern Florida.
Ronald H. Jones............ Mr. Jones has been Vice President and Treasurer
of WMI since the consummation of the Merger. Mr.
Jones was Vice President and Treasurer of USA
Waste from the time he joined USA Waste in June
1995 until the consummation of the Merger. Prior
to joining USA Waste, Mr. Jones was employed by
Chambers Development Company, Inc. ("Chambers")
as Vice President and Treasurer from July 1992 to
June
B-6
1995, Director-Corporate Development from Decem-
ber 1990 to July 1992, and Assistant Vice Presi-
dent-Finance from July 1989 to December 1990.
Prior to joining Chambers, Mr. Jones was Vice
President and manager of the Cincinnati regional
office engaged in corporate and middle market
lending with Bank of New York (formerly Irving
Trust Company) and with Chase Manhattan Bank.
Bruce E. Snyder............ Mr. Snyder has been Vice President and Chief Ac-
counting Officer of WMI since the consummation of
the Merger. Mr. Snyder was Vice President and
Chief Accounting Officer of USA Waste from July
1, 1992 until the consummation of the Merger.
Prior to joining USA Waste, Mr. Snyder was em-
ployed by the international accounting firm of
Coopers & Lybrand L.L.P., serving there since
1989 as an audit manager. From 1985 to 1989, Mr.
Snyder held various financial positions with
Price Edwards Henderson & Co., a privately held
real estate development and management company in
Oklahoma City, Oklahoma, and its affiliated com-
panies, ultimately serving as Senior Vice Presi-
dent.
B-7
SCHEDULE C
DIRECTORS AND OFFICERS OF THE COMPANY
DIRECTORS OF THE COMPANY
Set forth below are the name, business address and business background of
each person who is a director of the Company.
NAME AND ADDRESS PRINCIPAL OCCUPATIONS
Sir William Barlow......... Sir William Barlow has been a director of the
4 Parkside Henley-on- Company since March 1992 and is a former Chairman
Thames Oxfordshire RG9 1TX of BICC plc (which includes Balfour Beatty Limit-
England ed). He is a former Chairman of the British Post
Office (which during his tenure included British
Telecom), and of Thorn EMI Engineering Group. Sir
William Barlow is a citizen of the United King-
dom.
Peter B. Dessing...... Mr. Dessing has been a director of the Company
Waste Management since March 1997. Mr. Dessing is the director
International plc 3 principally charged by the Board of Directors
Shortlands Hammersmith with overseeing the finance and accounting opera-
International Centre tions of the Company. From 1990 to March 1997, he
London W6 8RX England was the manager of the Company's operations in
the Netherlands. Mr. Dessing is also a director
of R. Frazier Group Limited. He is a non-resident
citizen of the United States and currently re-
sides in the United Kingdom.
Jan Ekman.................. Mr. Ekman has been a director of the Company
Svenska Handelsbanken since March 1992 and has been Vice Chairman of
Grevgrand 2 S-106 70 Svenska Handelsbanken (a major Swedish banking
Stockholm Sweden institution) since 1985. Mr. Ekman is Chairman of
WMI Sellbergs AB and Svensk Avfallskonverting AB,
each a subsidiary of the Company, and also a di-
rector of Catella AB, NCC AB, PLM AB and Ingka
Holdings B.V. Amsterdam. He is also a member of
the Banking Advisory Group of the International
Finance Corporation, Washington, D.C. He is a
citizen of Sweden.
Edwin G. Falkman........... Mr. Falkman has been a director of the Company
Waste Management since February 1992 and the Company's Chairman
International plc 3 since July 1995. From June 1992 to July 1995 he
Shortlands Hammersmith served as the Chief Executive of the Company. He
International Centre was employed by Old WMI from 1977 to February
London W6 8RX England 1992, working exclusively on its international
operations, and was a Vice President of Old WMI
from January 1990 to February 1992 and President
of WMII from June 1989 until August 1991. Mr.
Falkman is the Chairman of the Environment Com-
mission of the International Chamber of Commerce
and a member of the Executive Committee of the
World Business Council for Sustainable Develop-
ment. He is also a director of Wessex Water plc.
He is a non-resident citizen of the United States
and has resided in the United Kingdom since 1978.
Donald F. Flynn............ Mr. Flynn has been a director of the Company
Flynn Enterprises Inc. 676 since March 1992. Mr. Flynn served as a director
North Michigan Avenue of Old WMI from 1981 until the consummation of
Suite 4000 Chicago, the Merger. He served as Chairman of the Board
Illinois 60611 U.S.A. and President of Flynn Enterprises, Inc., a fi-
nancial advisory and venture capital firm, since
February 1988. He also served as Chairman of the
Board, from July 1992 to February 1996 and Chief
Executive Officer from July 1992 to May 1995, of
Discovery Zone, Inc., a franchiser and operator
of
C-1
indoor entertainment and fitness facilities de-
signed for children. Mr. Flynn was a Senior Vice
President of Old WMI from May 1975 to January
1991. From January 1, 1991 to December 31, 1994,
Mr. Flynn served as a consultant to Old WMI. Mr.
Flynn also serves as a director of Psychemedics
Corporation and Extended Stay America, Inc. He is
a citizen of the United States.
Bo Gabrielson.............. Mr. Gabrielson was elected to the Board of Direc-
Waste Management tors in January 1997 and has been Chief Executive
International plc 3 of the Company since March 1997. The Chief Execu-
Shortlands Hammersmith tive is the director principally charged by the
International Centre Board of Directors with overseeing the executive
London W6 8RX England operations of the Company. He served as Vice
President-Group Financial Director of Waste Man-
agement International Services Limited ("WM Serv-
ices") between July 1995 and January 1997. From
February 1992 to July 1995, he served as Vice
President-Legal Affairs of WM Services. Previous-
ly, Mr. Gabrielson was employed for nine years by
PLM AB (Sweden) in various legal and financial
positions, most recently as Executive Vice Presi-
dent of Finance and Administration. He is a non-
resident citizen of Sweden and has resided in the
United Kingdom since 1992.
Joseph M. Holsten.......... Mr. Holsten has been a director of the Company
Waste Management, Inc. since July 1995. He served as the Company's Chief
3003 Butterfield Road Oak Executive between July 1995 and March 1997. Mr.
Brook, Illinois Holsten was elected Executive Vice President and
60523-1100 U.S.A. Chief Operating Officer of Old WMI in February
1997. Since joining Old WMI in 1981, Mr. Holsten
has held a number of positions within the Group
including from October 1993 to July 1995 serving
as Executive Vice President and Chief Financial
Officer of Old WMI, from September to October
1993 as Vice President, Chief Financial Officer
and Treasurer of Rust, and from April 1992 to Au-
gust 1993 as Vice President of Acquisitions and
Project Development for the Company. He is a cit-
izen of the United States.
Robert S. Miller...........
1001 Fannin Suite 4000 Mr. Miller has been a director of the Company
Houston, Texas 77002 since January 1988. Mr. Miller has been a direc-
U.S.A. tor of WMI since the consummation of the Merger.
Mr. Miller was a director of Old WMI from May
1997 and was Chairman of the Board and Chief Ex-
ecutive Officer from October 1997 until the con-
summation of the Merger. He has been Vice Chair-
man of Morrison Knudsen Corporation since Septem-
ber 1996 and served as Chief Executive Officer of
Federal Mogul from September until November 1996.
Since 1993 Mr. Miller has served as Vice Presi-
dent and Treasurer of Moor Mill and Lumber and
from 1992 to 1993 he was Senior Partner at James
D. Wolfensohn, Inc. Between 1979 and 1992 Mr.
Miller was employed at Chrysler. Mr. Miller is a
director of the Coleman Company, Inc., Federal
Mogul, Pope and Talbot, Inc. and Symantec Corpo-
ration. He is a citizen of the United States.
Giorgio Porta.............. Mr. Porta has been a director of the Company
Comune di Milano Piazza since March 1992 and is the Chief Councilor for
Scala 3 20122 Milan Italy Privatization and Development for the Municipal-
ity of Milan, Italy. Mr. Porta was the Interna-
tional Affairs Director of ENI S.p.A., the Ital-
ian state-owned petroleum and chemicals group
from 1993 to 1997. He was Chairman of Enichem
S.p.A. (a specialty chemical business) from 1990
until 1993. From 1988 to 1990
C-2
he served as Vice Chairman of Ferruzzi Agricola
Finanziaria. He is Chairman of the Environment
Working Group of UNICE (the Union of Industrial
Employers Confederations of Europe), and Chairman
of the Environment Working Group of Confindustria
(The Industrial Employers Federation of Italy).
He is also a member of the Environment Consulta-
tive Forum of the European Commission. He is a
citizen of Italy.
Dr. Manfred Scholz......... Dr. Scholz has served as a director of the Com-
Haindl Papier GmbH Georg- pany since April 1993 and is Executive Director
Haindl--Strasse 5 86153 of Haindl Papier GmbH (a paper manufacturing com-
Augsburg Germany pany). He is also the President of the Bavarian
Industry Federation and a member of the supervi-
sory boards of Gothaer Versicherungsbank, G.A.
Pfleiderer Unternehmensverwaltung, Heilit &
Woerner Bau-AG, Bayerische Handelsbank and SG
Holding AG. He is a citizen of Germany.
EXECUTIVE OFFICERS OF THE COMPANY
The Company has no officers; however, certain technical, administrative,
clerical and support services of the Company and the various country holding
companies and operating subsidiaries of the Company are performed by WM
Services, an English subsidiary of the Company. Its staff, which are located
primarily in London, and the key staff members of the Company's other
subsidiaries, including country-level holding companies and operating
companies, implement the policies of the Company Board and manage various
aspects of the Company's business. The senior management of WM Services
includes the following individuals:
NAME AND ADDRESS PRINCIPAL OCCUPATIONS
Stephen P. Stanczak........ Mr. Stanczak has been Vice President-Legal Af-
3 Shortlands Hammersmith fairs since July 1995 and Company Secretary of
International Centre the Company since October 1995. From January 1992
London W6 8RX England to July 1995 he was Staff Vice President and As-
sociate General Counsel of WTI and from May 1993
to July 1995 he served as Corporate Secretary of
WTI. He served as Vice President, Corporate Sec-
retary and Associate General Counsel of Rust from
May 1994 to July 1995. Mr. Stanczak is a non-res-
ident citizen of the United States and currently
resides in the United Kingdom.
John S. Quinn.............. Mr. Quinn has been Vice President and Corporate
3 Shortlands Hammersmith Controller since July 1997. From March 1996 until
International Centre June 1997 he was Division President for Old WMI's
London W6 8RX England operations in Alberta and British Columbia, Cana-
da. From February 1992 to February 1996 he was
Vice President and Controller--Western Canada for
Old WMI and prior to that he held a number of
controllership functions throughout Canada with
Old WMI during the period from August 1987. Mr.
Quinn is a non-resident citizen of Canada and
currently resides in the United Kingdom.
C-3
LOGO SCHEDULE D
KPMG Corporate Finance
8 Salisbury Square
London EC4Y 8BB
United Kingdom
Sir William Barlow, Messrs Jan Ekman and
Giorgio Porta and Dr Manfred Scholz
(together "Independent Directors")
Waste Management Plc ("plc" or "Company")
3 Shortlands
Hammersmith International Centre
London
W6 8RX
29 June 1998
Dear Sirs
PROJECT PHOENIX
You, the Independent Directors, have requested our opinion as to the fairness
from a financial point of view to the holders (other than Waste Management
Inc. ("Inc") and its subsidiaries) (the "Minority Shareholders") of the
outstanding ordinary shares, par value 10 pence per share (the "Minority
Shares") of plc, of the 345 pence per Minority Share in cash consideration
proposed to be paid to the Minority Shareholders by Inc (the "Proposal"),
details of which are set out in the attached draft news release. As of today's
date, Inc is the holder of approximately 80% of plc ordinary shares.
KPMG Corporate Finance, as part of its investment banking and corporate
finance advisory business, is engaged in the valuation of businesses and their
securities in connection with, inter alia, mergers and acquisitions,
disposals, private placements and valuations. We are acting as financial
adviser to the Independent Directors in connection with, and have participated
in certain of the negotiations leading to, the Proposal.
In connection with this opinion, we have:
. reviewed the financial terms and conditions of the Proposal;
. reviewed certain historical business and financial information relating to
the Company;
. reviewed certain internal financial analyses and forecasts for the Company
prepared by its management;
. held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects;
. reviewed the reported price and trading activity for the ordinary shares;
. visited certain of the facilities of the Company;
. compared certain financial and stock market information for the Company with
similar information for certain other companies the shares of which are
publicly traded;
. reviewed the financial terms of certain business combinations in the waste
industry specifically and in other industries generally; and
. performed such other studies and analysis as we considered appropriate.
In light of Inc's position as the majority shareholder in the Company and the
absence of any indication that Inc would support either a sale of the Company
or other alternatives to the Proposal involving a third party, an active
D-1
solicitation of third party interest in a transaction involving the Company is
not practicable and therefore has not been pursued.
We have relied upon the accuracy and completeness of all the financial
information and other information reviewed by us and have assumed such
accuracy and completeness for the purposes of rendering this opinion. We have
not performed any independent verification of this information. In addition,
we have not made an independent evaluation or appraisal of the assets and
liabilities of the Company and we have not been furnished with any such
evaluation or appraisal. Our advisory services and the opinion expressed
herein are provided for the information and assistance of the Independent
Directors in connection with their consideration of the transaction
contemplated by the Proposal and such opinion does not constitute a
recommendation as to how any holder of ordinary shares should vote or act with
respect to such transaction.
In rendering our opinion, we have assumed that the Proposal will be
consummated on the terms stated in the draft news release attached, without
any waiver of any material terms or conditions by the Company and that
obtaining any necessary regulatory or third party approvals will not have an
adverse effect on the Company.
KPMG Corporate Finance is acting as financial adviser to the Independent
Directors in connection with the Proposal and will receive a fee for its
services, a portion of which is contingent upon consummation of the Proposal.
Based on and subject to the foregoing:
. we are of the opinion that the consideration is fair to the Minority
Shareholders from a financial point of view; and
. we consider the terms of the Proposal to be fair and reasonable so far as
the Minority Shareholders are concerned.
Yours faithfully
KPMG Corporate Finance
D-2
SCHEDULE E
Investment
Banking
Corporate and
Institutional
Client Group
5500 Sears
Tower
Chicago,
Illinois 60606
312 906 6200
FAX 312 906
6262
LOGO
June 29, 1998
Board of Directors
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, Illinois 60521
Members of the Board of Directors:
Waste Management, Inc. (the "Acquiror"), Waste Management International,
Inc. ("WMII"), a wholly owned subsidiary of the Acquiror, and Waste Management
International, plc ("WME") have reached an agreement on the terms of a
proposal pursuant to which the Acquiror, through WMII, would acquire the
approximately 20% of the WME ordinary shares not already directly or
indirectly owned by the Acquiror or its affiliates (the "Shares") for
(Pounds)3.45 per ordinary Share net to the seller in cash (the
"Consideration"). Each depositary Share represented by American Depositary
Receipts ("ADR"), the equivalent of 2 ordinary Shares, would be valued at
$11.50 per ADR based on the exchange rate US$1.6662:UK(Pounds)1 as of June 29,
1998, it being understood that because the Shares are priced in Pounds
Sterling the U.S. Dollar value of each ADR will fluctuate with the U.S.
Dollar--Pounds Sterling exchange rate. The proposal will be implemented by
means of a Scheme of Arrangement under Section 425 of the English Companies
Act 1985 (the "Transaction").
You have asked us whether, in our opinion, the Consideration to be paid by
the Acquiror pursuant to the Transaction is fair from a financial point of
view to the Acquiror.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the WME and the Acquiror that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of WME, as well as the amount and timing of the cost savings and
related expenses and synergies expected to result from the Transaction
(the "Expected Cost Savings") furnished to us by the WME and the
Acquiror, respectively;
(3) Conducted discussions with members of senior management of WME and the
Acquiror concerning the matters described in clauses 1 and 2 above, as
well as their respective businesses and prospects before and after
giving effect to the Transaction and the Expected Cost Savings;
(4) Reviewed the market prices and valuation multiples for the Shares and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
(5) Reviewed the results of operations of WME and compared them with those
of certain publicly traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions which we deemed to be
relevant;
E-1
(7) Participated in discussions and negotiations among representatives of
the Acquiror and WME and their financial and legal advisors;
(8) Reviewed the potential pro forma impact of the Transaction on the
Acquiror;
(9) Reviewed the U.S. and U.K. joint press releases, dated June 29, 1998,
describing the terms of the Transaction (the "Press Releases"); and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have
not assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of WME. In addition, we have not assumed any obligation to conduct
any physical inspection of the properties or facilities of the WME. With
respect to the financial forecast information and the Expected Cost Savings
furnished to or discussed with us by WME or the Acquiror, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of WME's or the Acquiror's management as to the
expected future financial performance of WME or the Acquiror, as the case may
be, and the Expected Cost Savings. We have also assumed that the final form of
the Press Releases will be substantially similar to the last draft reviewed by
us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available
to us as of, the date hereof. Without limiting the foregoing, our opinion does
not address the potential effects of fluctuations in the U.S. Dollar--Pounds
Sterling exchange rate after the date hereof. We have assumed that in the
course of obtaining the necessary regulatory or other consents or approvals
(contractual or otherwise) for the Transaction, no restrictions, including any
divestiture requirements or amendments or modifications, will be imposed that
will have a material adverse effect on the contemplated benefits of the
Transaction.
We are acting as financial advisor to the Acquiror in connection with the
Transaction and will receive a fee from the Acquiror for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. In addition, the Acquiror has agreed to indemnify us for certain
liabilities arising out of our engagement. We are currently advising the
Acquiror in connection with its merger with USA Waste Services, Inc., we are
an appointed financial advisor to WME and have, in the past, provided
financial advisory and financing services to the Acquiror and/or its
affiliates, including WME, and may continue to do so and have received, and
may receive, fees for the rendering of such services. In addition, in the
ordinary course of our business, we may actively trade the Shares and other
securities of WME, as well as securities of the Acquiror for our own account
and for the accounts of customers and, accordingly, may at any time hold a
long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Acquiror. Our opinion does not address the merits of the underlying decision
by the Acquiror to engage in the Transaction and does not constitute a
recommendation to any shareholder of WME as to how such shareholder should
vote on the proposed Transaction or any matter related thereto.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Consideration to be paid by the Acquiror pursuant to
the Transaction is fair from a financial point of view to the Acquiror.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
E-2
Exhibit 17(b)(5)
[Arthur Andersen Logo]
The Board of Directors
Waste Management International plc
As independent public accountants, we hereby consent to the incorporation by
reference in this Transaction Statement on Schedule 13E-3 of our report dated
March 3, 1998 included in the Annual Report of Waste Management International
plc ("the Company") on Form 20-F for the fiscal year ended December 31, 1997. It
should be noted that we have not audited any financial statements of the Company
and its subsidiaries subsequent to December 31, 1997 or performed any audit
procedures subsequent to the date of our report.
/s/ Arthur Andersen
------------------------------
Arthur Andersen
Independent Public Accountants
London, England
August 28, 1998
EXHIBIT 17(c)1
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
WASTE MANAGEMENT INTERNATIONAL plc,
CITIBANK, N.A.,
As Depositary,
AND
HOLDERS OF AMERICAN DEPOSITARY RECEIPTS
------------------
Deposit Agreement
------------------
Dated as of April 1, 1992
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
PARTIES......................................................................1
RECITALS.....................................................................1
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. American Depositary Shares............................2
SECTION 1.02. Articles of Assoication...............................2
SECTION 1.03. Commission............................................2
SECTION 1.04. Company...............................................3
SECTION 1.05. Custodian; Custodians.................................3
SECTION 1.06. Deposit Agreement.....................................3
SECTION 1.07. Depositary............................................3
SECTION 1.08. Deposited Securities..................................4
SECTION 1.09. Dollars; Pounds Sterling;
Pence or "P"..........................................4
SECTION 1.10. Holder................................................4
SECTION 1.11. Principal Office......................................4
SECTION 1.12. Receipts..............................................5
SECTION 1.13. Registrar.............................................5
SECTION 1.14. Restricted Securities.................................5
SECTION 1.15. Securities Act of 1933................................6
SECTION 1.16. Securities Exchange Act of
1934..................................................6
SECTION 1.17. Shares................................................6
SECTION 1.18. Shares Registrar......................................6
SECTION 1.19. Stamp Taxes...........................................6
SECTION 1.20. U.K. Taxing Authority.................................7
ARTICLE II
FORM OF RECEIPTS, DEPOSIT OF SHARES,
EXECUTION AND DELIVERY, TRANSFER AND SURRENDER
OF RECEIPTS
----------------------------------------------
SECTION 2.01. Form and Transferability of
Receipts..............................................7
SECTION 2.02. Deposit of Shares....................................10
SECTION 2.03. Execution and Delivery of
Receipts.............................................12
SECTION 2.04. Transfer of Receipts; Combina-
tion and Split-up of Receipts.........................14
SECTION 2.05. Surrender of Receipts and
Withdrawal of Deposited
Securities............................................16
SECTION 2.06. Limitations on Execution and
Delivery, Transfer, Etc. of
Receipts; Suspension of Deliv-
ery, Transfer, Etc....................................18
SECTION 2.07. Lost Receipts, Etc....................................21
SECTION 2.08. Cancellation and Destruction
of Surrendered Receipts...............................21
ARTICLE III
CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS
------------------------------------------
SECTION 3.01. Filing Proofs, Certificates
and Other Information.................................22
SECTION 3.02. Liability of Holder for Taxes.........................23
SECTION 3.03. Warranties on Deposit of
Shares................................................23
SECTION 3.04. Disclosure of Beneficial
Ownership.............................................24
ARTICLE IV
THE DEPOSITED SECURITIES
------------------------
SECTION 4.01. Power of Attorney.....................................26
SECTION 4.02. Cash Distributions; Withhold-
ing and Other Taxes...................................26
SECTION 4.03. Distributions Other Than Cash,
Shares or Rights......................................28
SECTION 4.04. Distribution in Shares................................29
SECTION 4.05. Rights................................................30
SECTION 4.06. Conversion of Foreign
Currency..............................................33
SECTION 4.07. Fixing of Record Date.................................35
SECTION 4.08. Voting of Deposited Securities........................37
SECTION 4.09. Changes Affecting Deposited
Securities............................................40
SECTION 4.10. Available Information.................................41
SECTION 4.11. Reports...............................................41
SECTION 4.12. Lists of Receipt Holders..............................43
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Page
----
SECTION 4.13. Withholding 44
ARTICLE V
THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY
---------------------------------------------
SECTION 5.01. Maintenance of Office and
Transfer Books by the
Depositary 45
SECTION 5.02. Prevention or Delay in
Performance 46
SECTION 5.03. Obligations of the Depositary,
the Custodian and the Company 47
SECTION 5.04. Resignation and Removal of the
Depositary; Appointment of
Successor Depositary 49
SECTION 5.05. The Custodian 51
SECTION 5.06. Notices and Reports 53
SECTION 5.07. Issuance of Additional Shares,
Etc 54
SECTION 5.08. Indemnification 57
SECTION 5.09. Charges of Depositary 59
SECTION 5.10. Exclusivity 62
SECTION 5.11. List of Restricted Securities
Owners 62
SECTION 5.12. Certain Rights of the Deposi-
tary; Limitations 62
ARTICLE VI
AMENDMENT AND TERMINATION
-------------------------
SECTION 6.01. Amendment 65
SECTION 6.02. Termination 66
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.01. Counterparts 69
SECTION 7.02. No Third Party Beneficiaries 69
SECTION 7.03. Severability 69
SECTION 7.04. Holders and Parties; Binding
Effect 69
SECTION 7.05. Notices 70
SECTION 7 06. Governing Law 71
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Page
----
SECTION 7.07. Assignment 72
SECTION 7.08. Compliance With U.S. Securi-
ties Laws 72
TESTIMONIUM 73
SIGNATURES 73
EXHIBIT A
---------
FORM OF FACE OF RECEIPT
- -----------------------
Introductory Paragraph A-1
(1) The Deposit Agreement A-2
(2) Surrender of Receipts and with-
drawal of Deposited Securities A-3
(3) Transfers, Split-ups and
Combinations A-4
(4) Liability of Holder For Taxes A-7
(5) Warranties by Depositor A-8
(6) Charges of Depositary A-9
(7) Filing Proofs, Certificates, and
Other Information A-10
(8) Disclosure of Beneficial Ownership A-11
(9) Title to Receipts A-12
(10) Validity of Receipt A-13
(11) Available Information A-13
FORM OF REVERSE OF RECEIPT--Summary of Certain
- -------------------------- Additional Provisions of the Deposit Agreement
(12) Dividends and Distributions;
Rights A-14
(13) Record Dates A-18
(14) Voting of Deposited Securities A-19
(15) Changes Affecting Deposited
Securities A-22
(16) Reports; Inspection of Transfer
Books A-23
(17) Withholding A-24
(18) Liability of the Company and
Depositary A-24
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Page
----
(19) Resignation and Removal of Deposi-
tary; Substitution of Custodian A-29
(20) Amendment of Deposit Agreement and
Receipts A-30
(21) Termination of Deposit Agreement A-31
(22) Compliance With U.S. Securities
Laws A-33
EXHIBIT B
---------
Charges of the Depositary B-1
-v-
DEPOSIT AGREEMENT
-----------------
DEPOSIT AGREEMENT dated as of April 1, 1992 among WASTE MANAGEMENT
INTERNATIONAL plc, a company incorporated under the laws of England and Wales
(the "Company"), CITIBANK, N.A., a national banking association organized
under the laws of the United States of America (the "Depositary"), and all
Holders from time to time of American Depositary Receipts issued hereunder.
W I T N E S S E T H :
---------------------
WHEREAS, the parties hereto desire to provide arrangements for the
deposit of Shares as hereinafter defined of the Company, from time to time
with the Depositary or with the Custodian (as hereinafter defined), which at
the date hereof is Citibank (London), as agent of the Depositary for the
purposes set forth in this Deposit Agreement, for the creation of American
Depositary Shares representing the Shares so deposited and for the execution
and delivery of American Depositary Receipts in respect of the American
Depositary Shares,
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
-----------
The following definitions shall for all purposes, unless otherwise
clearly indicated, apply to the respective terms used in this Deposit
Agreement:
SECTION 1.01. American Depositary Shares. The term "American
Depositary Shares" shall mean the rights represented by the Receipts issued
hereunder and the interests in the Deposited Securities represented thereby.
Each one (1) American Depositary Share shall represent two (2) Shares, until
there shall occur a distribution upon Deposited Securities covered by Section
4.04 or a change in Deposited Securities covered by Section 4.09 with respect
to which additional Receipts are not executed and delivered, and thereafter
American Depositary Shares shall represent the Shares or Deposited Securities
specified in such Sections.
SECTION 1.02. Articles of Association. The term "Articles of
Association" means the Articles of Association of the Company.
SECTION 1.03. Commission. The term "Commission" shall mean the
Securities and Exchange Commission of the United
-2-
States or any successor governmental agency in the United States.
SECTION 1.04. Company. The term "Company" shall mean WASTE MANAGEMENT
INTERNATIONAL plc, a company incorporated and existing under the laws of
England and Wales, having its registered office at Windsor House, 55-56 St.
James Street, London SW1A1LA, England, and its successors.
SECTION 1.05. Custodian; Custodians. The term "Custodian" shall mean,
as of the date hereof, Citibank (London), having its principal office at 11
Old Jewry, London EC2R8DJ, England, as Custodian and agent of the Depositary
for the purposes of this Deposit Agreement, and any other firm or corporation
which may be appointed by the Depositary pursuant to the terms of Section 5.05
as a substitute or an additional or custodians hereunder, as the context shall
require, and the term "Custodian" shall mean all of them, collectively.
SECTION 1.06. Deposit Agreement. The term "Deposit Agreement" shall
mean this instrument as it may from time to time be amended in accordance with
the terms hereof and all instruments supplemental hereto.
SECTION 1.07. Depositary. The term "Depositary" shall mean Citibank,
N.A., a national banking association
-3-
incorporated under the laws of the United States of America, and any successor
as depositary hereunder.
SECTION 1.08. Deposited Securities. The term "Deposited Securities" as
of any time shall mean shares at such time deposited under this Deposit
Agreement and any and all other securities, property and cash received by the
Depositary or the Custodian in respect thereof and at such time held
hereunder, subject in the case of cash to the provisions of Section 4.06.
SECTION 1.09. Dollars; Pounds Sterling; Pence or "P". The term
"dollars" shall mean United States dollars. The term "Pounds Sterling" shall
mean pounds sterling of England and Wales and the term "pence" or "P" shall
mean pence of England and Wales.
SECTION 1.10. Holder. The term "Holder" shall mean the person in whose
name a Receipt is registered on the books of the Depositary or the Registrar,
if any, maintained for such purpose.
SECTION 1.11. Principal Office. The term "Principal Office", when used
with respect to the Depositary, shall mean the principal office of the
Depositary at which at any particular time its corporate trust business shall
be administered, which, at the date of this Deposit Agreement, is located at
111 Wall Street, 5th Floor, New York, New York 10043.
-4-
SECTION 1.12. Receipts. The term "Receipts" shall mean the American
Depositary Receipts issued hereunder evidencing American Depositary Shares. A
Receipt may evidence any number of American Depositary Shares.
SECTION 1.13. Registrar. The term "Registrar" shall mean the
Depositary or, upon the request or with the approval of the Company, any bank
or trust company having an office in the Borough of Manhattan, the City of New
York, which shall be appointed by the Depositary to register Receipts and
transfers of Receipts as herein provided, and shall include any co-registrar
appointed by the Depositary, upon the request or with the approval of the
Company, for such purposes.
SECTION 1.14. Restricted Securities. The term "Restricted Securities"
shall mean Shares as defined below, or Receipts representing such Shares,
which are acquired directly or indirectly from the Company or its affiliates
(as defined in Rule 144 to the Securities Act of 1933) in a transaction or
chain of transactions not involving any public offering or which are subject
to resale limitations under Regulation D or Rule 144 under that Act or both,
or which are held by an officer, director (or persons performing similar
functions) or other affiliate of the Company, or which are subject to other
restrictions on sale or deposit under the laws of the United States, England
and
-5-
Wales, or under a shareholder agreement or Articles of Association of the
Company.
SECTION 1.15. Securities Act of 1933. The term "Securities Act of
1933" shall mean the United States Securities Act of 1933, as from time to
time amended.
SECTION 1.16. Securities Exchange Act of 1934. The term "Securities
Exchange Act of 1934" shall mean the United States Securities Exchange Act of
1934, as from time to time amended.
SECTION 1.17. Shares. The term "Shares" shall mean the Ordinary Shares
of 10p. each in the capital of the Company, validly issued and outstanding,
fully paid and shall include evidence of rights to receive Shares; provided
that in no event shall Shares include evidence of rights to receive Shares
with respect to which the full purchase price has not been paid.
SECTION 1.18. Share Registrar. The term "Share Registrar" shall mean
Barclays Bank plc, a company incorporated in England under the Companies Act
of 1862 of Great Britain, which acts as registrar for the Shares, when acting
in such capacity, and any successor in such capacity.
SECTION 1.19. Stamp Tax. The term "Stamp Tax" shall mean, as the
context may require, (a) any stamp duty reserve tax imposed by Part IV of the
Finance Act of 1986 of England and
-6-
Wales (or any statutory modification or re-enactment thereof) in respect of
any deposit of Shares in accordance with Section 2.02 of this Deposit
Agreement, or (b) any stamp duty imposed by Part III of the Finance Act 1986
of England and Wales (or any statutory modification or re-enactment thereof)
in respect of any deposit of Shares in accordance with Section 2.02 of the
Deposit Agreement, or (c) both of them.
SECTION 1.20. U.K. Taxing Authority. The term "U.K. taxing authority"
shall mean the Inland Revenue of the England and Wales.
ARTICLE II
FORM OF RECEIPTS, DEPOSIT OF SHARES,
EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF
RECEIPTS
-------------------------------------------------
SECTION 2.01. Form and Transferability of Receipts. Definitive
Receipts shall be engraved or printed or lithographed on steel-engraved
borders and shall be substantially in the form set forth in Exhibit A annexed
to this Deposit Agreement, with appropriate insertions, modifications and
omissions, as hereinafter provided or may be required or permitted under the
rules of the New York Stock Exchange. Receipts shall be issued in
denominations of whole numbers of American Depositary Shares. Such Receipts
shall be executed and dated by the Depositary by
-7-
the manual signature of a duly-authorized officer of the Depositary; provided,
however, that such signature may be a facsimile if a Registrar for the
Receipts shall have been appointed and such Receipts are countersigned by the
manual signature of a duly-authorized officer of the Registrar and dated by
such officer. No Receipt shall be entitled to any benefits under this Deposit
Agreement or be valid or obligatory for any purpose, unless such Receipt shall
have been executed by the Depositary by the manual signature of a
duly-authorized officer or, if a Registrar shall have been appointed, by the
manual signature of a duly-authorized officer of the Registrar, and such
execution of any Receipt by manual signature shall be conclusive evidence, and
the only evidence, that such Receipt has been duly executed and delivered
hereunder. The Depositary shall maintain books in which each Receipt so
executed and delivered as hereinafter provided and the transfer of each
Receipt shall be registered. Receipts bearing the facsimile signature of a
duly-authorized officer of the Depositary, who was at the time of signature a
proper officer of the Depositary, shall bind the Depositary, notwithstanding
the fact that such officer has ceased to hold such office prior to the
execution of such Receipts by the Registrar and their delivery or such officer
did not hold such office at the date of such Receipts.
-8-
The Receipts may be endorsed with or have incorporated in the text
thereof such legends or recitals or changes not inconsistent with the
provisions of this Deposit Agreement as may be necessary to enable the
Depositary to perform its obligations hereunder or as may be required to
comply with any applicable law or regulations thereunder or with the rules and
regulations of any securities exchange or market upon which American
Depositary Shares may be traded or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to which any
particular Receipts are subject by reason of the date of issuance of the
underlying Deposited Securities or otherwise.
Title to a Receipt (and to each American Depositary Share evidenced
thereby), when properly endorsed or accompanied by proper instruments of
transfer, shall be transferable by delivery with the same effect as in the
case of a negotiable instrument under the laws of the State of New York;
provided, however, that the Depositary, notwithstanding any notice to the
contrary, may deem and treat the Holder thereof as the absolute owner thereof
for the purpose of determining the person entitled to distribution of
dividends or other distributions or to any notice provided for in this Deposit
Agreement and for all other purposes.
-9-
SECTION 2.02. Deposit of Shares. Subject to the terms and conditions
of this Deposit Agreement, Shares or evidence of rights to receive Shares
(except as otherwise contemplated by Section 5.12 hereof) may be deposited by
any person (in the case of the Company, or any affiliate, subject to Section
5.07 hereof) including the Depositary in its individual capacity by delivery
thereof to the Custodian, accompanied by any appropriate instrument or
instruments of transfer or endorsement, in form satisfactory to such
Custodian, together with (i) all such certifications and payments (including,
without limitation, amounts in respect of any applicable stamp taxes) and
evidence of such payments (including, without limitation, stamping or
otherwise marking such Shares by way of receipt) as may be required by the
Depositary or such Custodian in accordance with the provisions of this Deposit
Agreement and (ii) if the Depositary requires, a written order directing the
Depositary to execute and deliver to, or upon the written order of, the
persons or persons stated in such order a Receipt or Receipts for the number
of American Depositary Shares representing the Shares so deposited.
Except as otherwise contemplated by Section 5.12, no Shares shall be
accepted for deposit and no Receipts shall be issued unless the Shares are
accompanied by (a) payment of any
-10-
tax or duty of England and Wales, and (b) evidence satisfactory to the
Depositary (which may be an opinion of counsel) that any necessary approval
has been granted by, or there has been compliance with the rules and
regulations of the governmental agency in England and Wales, if any, which is
then performing the function of the regulation of currency exchange.
If required by the Depositary, Shares presented for deposit at any
time, whether or not the transfer books of the Company or the Share Registrar
are closed, shall also be accompanied by (1) an agreement or assignment, or
other instrument satisfactory to the Depositary, which will provide for the
prompt transfer to the Custodian of any dividend, or right to subscribe for
additional Shares or to receive other property which any person in whose name
the Shares are or have been recorded may thereafter receive upon or in respect
of any such deposited Shares, or in lieu thereof, such agreement of indemnity
or other agreement as shall be satisfactory to the Depositary and (2) if the
Shares are registered in the name of the person on whose behalf they are
presented for deposit, a proxy or proxies entitling the Custodian to vote such
deposited Shares for any and all purposes until the Shares are so registered
in the name of the Custodian or its nominee.
-11-
At the request and risk and expense of any holder of Shares, and for
the account of such holder, the Depositary may receive Shares to be deposited,
together with the other instruments herein specified for the purpose of
forwarding such Shares to the Custodian for deposit hereunder.
Upon each delivery to a Custodian of a certificate or certificates for
Shares to be deposited hereunder (or other Deposited Securities pursuant to
Section 4.02, 4.03, 4.05 or 4.09), together with the other documents above
specified, such Custodian shall advise the Depositary of such deposit, and the
Custodian shall, as soon as practicable, present such certificate or
certificates to the Company (or the appointed agent of the Company for
registration of transfer, which agent may be the Share Registrar) for
registration of transfer of the Shares or the Deposited Securities, as the
case may be, being deposited in the name of the Depositary or its nominee or
such Custodian or its nominee.
Deposited Securities shall be held by the Depositary or by a Custodian
for the account and to the order of the Depositary (on behalf of Holders) at
such other place or places as the Depositary shall determine.
SECTION 2.03. Execution and Delivery of Receipts. Upon receipt by a
Custodian of a deposit of Shares pursuant to
-12-
Section 2.02 hereunder and, in addition, if the register of the Company (or
any agent of the Company for transfer and registration of Deposited Securities
which may be the Share Registrar) are open, the Depositary may require a
proper acknowledgment or other evidence from the Company or such agent, if
any, satisfactory to the Depositary that any Deposited Securities have been
recorded upon the register of the Company (or any agent of the Company for
transfer and registration of such Deposited Securities) in the name of the
Depositary or its nominee or such Custodian or its nominee, together with the
other documents specified above, such Custodian shall notify the Depositary of
such deposit and the person or persons to whom or upon whose written order a
Receipt or Receipts are deliverable in respect thereof and the number of
American Depositary Shares to be evidenced thereby. Such notification shall be
made by letter or, at the request and risk and expense of the person making
the deposit, by cable, telex or facsimile transmission. Upon receiving such
notice from such Custodian, or upon the receipt of Shares by the Depositary,
the Depositary, subject to the terms and conditions of this Deposit Agreement,
shall execute and deliver at its Principal Office to or upon the order of the
person or persons named in the notice delivered to the Depositary, a Receipt
or Receipts, registered in the name or names requested by such
-13-
person or persons and evidencing in the aggregate the number of American
Depositary Shares to which such person or persons are entitled, but only upon
payment to the Depositary of the fees of the Depositary for making a deposit
and the issuance, execution and delivery of such Receipt or Receipts (as set
forth on Exhibit B hereto) and of all taxes (including Stamp Tax) and
governmental charges and fees payable in connection with such deposit and the
transfer of the Deposited Securities.
SECTION 2.04. Transfer of Receipts; Combination and Split-up of
Receipts. The Depositary, subject to the terms and conditions of this Deposit
Agreement, shall register transfers of Receipts on its transfer books, upon
any surrender to the Principal Office of the Depositary of a Receipt by the
Holder thereof in person or by duly-authorized attorney, properly endorsed or
accompanied by proper instruments of transfer and duly stamped as may be
required by applicable law and accompanied by funds sufficient to pay any
applicable transfer taxes. Upon payment to the Depositary of the expenses set
forth on Exhibit B hereto, the Depositary shall execute a new Receipt or
Receipts and deliver the same to or upon the order of the person entitled
thereto evidencing the same aggregate number of American Depositary Shares
as those evidenced by the Receipts surrendered.
-14-
The Depositary, subject to the terms and conditions of this Deposit
Agreement, shall upon surrender of a Receipt or Receipts for the purpose of
effecting a split-up or combination of such Receipt or Receipts, execute and
deliver a new Receipt or Receipts for any authorized number of American
Depositary Shares requested, representing the same aggregate number of
American Depositary Shares as the Receipt or Receipts surrendered.
The Depositary may appoint one or more co-transfer agents for the
purpose of effecting transfers, combinations and split-ups of Receipts at
designated transfer offices on behalf of the Depositary. In carrying out its
functions, a co-transfer agent may require evidence of authority and
compliance with applicable laws and other requirements by Holders or persons
entitled thereto and will be entitled to protection and indemnity to the same
extent as the Depositary. Such co-transfer agents may be removed and
substitutes appointed by the Depositary upon the request or with the approval
of the Company. Each co-transfer agent appointed under this Section 2.04
(other than Citibank, N.A.) shall give notice in writing to the Company and
the Depositary accepting such appointment and agreeing to be bound by the
applicable terms of this Deposit Agreement.
-15-
SECTION 2.05. Surrender of Receipts and Withdrawal of Deposited
Securities. Upon surrender at the Principal Office of the Depositary of a
Receipt for the purpose of withdrawal of the Deposited Securities represented
thereby, and upon payment of (i) the fee of the Depositary for the making of
withdrawals and cancellation of Receipts (as set forth on Exhibit B hereto)
and (ii) all taxes and governmental charges payable in connection with such
surrender and withdrawal, and subject to the terms and conditions of this
Deposit Agreement, the Company's Articles of Association and the provisions of
or governing the Deposited Securities and other applicable laws, the Holder of
such Receipt shall be entitled to delivery, to him or upon his order, of the
Deposited Securities at the time evidenced by such Receipt. Delivery of such
Deposited Securities may be made by the delivery of (a) certificates in the
name of such Holder or as ordered by him or by certificates properly endorsed
or accompanied by proper instruments of transfer to such Holder or as ordered
by him and (b) any other securities, property and cash to which such Holder is
then entitled in respect of such Receipts to such Holder or as ordered by him.
Such delivery shall be made, as hereinafter provided, without unreasonable
delay and, at the option of the Holder, either at the office of the Custodian
or at the Principal Office of the Depositary, provided that the
-16-
forwarding of certificates evidencing Shares or other Deposited Securities for
such delivery shall be at the risk and expense of the Holder.
A Receipt surrendered for such purposes may be required by the
Depositary to be properly endorsed in blank or accompanied by proper
instruments of transfer in blank, and if the Depositary so requires, the
Holder thereof shall execute and deliver to the Depositary a written order
directing the Depositary to cause the Deposited Securities being withdrawn to
be delivered to or upon the written order of a person or persons designated in
such order. Thereupon, the Depositary shall direct the Custodian to deliver at
the designated office of the Custodian, subject to Sections 2.06, 3.01, 3.02,
3.04, 5.01 and 5.12 and to the other terms and conditions of this Deposit
Agreement, the Articles of Association of the Company and to the provisions of
or governing the Deposited Securities and other applicable laws, now or
hereafter in effect, to or upon the written order of the person or persons
designated in the order delivered to the Depositary if so required by the
Depositary as provided above, the Deposited Securities represented by such
Receipt together with any certificate or other proper documents of or relating
to title for the Deposited Securities, except that the Depositary may make
delivery to such person or persons
-17-
at the Principal Office of the Depositary of any dividends or distributions
with respect to the Deposited Securities represented by such Receipt, or of
any proceeds of sale of any dividends, distributions or rights, which may at
the time be held by the Depositary.
At the request, risk and expense of any Holder so surrendering a
Receipt, and for the account of such Holder, the Depositary shall direct the
Custodian to forward any cash or other property (other than rights) held in
respect of, and any certificate or certificates and other proper documents of
or relating to title for, the Deposited Securities represented by such Receipt
to the Depositary for delivery at the Principal Office of the Depositary. Such
direction shall be given by letter or, at the request, risk and expense of
such Holder, by cable, telex or facsimile transmission.
SECTION 2.06. Limitations on Execution and Delivery, Transfer, Etc. of
Receipts; Suspension of Delivery, Transfer, Etc. As a condition precedent to
the execution and delivery, registration, registration of transfer, split-up,
combination or surrender of any Receipt, the delivery of any distribution
thereon or withdrawal of any Deposited Securities, the Depositary or the
Custodian may require (a) payment from the depositor of Shares or presenter of
the Receipt of a sum sufficient to
-18-
reimburse it for any tax (including any Stamp Tax) or other governmental
charge and any stock transfer or registration fee with respect thereto
(including any such tax or charge and fee with respect to Shares being
deposited or withdrawn) and payment of any applicable fees as provided herein,
or in Exhibit B to this Deposit Agreement, (b) the production of proof
satisfactory to it as to the identity and genuineness of any signature or any
other matter contemplated by Section 3.01 hereof and (c) compliance with (i)
any laws or governmental regulations relating to Receipts or to the withdrawal
of Deposited Securities and (ii) such reasonable regulations, if any, as the
Depositary and the Company may establish consistent with the provisions of
this Deposit Agreement, including, without limitation, Section 7.08 hereof.
The delivery of Receipts against deposits of Shares generally or
against deposits of particular Shares may be suspended, or the delivery of
Receipts against the deposit of particular Shares may be withheld, or the
registration of transfer of Receipts in particular instances may be refused,
the registration of transfer generally may be suspended, during any period
when the register or transfer books of the Company, the Depositary or the
Share Registrar are closed or if any such action is deemed necessary or
advisable by the Depositary or the
-19-
Company, in good faith, at any time or from time to time because of any
requirement of law, any government or governmental body or commission or any
securities exchange on which the Receipts or Shares are listed, or under any
provision of this Deposit Agreement or the provision of or governing Deposited
Securities, or any meeting of shareholders of the Company or for any other
reason, subject in all cases to Section 7.08 of this Deposit Agreement.
Notwithstanding any provision of this Deposit Agreement or the Receipts to the
contrary, the surrender of outstanding Receipts and withdrawal of Deposited
Securities may not be suspended or refused, except as permitted in General
Instruction IA(1) to Form F-6 (as such instruction may be amended from time to
time) under the Securities Act of 1933 in connection with (i) temporary delays
relating to the deposit of Shares in connection with voting at a shareholders'
meeting, or the payment of dividends, (ii) the payment of fees, taxes and
similar charges, and (iii) compliance with any U.S. or foreign laws or
governmental regulations relating to the Receipts or to the withdrawal of the
Deposited Securities. Without limitation of the foregoing, the Depositary
shall not knowingly accept for deposit under this Deposit Agreement any Shares
or other Deposited Securities (a) that are required to be registered under the
provisions of the Securities Act of 1933, unless a registration statement is
in
-20-
effect as to such Shares or other Deposited Securities, or (b) that would
thereby infringe any provisions of the Articles of Association of the Company.
SECTION 2.07. Lost Receipts, Etc. In case any Receipt shall be
mutilated, destroyed, lost, or stolen, the Depositary shall execute and
deliver a new Receipt of like tenor, (a) in the case of a mutilated Receipt,
in exchange and substitution for such mutilated Receipt upon cancellation
thereof, or (b) in lieu of and in substitution for such destroyed, lost, or
stolen Receipt, after the Holder thereof (i) has filed with the Depositary a
written request for such exchange and delivery before the Depositary has
notice that the Receipt has been acquired by a bona fide purchaser, (ii) has
provided a sufficient indemnity bond and (iii) has satisfied any other
reasonable requirements imposed by the Depositary, including, without
limitation, evidence satisfactory to the Depositary of such destruction, loss
or theft of such Receipt, the authenticity thereof and the Holder's ownership
thereof.
SECTION 2.08. Cancellation and Destruction of Surrendered Receipts.
All Receipts surrendered to the Depositary shall be cancelled by the
Depositary. The Depositary is authorized to destroy Receipts so cancelled.
-21-
ARTICLE III
CERTAIN OBLIGATIONS OF HOLDERS OF RECEIPTS
------------------------------------------
SECTION 3.01. Filing Proofs, Certificates and Other Information. Any
person presenting Shares for deposit or any Holder may be required from time
to time to file such proof of citizenship, taxpayer status, residence or
exchange control approval, compliance with applicable laws and the terms of
this Deposit Agreement or other information, to execute such certificates and
to make such representations and warranties, as the Depositary may deem
necessary or proper or as the Company may require by written request to the
Depositary consistent with its obligations hereunder. The Depositary may
withhold the execution or delivery or registration of transfer of any Receipt
or the distribution or sale of any dividend or distribution of rights or of
the proceeds thereof or, subject to Section 7.08, the delivery of any
Deposited Securities until such proof or other Information is filed or such
certificates are executed to the Depositary and the Company's satisfaction.
The Depositary shall provide the Company, in a timely manner, with copies or
originals if necessary and appropriate of (i) any such proofs of citizenship,
taxpayer status, residence, or exchange control approval which it receives,
and (ii) any other information or documents which the Company may reasonably
request and which the
-22-
Depositary shall request and receive from the Holder or any per son
presenting Shares for deposit.
SECTION 3.02. Liability of Holder for Taxes. If any tax or other
governmental charge or assessment imposed under applicable laws (including,
without limitation, any Stamp Tax) shall become payable with respect to any
Receipt or any Deposited Securities evidenced by any Receipt, such tax, other
governmental charge or expense shall be payable by the Holder of such Receipt
to the Depositary. The Depositary may refuse, and the Company shall be under
no obligation, to effect any transfer of such Receipt, or split-up or
combination of such Receipt or, subject to Section 7.08, any withdrawal of
Deposited Securities represented thereby until such payment is made, and may
withhold any dividends or other distributions or securities receivable in
respect of Deposited Securities, or may sell for the account of the Holder
thereof any part or all of the Deposited Securities represented by such
Receipt, and may apply such dividends or other distributions or the proceeds
of any such sale in payment of such tax, other governmental charge or expense,
the Holder of such Receipt remaining liable for any deficiency.
SECTION 3.03. Warranties on Deposit of Shares. Each person depositing
Shares under the Deposit Agreement shall be deemed thereby to represent and
warrant that such Shares and the
-23-
certificates therefor are validly issued, fully paid, nonassessable, that all
preemptive rights, if any, with respect to such Shares have been validly
waived or exercised and that each such person making such deposit is duly
authorized so to do. Each such person shall also be deemed to represent that
the deposit of Shares or sale of Receipts by that person is not restricted,
and that the Shares deposited by that person are not Restricted Securities,
under the Securities Act of 1933. In addition, such person shall be deemed to
represent that such Shares are not liable to disenfranchisement or disposal by
the Company pursuant to the Articles of Association. Such representations and
warranties shall survive the deposit and withdrawal of Shares and the issuance
and cancellation of Receipts in respect thereof.
SECTION 3.04. Disclosure of Beneficial Ownership. Notwithstanding any
other provision of this Deposit Agreement, each Holder agrees to be bound by
and subject to the Articles of Association, and to provide such information as
the Company may request in a disclosure notice (a "Disclosure Notice") given
pursuant to statutory provisions of English law or the Articles of
Association. Failure of a Holder to provide in a timely fashion the
information requested in any Disclosure Notice may, in the Company's sole
discretion, result in the withholding of
-24-
certain rights in respect of such Holder's American Depositary Shares
(including voting rights and certain rights as to dividends in respect of the
Shares represented by such American Depositary Shares). The Depositary agrees
to use its reasonable efforts to comply with any instructions received from
the Company requesting that the Depositary take the reasonable actions
specified therein to obtain such information.
In addition, any Holder who is or becomes directly or indirectly
interested (within the meaning of the Companies Acts 1985, as amended from
time to time (the "Companies Act")) in 3% (or such other amount as may be
required by the Companies Act) or more of the outstanding Shares, or is aware
that another person for whom it holds such Receipts is so interested, must
within two business days (or such other period as may be required by the
Companies Act) after becoming so interested or so aware, and thereafter upon
any changes of at least 1% of the outstanding Ordinary Shares, notify the
Company as required by the Companies Act.
If the Company requests information from the Depositary or the
Custodian, as the registered holders of Shares, pursuant to the Articles of
Association of the Company or the Companies Act, the obligations of the
Depositary or the Custodian,
-25-
as the case may be, shall be limited to disclosing to the Company such
information relating to the Shares in
question as has in each case been recorded by it pursuant to the terms of
this Deposit Agreement.
ARTICLE IV
THE DEPOSITED SECURITIES
-----------------------
SECTION 4.01. Power of Attorney. Each Holder, upon acceptance of a
Receipt issued in accordance with the terms hereof, hereby appoints the
Depositary its agent, with power to delegate, to act on its behalf and to take
any and all steps or action provided for or contemplated herein with respect
to the Deposited Securities, to adopt any and all procedures necessary to
comply with English law, including, but not limited to, those set forth in
Article IV, and to take such further steps or action as the Depositary in its
sole discretion may deem necessary or appropriate to carry out the purposes of
this Deposit Agreement.
SECTION 4.02. Cash Distributions; Withholding and Other Taxes.
Whenever the Company proposes to make any cash dividend or other cash
distribution on any Deposited Securities the Company shall deliver to the
Depositary and the Custodian written notice with respect thereto. Upon receipt
of such
-26-
dividend or distribution the Depositary shall, subject to the provisions of
Section 4.06, convert, or cause the conversion of, such dividend or
distribution into dollars and shall, after fixing a record date in respect
thereof pursuant to Section 4.07, distribute such amount to the Holders
entitled thereto in proportion to the number of American Depositary Shares
representing such Deposited Securities held by them respectively; provided,
however, that in the event that the Company, the Custodian or the Depositary
shall be required to withhold and does withhold from any cash dividend or
other cash distribution in respect of any Deposited Securities an amount on
account of taxes or other governmental charges, the amount distributed to the
Holder for American Depositary Shares representing such Deposited Securities
shall be reduced accordingly.
The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any Holder a fraction of one cent. Any such
fractional amounts shall be rounded downward to the nearest whole cent and so
distributed to the Holders entitled thereto, and any balance not so
distributable shall be held by the Depositary (without liability for interest
thereon) and shall be added to and become part of the next sum received by the
Depositary for distribution to Holders then outstanding. The Company or its
agent will remit to the
-27-
appropriate governmental authority or agency in England and Wales all amounts
required to be withheld by the Company and owing to such authority or agency.
The Depositary will remit to the appropriate governmental authority or agency
in England and Wales all amounts required to be withheld by the Depositary and
owing to such authority or agency. The Depositary will forward to the Company
or its agent such information from its records as the Company may reasonably
request in writing to enable the Company or its agent to file necessary
reports with governmental authorities or agencies, and the Custodian, the
Depositary or the Company or its agent may, but shall not be obligated to,
file any such reports necessary to obtain benefits under applicable tax
treaties for the Holders.
SECTION 4.03. Distributions Other Than Cash, Shares or Rights.
Whenever the Custodian shall receive any distribution other than cash, Shares
or rights upon any Deposited Securities, the Depositary shall, upon
consultation with the Company, cause the securities or property so received to
be distributed to the Holders as of a record date fixed pursuant to Section
4.07 hereto, entitled thereto, in proportion to the number of American
Depositary Shares representing such Deposited Securities held by them
respectively, in any manner that the Depositary may deem equitable and
practicable for accomplishing
-28-
such distribution, net of expenses of the Depositary; provided, however, that
if in the opinion of the Depositary it cannot cause such securities or
property to be distributed or such distribution cannot be made proportionately
among the Holders entitled thereto, or if for any other reason (including
without limitation any requirement (i) that the Company, the Depositary or the
Custodian withhold an amount on account of taxes or other governmental
charges, (ii) under applicable securities or exchange control regulations or
law, or (iii) that such securities must be registered under the Securities Act
of 1933 or other law in order to be distributed to Holders) the Depositary
deems such distribution not to be feasible, the Depositary may, with the
reasonable approval of the Company, adopt such method as it may deem equitable
and practicable for the purpose of effecting such distribution, including the
sale (at public or private sale) of the securities or property thus received,
or any part thereof, and the net proceeds of any such sale (net of taxes and
expenses of the Depositary as set forth in Exhibit B) shall be distributed by
the Depositary to the Holders entitled thereto as in the case of a
distribution received in cash.
SECTION 4.04. Distribution in Shares,. If any distribution upon any
Deposited Securities consists of a dividend in the form of Shares, the
Depositary may, with the Company's
-29-
approval, and shall, if the Company shall so request, (i) instruct the Company
to deposit or cause such Shares to be deposited with and registered in the
name of the Custodian and (ii) distribute to the Holders, as of the record
date fixed pursuant to Section 4.07 hereof, of outstanding Receipts entitled
thereto, in proportion to the number of American Depositary Shares
representing such Deposited Securities held by them respectively, additional
Receipts for an aggregate number of American Depositary Shares representing
the number of Shares received as such dividend, subject to the terms of this
Deposit Agreement, including, without limitation, Sections 2.02, 2.03, 4.13
and 5.09 hereof. In lieu of delivering Receipts for fractional American
Depositary Shares in any such case, the Depositary shall sell the number of
Shares represented by the aggregate of such fractions and distribute the net
proceeds, all in the manner and subject to the conditions described in Section
4.02. If additional Receipts are not so distributed (except as pursuant to the
preceding sentence), each American Depositary Share shall thenceforth also
represent the additional Shares distributed upon the Deposited Securities
represented thereby.
SECTION 4.05. Rights. In the event that the Company shall offer or
cause to be offered to the holders of any
-30-
Deposited Securities any rights to subscribe for additional Shares or any
rights of any other nature, the Depositary may, after consultation with the
Company, and if requested in writing by the Company shall, take action,
subject to the terms of this Deposit Agreement, as follows:
(a) if at the time of the offering of any rights the
Depositary determines in its discretion that it is lawful and feasible
to make such rights available to all Holders or certain Holders but
not to others by means of warrants or otherwise, the Depositary may
distribute warrants or other instruments therefor in such form as it
may determine to the Holders entitled thereto, in proportion to the
number of American Depositary Shares representing such Deposited
Securities held by them respectively, or employ such other method as
it may deem feasible in order to facilitate the exercise, sale or
transfer of rights by such Holders; or
(b) if at the time of the offering of any rights the
Depositary determines in its discretion that it is not lawful or not
feasible to make such rights available to certain Holders by means of
warrants or otherwise, or if the rights represented by such warrants
or such other instruments are not exercised and appear to be about to
lapse,
-31-
the Depositary in its discretion may sell such rights or such warrants
or other instruments at public or private sale, at such place or
places and upon such terms as it may deem proper, and allocate the
proceeds Of such sales (net of the expenses of the Depositary set
forth in Section 5.09 hereof) for the account of the Holders
otherwise entitled to such rights, warrants or other instruments upon
an averaged or other practicable basis without regard to any
distinctions among such Holders because of exchange restrictions or
the date of delivery of any Receipt or Receipts, or otherwise, and
distribute such net proceeds so allocated to the extent practicable as
in the case of a distribution of cash pursuant to Section 4.02 hereof.
The Depositary shall not be responsible for any failure to determine
that it may be lawful or feasible to make such rights available to
Holders in general or any Holder or Holders in particular.
If the Depositary does not receive such written request from the
Company, the Depositary shall, after consultation with the Company, have
discretion as to the procedure to be followed (i) in making such rights
available to the Holders, or (ii) in disposing of such rights on behalf of
such Holders and distributing the net proceeds available in dollars to such
-32-
Holders as in the case of a distribution of cash pursuant to
Section 4.02 hereof, or (iii) in allowing such rights to lapse in the event
such rights may not be made available to Holders or be disposed of and the net
proceeds thereof made available to Holders.
Notwithstanding anything to the contrary in this Section 4.05, if
registration under the Securities Act of 1933 of the securities to which any
rights relate is required in order for the Company to offer such rights or
such securities to Holders and to sell the securities represented by such
rights, the Depositary will not offer such rights to the Holders (i) unless
and until a registration statement under the Securities Act of 1933 covering
such offering is in effect, or (ii) unless the Company furnishes the
Depositary an opinion of counsel for the Company in the United States
satisfactory to the Depositary or other evidence satisfactory to the
Depositary to the effect that the offering and sale of such securities to the
Holders of such Receipts are exempt from or do not require registration under
the provisions of the Securities Act of 1933.
SECTION 4.06. Conversion of Foreign Currency. Whenever the Depositary
or the Custodian shall receive foreign currency, by way of dividends or other
distributions or the net proceeds from the sale of securities, property or
rights, which
-33-
in the judgment of the Depositary can at such time be converted on a
reasonable basis into dollars distributable to the Holders entitled thereto
and transferable to the United States, the Depositary shall convert or cause
to be converted, by sale or in any other manner that it may determine, such
foreign currency into dollars, and shall transfer such dollars (net any of its
reasonable and customary expenses incurred in such conversion and any expenses
incurred on behalf of the Holder in complying with currency exchange control
or other governmental requirements) to the Holders entitled thereto or, if the
Depositary shall have distributed any warrants or other instruments that
entitle the holders thereof to such dollars, then to the holders of such
warrants and/or instruments upon surrender thereof for cancellation. Such
distribution may be made upon an averaged or other practicable basis without
regard to any distinctions among Holders on account of any application of
exchange restrictions or otherwise.
If such conversion or distribution can be effected only with the
approval or license of any government or agency thereof, the Depositary shall
file such application for approval or license, if any, as it may deem
desirable.
If at any time the Depositary shall determine that in its judgment any
foreign currency received by the Depositary is
-34-
not convertible on a reasonable basis into dollars distributable to the
Holders entitled thereto, or if any approval or license of any government or
authority or agency thereof that is required for such conversion is denied or
in the opinion of the Depositary is not obtainable at a reasonable cost or
within a reasonable period as determined by the Depositary, the Depositary may
distribute the foreign currency (or an appropriate document evidencing the
right to receive such foreign currency) to, or in its discretion may hold such
foreign currency (without liability for interest thereon) for the respective
accounts of, the Holders entitled to receive the same.
If any such conversion of foreign currency, in whole or in part, is
not practicable for distribution to some Holders entitled thereto, the
Depositary may in its discretion make such conversion and distribution in
dollars to the extent permissible to the Holders entitled thereto and may
distribute the balance of the foreign currency received by the Depositary to,
or hold such balance (without liability for interest thereon) for the account
of, the Holders for whom such conversion and distribution is not practicable.
SECTION 4.07. Fixing of Record Date. Whenever the Depositary shall
receive notice of the fixing of a record date by the Company for the
determination of holders of Deposited
-35-
Securities entitled to receive any cash dividend or other cash distribution or
any distribution other than cash, or any rights to be issued with respect to
the Deposited Securities, or whenever for any reason the Depositary causes a
change in the number of Shares that are represented by each American
Depositary Share, or whenever the Depositary shall receive notice of any
meeting of holders of Shares or other Deposited Securities, or whenever the
Depositary shall find it necessary or convenient in connection with the giving
of any notice, solicitation of any consent or any other matter, the Depositary
shall, after consultation with the Company, fix a record date for the
determination of the Holders who shall be entitled to receive such dividend,
distribution, rights or the net proceeds of the sale thereof, to give
instructions for the exercise of voting rights at any such meeting, or to give
or withhold such consent, or to receive such notice or solicitation or to
otherwise take action, or whose Receipts shall evidence such changed number of
Shares. Subject to the provisions of Section 4.02 through 4.06 and to the
other terms and conditions of this Deposit Agreement, the Holders at the close
of business on such record date shall be entitled to receive the amount
distributable by the Depositary with respect to such dividend or other
distribution or such rights or the net proceeds of sale thereof in proportion
to the number of American
-36-
Depositary Shares held by them respectively, or to give such voting
instructions, to receive such notice or solicitation, or otherwise take
action.
SECTION 4.08. Voting of Deposited Securities. As soon as practicable
after receipt of notice of any meeting or solicitation of consents or proxies
from holders of Shares or other Deposited Securities, the Depositary shall fix
a record date in respect of such meeting for the giving of instructions for
voting such consent or proxy and shall mail to Holders a notice which shall
contain: (a) such information as is contained in such notice of meeting, (b) a
statement, in a form provided by the Company, that the Holders at the close of
business on the specified record date will be entitled, subject to any
applicable provisions of the laws of England and Wales, the Articles of
Association of the Company and the provisions of or governing Deposited
Securities (which provisions, if any, shall, be summarized in pertinent part),
to instruct the Depositary as to the exercise of the voting rights, if any,
pertaining to the Shares or other Deposited Securities represented by American
Depositary Shares evidenced by their respective Receipts, and (c) a brief
statement as to the manner in which such instructions may be given including
an express indication that instructions may be given to the Depositary to give
a discretionary
-37-
proxy to a person or persons designated by the Company. Upon receipt of the
written request of a Holder (an "Instructing Holder" ) on such record date the
Depositary shall endeavor insofar as practicable and permitted under
applicable law and the provisions of the Articles of Association of the
Company and the provisions of the Deposited Securities to vote or cause the
Custodian to vote the Shares and/or other Deposited Securities represented by
American Depositary Shares evidenced by such Receipt in accordance with the
instructions set forth in such request. In the event a poll is duly demanded
and if no instructions are received, the Depositary will deem, unless
otherwise requested by the Company and unless otherwise provided for in the
Deposit Agreement, such Holders to have instructed the Depositary to give a
discretionary proxy to the person designated by the Company; provided,
however, no discretionary proxy shall be given with respect to any proposition
as to which the Depositary has actual knowledge which (i) involves any
solicitation of opposing proxies or other substantial opposition, or (ii)
authorizes a merger, consolidation, or any other matter which may materially
affect the rights and privileges of the holders of Shares or Receipts. Unless
specifically instructed by at least five Holders or Holders representing not
less than 10% of the total voting rights of all Holders having the right to
vote at such
-38-
meeting, the Depositary shall not join in demanding a poll and, in such case,
the Depositary shall follow the instructions of the Instructing Holders
holding Receipts evidencing a majority of the American Depositary Shares held
by all Instructing Holders.
Subject to the previous paragraph, neither the Depositary nor the
Custodian shall vote or attempt to exercise the right to vote the Shares or
other Deposited Securities represented by American Depositary Shares evidenced
by a Receipt other than in accordance with such written instructions. The
Depositary undertakes to procure the appointment of one or more corporate
representatives authorized to vote at meetings of the Company either on a show
of hands or a poll in accordance with the provisions of this Section 4.08. In
accordance with the Articles of Association and the Companies Act, failure by
a Holder, or a person holding an interest in Shares through a Holder, to
comply with the Company's request for information of the nature referred to in
Section 3.04 may result, inter alia, in withdrawal of the voting rights of the
Shares underlying the Receipts held by that Holder and thus of the rights
described in this Section 4.08 to direct the voting of Deposited Securities
underlying such Receipts.
-39-
SECTION 4.09. Changes Affecting Deposited Securities. Upon any change
in nominal or par value, split-up, cancellation, consolidation or any other
reclassification of Deposited Securities, or upon any recapitalization,
reorganization, merger or consolidation or sale of assets affecting the
Company or to which it is a party, any securities which shall be received by
the Depositary or a Custodian in exchange for, or in conversion of or
replacement or otherwise in respect of, Deposited Securities shall be treated
as new Deposited Securities under this Deposit Agreement, and the American
Depositary Shares shall thenceforth represent, in addition to, in replacement
or conversion of, existing Deposited Securities, the right to receive the new
Deposited Securities so received in exchange, conversion, replacement or
otherwise unless additional or new Receipts are delivered pursuant to the
following sentence. In any such case the Depositary may, with the Company's
approval, and shall, if the Company shall so request, subject to the terms
hereof, execute and deliver additional Receipts as in the case of a stock
dividend on the Shares, or call for the surrender of outstanding Receipts to
be exchanged for new Receipts specifically describing such new Deposited
Securities. Notwithstanding the foregoing, in the event that any security so
received may not be lawfully distributed to some or all Holders, the
Depositary may,
-40-
with the Company's approval, and shall if the Company requests, sell such
securities at public or private sale, at such place or places and upon such
terms as it may deem proper, and may allocate the net proceeds of such sales
for the account of the Holders otherwise entitled to such securities upon an
averaged or other practicable basis without regard to any distinctions among
such Holders and distribute the net proceeds so allocated to the extent
practicable as in the case of a distribution received in cash pursuant to
Section 4.02.
SECTION 4.10. Available information. The Company is subject to the
periodic reporting requirements of the Securities Exchange Act of 1934 and
accordingly files certain reports with the Commission. Such reports and other
information may be inspected and copied at the public reference facilities
maintained by the Commission located at the date hereof at Judiciary Plaza,
450 Fifth Street (Room 1024), N.W., Washington, D.C. 20549.
SECTION 4.11. Reports. The Depositary shall make available for
inspection by Holders at its Principal Office any reports and communications,
including any proxy soliciting materials, received from the Company which are
both (a) received by the Depositary, the Custodian or the nominee of either as
the holder of the Deposited Securities and (b) made generally
-41-
available to the holders of such Deposited Securities by the Company. The
Depositary shall also send to Holders copies of such reports when furnished by
the Company to the Custodian pursuant to Section 5.06.
In addition, upon the express written request of the Company and at
the Company's sole cost and expense, the Depositary agrees to furnish,
without, however, thereby relieving the Company of its obligation under the
Securities Exchange Act of 1934 to do so, and without incurring any liability
for failure to do so, to the Commission, or any other securities regulatory
authority or stock exchange copies of any specified annual or other periodic
reports and other notices, information or communications which the Depositary,
the Custodian or the nominee of either receives from the Company so required
to be furnished. The Depositary shall also furnish to the Commission
semi-annually, so long as required by the Commission, beginning on or before
six months after the effective date of any registration statement filed with
the Commission under the Securities Act of 1933 relating to the Receipts, (a)
the following information in tabular form:
(1) The number of American Depositary Shares evidenced by
Receipts issued during the period covered by the report;
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(2) The number of American Depositary Shares evidenced by
Receipts retired during the period covered by the report;
(3) The total amount of American Depositary Shares evidenced
by Receipts remaining outstanding at the end of the six-month period;
and
(4) The total number of Holders at the end of the six-month
period;
and (b) the name of each dealer known to the Depositary depositing Shares
against issuance of Receipts during the period covered by the report. In
connection with such reports relating to the Receipts, the Company and the
Depositary shall each furnish to the other the name of each such dealer known
to it who (1) has deposited Shares against the issuance of Receipts relating
to each reporting period (including the six months prior to filing such
registration statement), (2) proposes to deposit Shares against the issuance
of Receipts (as to each such person indicating the number of Shares proposed
to be deposited to the extent known), or (3) assisted or participated in the
creation of any plan for the issuance of Receipts or the selection of Shares
to be deposited.
SECTION 4.12. Lists of Receipt Holders. Promptly upon written request
by the Company, the Depositary shall
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furnish to it a list, as of a recent date, of the names, addresses and
holdings of American Depositary Shares of all Holders.
SECTION 4.13. Withholding. Notwithstanding any other provision of this
Deposit Agreement, in the event that the Depositary determines that any
distribution in cash or other property (including Shares or rights to
subscribe therefor) is subject to any tax or other governmental charge or
assessment which the Depositary or the Custodian is obligated to withhold, the
Depositary may dispose of all or a portion of such property (including Shares
and rights to subscribe therefor) in such amounts and in such manner as the
Depositary deems necessary and practicable or may use such cash to pay such
taxes, charges or assessments by public or private sale, and the Depositary
shall distribute the net proceeds of any such sale or the balance of any such
property or cash after deduction of such taxes, charges or assessments to the
Holders entitled thereto in proportion to the number of American Depositary
Shares held by them respectively.
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ARTICLE V
THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY
---------------------------------------------
SECTION 5.01. Maintenance of Office and Transfer Books by the
Depositary. Until termination of this Deposit Agreement in accordance with its
terms, the Depositary shall maintain in the Borough of Manhattan, the City of
New York, an office and facilities for the execution and delivery,
registration, registration of transfers, combination and split-up of Receipts,
the surrender of Receipts and the delivery and withdrawal of Deposited
Securities in accordance with the provisions of this Deposit Agreement.
The Depositary shall keep books for the registration of Receipts and
transfers of Receipts which at all reasonable times shall be open for
inspection by the Company and by the Holders, provided that such inspection
shall not be, to the Depositary's knowledge, for the purpose of communicating
with Holders in the interest of a business or object other than the business
of the Company or a matter related to this Deposit Agreement or the Receipts.
The Depositary may close the transfer books, at any time or from time
to time, when deemed expedient by it in connection with the performance of its
duties hereunder.
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If any Receipts or the American Depositary Shares evidenced thereby
are listed on one or more stock exchanges in the United States, the Depositary
shall act as Registrar or, with the written approval of the Company, appoint a
Registrar or one or more co-registrars for registration of Receipts and
transfers, combinations and split-ups, and to countersign Receipts in
accordance with any requirements of such exchange or exchanges in accordance
with the terms of such appointments. Such Registrar or co-registrars may be
removed and a substitute or substitutes appointed by the Depositary upon the
written request or with the written approval of the Company.
SECTION 5.02. Prevention or Delay in Performance. Neither the
Depositary nor the Company nor any of their respective directors, employees,
agents or affiliates shall incur any liability to any Holder or any other
person, if, by reason of any provision of any present or future law or
regulation of the United States, England and Wales or any other country, or of
any other governmental authority or regulatory authority or stock exchange, or
by reason of any provision, present or future, of the Articles of Association
of the Company or governing any Deposited Securities, or by reason of any act
of God or war or other circumstances beyond its control, the Depositary or its
agents or the Company or its agents shall be prevented or
-46-
forbidden from or subjected to any civil or criminal penalty or restraint on
account of, or delayed in, doing or performing any act or thing which by the
terms of this Deposit Agreement it is provided shall be done or performed; nor
shall the Depositary or its agents or the Company or its agents incur any
liability to any Holder or other person by reason of any non-performance or
delay, caused as aforesaid, in performance of any act or thing which by the
terms of this Deposit Agreement it is provided shall or may be done or
performed, or by reason of any exercise of, or failure to exercise, any
discretion provided for in this Deposit Agreement or in the Articles of
Association. where, by the terms of a distribution pursuant to Sections 4.02,
4.03, or 4.04 of this Deposit Agreement, or an offering or distribution
pursuant to Section 4.05 or 4.09 of this Deposit Agreement, or for any other
reason, such distribution or offering may not be made available to Holders, or
some of them, and the Depositary may not dispose of such distribution or
offering on behalf of such Holders and make the net proceeds available to such
Holders, then the Depositary shall not make such distribution or offering, and
shall allow any such rights, if applicable, to lapse.
SECTION 5.03. Obligations of the Depositary, the Custodian and the
Company. Each of the Company and its agents
-47-
assumes no obligation and shall be subject to no liability under this Deposit
Agreement or the Receipts to Holders or other persons, except that it agrees
to perform its obligations specifically set forth in this Deposit Agreement
without negligence or bad faith.
Each of the Depositary and its agents assumes no obligation and shall
be subject to no liability under this Deposit Agreement or the Receipts to
Holders or other persons (including without limitation, liability with respect
to the validity or worth of the Deposited Securities), except that it agrees
to perform its obligations specifically set forth in this Deposit Agreement
without negligence or bad faith. The Depositary shall not be subject to any
liability with respect to the validity or worth of the Deposited Securities.
Without limitation of the foregoing, neither the Depositary, nor any
of its agents, nor the Company nor any of its agents shall be (a) under any
obligation to appear in, prosecute or defend any action, suit or other
proceeding in respect of any Deposited Securities or in respect of the
Receipts, which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense (including fees and
disbursements of counsel) and liability be furnished as often as may be
required (and no Custodian shall be
-48-
under any obligation whatsoever with respect to such proceedings, the
responsibility of the Custodian being solely to the Depositary), or (b) liable
for any action or inaction by it in reliance upon the advice of or information
from legal counsel, accountants, any person presenting Shares for deposit, any
Holder, or any other person believed by it in good faith to be competent to
give such advice or information. The Depositary, its agents, the Custodian and
the Company may rely and shall be protected in acting upon any written notice,
request or other document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
The Depositary and its agents shall not be responsible for any failure
to carry out any instructions to vote any of the Deposited Securities, or for
the manner in which any vote is cast or the effect of any vote, provided that
any such action or omission is in good faith.
No disclaimer of liability under the Securities Act of 1933 is
intended by any provision of this Deposit Agreement.
SECTION 5.04. Resignation and Removal of the Depositary; Appointment
of Successor Depositary. The Depositary may at any time resign as Depositary
hereunder by written notice of its election so to do delivered to the Company,
such resignation to be effective upon the appointment of a successor
depositary
-49-
satisfactory to the Company and its acceptance of such appointment as
hereinafter provided, which appointment shall be on terms reasonably
satisfactory to the Company in its sole discretion.
The Depositary may at any time be removed by the Company by written
notice of such removal, such removal to be effective upon the appointment of a
successor depositary satisfactory to the Company and its acceptance of such
appointment as hereinafter provided, which appointment shall be on terms
satisfactory to the Company in its sole discretion.
In case at any time the Depositary acting hereunder shall resign or be
removed, the Company shall use its best efforts to appoint a successor
depositary, which shall be a bank or trust company having an office in the
Borough of Manhattan, the City of New York. Every successor depositary shall
execute and deliver to its predecessor and to the Company an instrument in
writing accepting its appointment hereunder, and thereupon such successor
depositary, without any further act or deed, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor; but such
predecessor, nevertheless, upon payment of all sums due it and on the written
request of the Company shall (i) execute and deliver an instrument
transferring to such successor all rights and powers of
-50-
such predecessor hereunder, (ii) duly assign, transfer and deliver all right,
title and interest in the Deposited Securities to such successor, and (iii)
deliver to such successor a list of the Holders of all outstanding Receipts
and such other information relating to Receipts and Holders thereof as the
successor may reasonably request. Any such successor depositary shall
promptly mail notice of its appointment to the Holders.
Any corporation into or with which the Depositary may be merged or
consolidated shall be the successor of the Depositary without the execution or
filing of any document or any further act.
SECTION 5.05. The Custodian. The Depositary has initially appointed
Citibank (London) as Custodian and agent of the Depositary for the purpose of
this Deposit Agreement. The Custodian or its successors in acting hereunder
shall be subject at all times and in all respects to the direction of the
Depositary and shall be responsible solely to it. Any Custodian may resign and
be discharged from its duties hereunder by notice of such resignation
delivered to the Depositary at least 30 days prior to the date on which such
resignation is to become effective. If, upon such resignation, there shall be
no custodian acting hereunder, the Depositary shall, promptly after receiving
such notice and after consultation with the Company, appoint a
-51-
substitute custodian which shall thereafter be the Custodian hereunder.
Whenever the Depositary determines, in its discretion, that it is in the best
interest of the Holders to do so, it may appoint an additional custodian, or
discharge the Custodian and appoint a substitute custodian, which shall
thereafter be Custodian hereunder. Upon demand of the Depositary, any
Custodian shall deliver such of the Deposited Securities held by it as are
requested of it to any other Custodian or such substitute or additional
custodian or custodians. Each such substitute or additional custodian shall
deliver to the Depositary forthwith upon its appointment, an acceptance of
such appointment and agreement to be bound by the terms hereof, satisfactory
in form and substance to the Depositary and the Company. Immediately upon any
such change, the Depositary shall give notice thereof in writing to all
Holders and each other Custodian.
Upon the appointment of any successor depositary hereunder, any
Custodian then acting hereunder shall forthwith become, without any further
act or writing, the agent hereunder of such successor depositary and the
appointment of such successor depositary shall in no way impair the authority
of each Custodian hereunder; but the successor depositary so appointed shall,
nevertheless, on the written request of any Custodian, execute and deliver to
such Custodian all such instruments as
-52-
may be proper to give to such Custodian full and complete power and authority
as agent hereunder of such successor depositary.
SECTION 5.06. Notices and Reports. On or before the first date on
which the Company gives notice, by publication or otherwise, of any meeting of
holders of Shares or other Deposited Securities, or of any adjourned meeting
of such holders, or of the taking of any action by such holders other than at
a meeting, or of the taking of any action in respect of any cash or other
distributions or the offering of any rights in respect of Deposited
Securities, the Company shall transmit to the Depositary and the Custodian a
copy of the notice thereof in the form given or to be given to holders of
Shares or other Deposited Securities.
The Depositary will arrange for the prompt transmittal by the
Custodian to the Depositary of such notices, and any other reports and
communications which are made generally available by the Company to holders of
its Shares or other Deposited Securities, and arrange for the mailing of
copies thereof to all Holders or, at the request of the Company, make such
notices, reports and other communications available to all Holders on a basis
similar to that for holders of Shares or other Deposited Securities or on such
other basis as the Company may advise the Depositary may be required by any
applicable law, regulation or
-53-
stock exchange requirement. The Company has delivered to the Depositary and
the Custodian a copy of the Articles of Association of the Company governing
the Shares and any other Deposited Securities issued by the Company or any
affiliate of the Company, and promptly upon any amendment thereto or change
therein, the Company shall deliver to the Depositary and the Custodian a copy
of such amendment thereto or change therein. The Depositary may rely upon such
copy for all purposes of this Deposit Agreement. The Depositary will make such
copy and such notices, reports and other communications available for
inspection by Holders at the Depositary's Office, at the office of the
Custodian and at any other designated transfer offices.
SECTION 5.07. Issuance of Additional Shares, Etc. The Company and each
company controlling, controlled by or under common control with the Company
agree that in the event of any issuance (otherwise than in a dividend pursuant
to Section 4.04 hereof) of (a) additional Shares, (b) rights to subscribe for
Shares or other Deposited Securities, (c) securities convertible or
exchangeable into Shares, or (d) rights to subscribe for securities
convertible or exchangeable in Shares, as a dividend or distribution with
respect to the Shares or other Deposited Securities evidenced by Receipts, or
in exchange or conversion for Shares or other Deposited Securities, the
Company will
-54-
promptly furnish to the Depositary a written opinion from counsel for the
Company in the United States, which counsel shall be satisfactory to the
Depositary, stating whether or not the circumstances of such issue are such as
to make it necessary for a registration statement under the Securities Act of
1933 to be in effect prior to the delivery of the Receipts to be issued in
connection with such securities or the issuance of such rights to the Holders
entitled thereto; provided, however, that no such opinion shall be required in
the event of an issuance of Shares as a bonus, share split or similar event.
If in the opinion of such counsel a registration statement is required, such
counsel shall furnish to the Depositary a written opinion as to whether or not
there is a registration statement in effect which will cover the issuance of
such securities.
The Company agrees that it will obtain legal advice as to whether
future issuances for cash of (1) additional Shares, (2) rights to subscribe
for Shares or other Deposited Securities, (3) securities convertible into or
exchangeable for Shares, or (4) rights to subscribe for securities convertible
into or exchangeable for Shares (in each event other than as a dividend or
distribution set forth above), are such as to make it necessary for a
registration statement under the Securities Act of 1933 covering such
securities to be in effect. If being
-55-
advised by counsel, the Company determines that an issuance of such securities
is required to be registered under the Securities Act of 1933, the Company
will register such issuance to the extent necessary, alter the terms of the
issuance to avoid the registration requirements of the Securities Act of 1933
or direct the Depositary to take specific measures with respect to the
acceptance for deposit of Shares to prevent such issuance from being made in
violation of the registration requirements of such Act.
The Company agrees with the Depositary that neither the Company nor
any company controlled by, controlling nor under common control with the
Company will at any time (i) deposit any Shares or other Deposited Securities,
either upon original issuance or upon a sale of Shares or other Deposited
Securities previously issued and reacquired by the Company or by any company
under its control, unless a registration statement is in effect as to such
Shares under the Securities Act of 1933, or (ii) issue additional Shares,
rights to subscribe for such Shares, securities convertible into or
exchangeable for Shares, or rights to subscribe for such securities except
under circumstances complying in all respects with the Securities Act of 1933.
-56-
SECTION 5.08. Indemnification. (a) The Company agrees to indemnify the
Depositary and its directors, employees, agents (including each Custodian) and
affiliates against, and hold each of them harmless from, any liability or
expense (including, without limitation, reasonable fees and expenses of
counsel) which may arise (A) out of acts performed or omitted, in accordance
with the provisions of this Deposit Agreement and of the Receipts, as the same
may be amended, modified or supplemented from time to time, (i) by either the
Depositary or any Custodian, except for any liability or expense arising out
of the negligence or bad faith of any of them, or (ii) by the Company or any
of its agents, or (B) out of or in connection with the registration of
Receipts, American Depositary Shares or any Deposited Securities with the
Commission or the offer or sale thereof to the public in the United States
except to the extent that such liability or expense arises out of information
relating to the Depositary or the Custodian, as the case may be, furnished in
writing to the Company by the Depositary or Custodian, as the case may be,
expressly for use in any proxy statement, registration statement, prospectus
or preliminary prospectus relating to the Shares represented by the American
Depositary Shares or omissions from such information.
-57-
(b) The indemnities contained in subsection (a) shall not extend to
any liability or expense which may arise out of any Pre-release Transactions
(as defined in Section 5.12) other than any such transaction to which the
Company is a party and other than the transfer or exchange of any pre-released
Receipts or any other act performed or omitted in accordance with the
provisions of this Deposit Agreement or the Receipts (other than Section 5.12
of this Deposit Agreement). The foregoing provisions of this subsection (b)
shall not apply to any liability or expense which may arise out of any
misstatement or alleged misstatement or omission or alleged omission in any
placement memorandum (in preliminary or final form) or other document relating
to the offer, sale or registration of American Depositary Shares.
(c) The Depositary agrees to indemnify the Company and its directors,
employees, agents and affiliates and hold them harmless from any liability or
expense (including, without limitation, reasonable fees and expenses of
counsel) which may arise out of acts performed or omitted by the Depositary or
its Custodian due to the negligence or bad faith of either the Depositary or
the Custodian.
(d) Any person seeking indemnification hereunder (an "indemnified
person") shall notify the person from whom it is
-58-
seeking indemnification (the "indemnifying person") of the commencement of any
indemnifiable action or claim promptly after such indemnified person becomes
aware of such commencement (provided that the failure to make such
notification shall not affect such indemnified person's rights otherwise than
under this Section 5.08) and shall consult in good faith with the indemnifying
person as to the conduct of the defense of such action or claim, which shall
be reasonable in the circumstances. No indemnified person shall compromise or
settle any action or claim without the consent of the indemnifying person,
which consent shall not be unreasonably withheld or delayed.
(e) The obligations set forth in this Section 5.08 shall survive the
termination of this Deposit Agreement and the succession or substitution of
any person indemnified hereby.
SECTION 5.09. Charges of Depositary. The Depositary shall charge any
party who makes a deposit or to whom Receipts are issued (including, without
limitation, a deposit or issuance pursuant to a stock dividend or stock split
declared by the Company or an exchange of stock regarding the Receipts or
Deposited Securities or a distribution of Receipts pursuant to Section 4.04
hereof) or who makes a withdrawal or surrenders Receipts a fee of $5.00 or
less per 100 American Depositary Shares (or portion thereof) for such
deposit, issuance, withdrawal or
-59-
surrender, respectively. In addition, Holders shall pay the charges and
expenses of the Depositary in accordance with the terms of this Deposit
Agreement including Exhibit B hereto. The Depositary may retain for its own
account any compensation for the issuance, in accordance with Section 5.12, of
Receipts against evidence of rights to receive Shares, including without
limitation earnings on the collateral securing such rights. The Company agrees
to pay the fees and charges and reasonable expenses of the Depositary and any
Registrar, co-transfer agent and co-registrar, if any, as indicated in Exhibit
B hereto to be paid by the Company and any other agent of the Depositary
appointed under this Deposit Agreement, and in accordance with the written
agreements between the Company and the Depositary from time to time, in each
case other than the following items which are payable by Holders: (1) the fees
of the Depositary for the execution and delivery of Receipts pursuant to
Section 2.03, the surrender of Receipts pursuant to Section 2.05, (2) taxes
and other governmental charges including any Stamp Tax, (3) such registration
fees as may from time to time be in effect for the registration of transfers,
if any, of Shares generally on the share register of the Company (or any
appointed agent of the Company for transfer and registration of Shares which
may be the Share Registrar) and accordingly applicable to transfers of
-60-
Shares to the name of the Depositary, a Custodian or their nominees or the
person who makes a withdrawal, on the making of deposits or withdrawal
pursuant to Sections 2.02 or 2.05, (4) such cable, telex, facsimile
transmission and delivery expenses as are expressly provided in this Deposit
Agreement to be at the expense of persons depositing Shares or Holders, (5)
such expenses as are incurred by the Depositary in the conversion of foreign
currency pursuant to Section 4.06, and (6) such fees and expenses as are
incurred by the Depositary (including without limitation expenses incurred on
behalf of Holders in connection with compliance with foreign exchange control
regulations) in delivery of Deposited Securities. Any other charges and
expenses of the Depositary hereunder will be paid by the Company after
consultation and agreement in writing between the Depositary and the Company
as to the amount and nature of such charges and expenses. Responsibility for
payment of such charges may at any time and from time to time be changed by
agreement between the Company and the Depositary. Unless otherwise agreed, the
Depositary shall present its statement for such expenses and fees or charges
to the Company once every three months. The charges and expenses of the
Custodian are for the sole account of the Depositary.
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SECTION 5.10. Exclusivity. The Company agrees not to appoint any other
depositary for issuance of American Depositary Receipts so long as Citibank,
N.A. is acting as Depositary hereunder.
SECTION 5.11. List of Restricted Securities Owners. Upon each issuance
by the Company of any securities that are Restricted Securities, the Company
shall provide the Depositary a list setting forth, to the actual knowledge of
the Company, those persons or entities who beneficially acquired Restricted
Securities. The Company agrees to advise in writing each of the persons or
entities so listed that such Restricted Securities are ineligible for deposit
hereunder. The Depositary may rely on such a list or update and shall not be
liable for any action or omission made in reliance thereon.
SECTION 5.12. Certain Rights of the Depositary; Limitations. Subject
to the further terms and provisions of this Section 5.12, Citibank, N.A. and
its agents may own and deal in any class of securities of the Company and its
affiliates and in Receipts. The Depositary may issue Receipts against evidence
of rights to receive Shares from the Company, or any custodian, registrar,
transfer agent, clearing agency or other entity involved in ownership or
transaction records in respect of the Shares. Such evidence of rights shall
consist of written
-62-
blanket or specific guarantees of ownership of Shares furnished on behalf of
the holder thereof. Neither the Depositary nor the Custodian shall lend Shares
deposited hereunder or Receipts; provided, however, that the Depositary
reserves the right to (i) issue Receipts prior to the receipt of Shares
pursuant to Section 2.02 and (ii) deliver Shares prior to the receipt and
cancellation of Receipts pursuant to Section 2.05, including Receipts which
were issued under (i) above but for which Shares may not have been received.
The Depositary may receive Receipts in lieu of Shares under (i) above and
receive Shares in lieu of Receipts under (ii) above. Each such transaction (a
"Pre-Release Transaction") shall be (a) accompanied by (x) a written
representation by the person or entity (the "Applicant") to whom Receipts are
issued or Shares delivered that at the time the Depositary issues such
Receipts or delivers such Shares, the Applicant or its customer owns the
Shares or Receipts to be delivered to the Depositary, or (y) such evidence of
ownership of Shares or Receipts as the Depositary deems appropriate, (b)
subject to a written representation by the Applicant that it will hold such
Shares or Receipts in trust for the Depositary until their delivery to the
Depositary or custodian, reflect on its records the Depositary as owner of
such Shares or Receipts and deliver such Shares or Receipts upon the
Depositary's
-63-
request, (c) at all times fully collateralized (marked to market daily) with
cash, United States government securities, or other collateral of comparable
safety and liquidity, (d) terminable by the Depositary on not more than five
(5) business days notice, and (e) subject to such further indemnities and
credit regulations as the Depositary deems appropriate. The Depositary intends
that the number of Receipts issued by it under (i) above and outstanding at
any time, generally will not exceed thirty percent (30%) of the Receipts
issued by the Depositary and with respect to which Shares are on deposit with
the Depositary or custodian; provided, however, that the Depositary reserves
the right to change or disregard such limit from time to time as the
Depositary deems appropriate. The Depositary will also set limits with respect
to the number of Receipts and Shares involved in transactions to be effected
hereunder with any one person on a case by case basis as it deems appropriate.
Collateral provided by an Applicant for Receipts or Shares, but not
the earnings thereon, shall be held for the benefit of the Holder. The
Depositary may retain for its own account any compensation received by it in
connection with the foregoing, including without limitation earnings on the
collateral.
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ARTICLE VI
AMENDMENT AND TERMINATION
-------------------------
SECTION 6.01. Amendment. The form of the Receipts and any provisions
of this Deposit Agreement may at any time and from time to time be amended by
agreement between the Company and the Depositary in any respect which they may
deem necessary or desirable. Any amendment which shall impose or increase any
fees or charges (other than the fees of the Depositary for deposits, the
execution and delivery of Receipts and taxes and other governmental charges),
or which shall otherwise prejudice any substantial existing right of Holders,
shall not, however, become effective as to outstanding Receipts until the
expiration of three months after notice of such amendment shall have been
given to the Holders of outstanding Receipts. The parties hereto agree that
any amendments which (i) are reasonably necessary (as agreed by the Company
and the Depositary) in order for (a) the American Depositary Shares to be
registered on Form F-6 under the Securities Act of 1933 or (b) the American
Depositary Shares or Shares to be traded solely in electronic book-entry form
and (ii) do not in either such case impose or increase any fees or charges to
be borne by Holders, shall be deemed not to prejudice any substantial rights
of Holders. Every Holder at the time any amendment so becomes effective shall
be deemed, by
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continuing to hold such Receipt, to consent and agree to such amendment and to
be bound by the Deposit Agreement as amended thereby. In no event shall any
amendment impair the right of the Holder to surrender such Receipt and receive
therefor the Deposited Securities represented thereby, except in order to
comply with mandatory provisions of applicable law.
SECTION 6.02. Termination. The Depositary shall, at any time at the
written direction of the Company, terminate this Deposit Agreement by mailing
notice of such termination to the Holders of all Receipts then outstanding at
least 30 days prior to the date fixed in such notice for such termination. If
60 days shall have expired after (i) the Depositary shall have delivered to
the Company a written notice of its election to resign, or (ii) the Company
shall have delivered to the Depositary a written notice of the removal of the
Depositary, and in either case a successor depositary shall not have been
appointed and accepted its appointment as provided in Section 5.04, this
Deposit Agreement shall automatically terminate on said 60th day after
delivery of such notice. The Depositary shall mail notice of such termination
to the Holders of all Receipts then outstanding at least 30 days prior to the
date fixed in such notice for such termination. On and after the date of
termination, the Holder will, upon surrender of such Receipt at the Principal
-66-
Office of the Depositary, upon the payment of the fees of the Depositary for
the surrender of Receipts referred to in Section 2.05 and subject to the
conditions and restrictions therein set forth, and upon payment of any
applicable taxes or governmental charges, be entitled to delivery, to him or
upon his order, of the amount of Deposited Securities represented by such
Receipt. If any Receipts shall remain outstanding after the date of
termination, the Depositary thereafter shall discontinue the registration of
transfers of Receipts, shall suspend the distribution of dividends to the
Holders thereof, and shall not give any further notices or perform any further
acts under this Deposit Agreement, except that the Depositary shall continue
to collect dividends and other distributions pertaining to Deposited
Securities, shall sell rights as provided in this Deposit Agreement, and shall
continue to deliver Deposited Securities, subject to the conditions and
restrictions set forth in Section 2.05, together with any dividends or other
distributions received with respect thereto and the net proceeds of the sale
of any rights or other property, in exchange for Receipts surrendered to the
Depositary (after deducting, or charging, as the case may be, in each case the
fees of the Depositary for the surrender of a Receipt, any expenses for the
account of the Holder in accordance with the terms and conditions of this
Deposit Agreement
-67-
and any applicable taxes or governmental charges or assessments). At any time
after the expiration of six months from the date of termination, the
Depositary may sell the Deposited Securities then held hereunder and may
thereafter hold uninvested the net proceeds of any such sale, together with
any other cash then held by it hereunder, in an unsegregated escrow account,
without liability for interest, for the pro rata benefit of the Holders whose
Receipts have not theretofore been surrendered. After making such sale, the
Depositary shall be discharged from all obligations under this Deposit
Agreement, except to account for such net proceeds and other cash (after
deducting, or charging, as the case may be, in each case the fees of the
Depositary for the surrender of a Receipt, any expenses for the account of the
Holder in accordance with the terms and conditions of this Deposit Agreement
and any applicable taxes or governmental charges or assessments). Upon the
termination of this Deposit Agreement, the Company shall be discharged from
all obligations under this Deposit Agreement except for its obligations to the
Depositary under Sections 5.08 and 5.09 hereof
-68-
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 7.01. Counterparts. This Deposit Agreement may be executed in
any number of counterparts, each of which shall be deemed an original and all
of such counterparts shall constitute one and the same instrument. Copies of
this Deposit Agreement shall be filed with the Depositary and each Custodian
and shall be open to inspection by any Holder during business hours.
SECTION 7.02. No Third Party Beneficiaries. This Deposit Agreement is
for the exclusive benefit of the parties hereto and shall not be deemed to
give any legal or equitable right, remedy or claim whatsoever to any other
person.
SECTION 7.03. Severability. In case any one or more of the provisions
contained in this Deposit Agreement or in the Receipts should be or become
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall
in no way be affected, prejudiced or disturbed thereby.
SECTION 7.04. Holders and Parties; Binding Effect. The Holders from
time to time shall be parties to this Deposit Agreement and shall be bound by
all of the terms and conditions hereof and of the Receipts by acceptance
thereof. Each Holder
-69-
agrees that, by accepting a Receipt, such Holder shall hold such Receipt
subject to the provisions hereof and the Articles of Association.
SECTION 7.05. Notices. Any and all notices to be given to the Company
shall be deemed to have been duly given if personally delivered or sent by
mail, air courier or cable, telex or facsimile transmission, confirmed by
letter, addressed to WASTE MANAGEMENT INTERNATIONAL plc, Windsor House, 55-56
St. James Street, London SW1A1LA, Attention: Company Secretary, and a copy to
___________, or to any other address which the Company may specify in writing.
Any and all notices to be given to the Depositary shall be deemed to
have been duly given if personally delivered or sent by mail, air courier or
cable, telex or facsimile transmission, confirmed by letter, addressed to
Citibank, N.A., 111 Wall Street, 5th Floor, New York, New York 10043,
Attention: ADR Department, or to any other address which the Depositary may
specify in writing.
Any and all notices to be given to the Custodian shall be deemed to
have been duly given if personally delivered or sent by mail, air courier or
cable, telex or facsimile transmission, confirmed by letter, addressed to
_____________ or to any other address which the Custodian may specify in
writing.
-70-
Any and all notices to be given to any Holder shall be deemed to have
been duly given if personally delivered or sent by mail, air courier or cable,
telex or facsimile transmission, confirmed by letter, addressed to such Holder
at the address of such Holder as it appears on the transfer books for Receipts
of the Depositary, or, if such Holder shall have filed with the Depositary a
written request that notices intended for such Holder be mailed to some other
address, at the address specified in such request.
Delivery of a notice sent by mail, air courier or cable, telex or
facsimile transmission shall be deemed to be effective at the time when a duly
addressed letter containing the same (or a confirmation thereof in the case of
a cable, telex or facsimile transmission) is deposited, postage prepaid, in a
post-office letter box or delivered to an air courier service. The Depositary
or the Company may, however, act upon any cable, telex or facsimile
transmission received by it from the other or from any Holder, notwithstanding
that such cable, telex or facsimile transmission shall not subsequently be
confirmed by letter as aforesaid.
SECTION 7.06. Governing Law. This Deposit Agreement and the Receipts
shall be interpreted under, and all rights
-71-
hereunder and thereunder and provisions hereof and thereof shall be governed
by the laws Of the State of New York, U.S.A.
SECTION 7.07. Assignment. This Deposit Agreement may not be assigned
by either the Company or the Depositary.
SECTION 7.08. Compliance With U.S. Securities Laws. Notwithstanding
anything in this Deposit Agreement to the contrary, the Company and the
Depositary each agrees that it will not exercise any rights it has under this
Deposit Agreement to prevent the withdrawal or delivery of Deposited
Securities in a manner which would violate the United States securities laws,
including, but not limited to, Instruction I A(1) of the General Instructions
to Form F-6 Registration Statement, as amended from time to time, under the
Securities Act of 1933.
-72-
IN WITNESS WHEREOF, WASTE MANAGEMENT INTERNATIONAL plc and Citibank,
N.A. have duly executed this Agreement as of the day and year first above set
forth and all Holders shall become parties hereto upon acceptance by them of
Receipts issued in accordance with the terms hereof.
WASTE MANAGEMENT INTERNATIONAL plc
By: /S/ Edwin G. Falkman
-------------------------------------
Name: Edwin G. Falkman
Title: Director
CITIBANK, N.A.
By: /S/ Wim Budding
-------------------------------------
Name: Wim Budding
Title: Vice President
-73-
EXHIBIT A
UNDER THE LAW OF ENGLAND AND WALES AND THE CONSTITUENT
DOCUMENTS OF THE COMPANY, HOLDERS OF AMERICAN DEPOSITARY
RECEIPTS MAY HAVE CERTAIN DISCLOSURE OBLIGATIONS, A SUMMARY
OF WHICH IS SET FORTH IN ARTICLE 8 HEREOF. FAILURE TO COMPLY
WITH SUCH DISCLOSURE OBLIGATIONS COULD AFFECT SUCH
HOLDER'S VOTING AND DIVIDEND RIGHTS.
Number
AMERICAN DEPOSITARY SHARES
(EACH REPRESENTING
TWO ORDINARY SHARES,
OF 10p. EACH)
[FORM OF FACE OF RECEIPT]
AMERICAN DEPOSITARY RECEIPT
Evidencing
AMERICAN DEPOSITARY SHARES
Representing
DEPOSITED ORDINARY SHARES,
OF 10p. EACH OF
WASTE MANAGEMENT INTERNATIONAL plc
(Incorporated under the laws of England and Wales)
CITIBANK, N.A., a national banking association organized and existing
under the laws of the United States of America, as Depositary (the
"Depositary"), such Depositary's
principal office being located at 111 Wall Street, New York, New York 10043,
hereby certifies that , or registered assigns, is the owner of
American Depositary Shares, representing deposited Ordinary Shares
of 10p. each ("Shares"), of WASTE MANAGEMENT INTERNATIONAL plc, a corporation
organized under the laws of England and Wales (the "Company"). At the date of
the Deposit Agreement, each American Depositary Share represents two (2) Shares
deposited under the Deposit Agreement (as hereafter defined) with the
Custodian which at the date of execution of the Deposit Agreement is Citibank
(London), 11 Old Jewry, London EC2R8DJ, England (the "Custodian"). The ratio
of American Depositary Shares ("ADSs") to Shares is subject to amendment as
provided in Article IV of the Deposit Agreement.
(1) The Deposit Agreement. This American Depositary Receipt is one of an
issue (herein called the Receipts), all issued and to be issued upon the terms
and conditions set forth in the Deposit Agreement, dated as of April 1, 1992
(the "Deposit Agreement"), by and among the Company, the Depositary and all
holders (the "Holders") from time to time of Receipts issued thereunder, each
of whom by accepting a Receipt agrees to become a party thereto and becomes
bound by all the terms and provisions thereof. The Deposit Agreement sets
forth the rights
A-2
of Holders and the rights and duties of the Depositary in respect of the
Shares deposited thereunder and any and all other securities, property and
cash from time to time received in respect of such Shares and held thereunder
(such Shares, securities, property and cash are herein called "Deposited
Securities"). Copies of the Deposit Agreement are on file at the Principal
Office in New York of the Depositary and at the office of the Custodian in
London. The statements made on the face and the reverse of this Receipt are
summaries of certain provisions of the Deposit Agreement and are qualified by
and subject to the detailed provisions of the Deposit Agreement, to which
reference is hereby made. Terms used and not defined herein shall have the
same meaning as in the Deposit Agreement. The Depositary makes no
representation or warranty as to the validity or worth of the Deposited
Securities.
(2) Surrender of Receipts and Withdrawal of Deposited Securities. Upon
surrender at the Principal Office of the Depositary of this Receipt for the
purpose of withdrawal of the Deposited Securities represented hereby, and upon
payment of (i) the fee of the Depositary for the making of withdrawals and
cancellation of Receipts (as set forth on Exhibit B to the Deposit Agreement)
and (ii) all fees, taxes and governmental charges payable in connection with
such surrender and withdrawal, and
A-3
subject to the terms and conditions of the Deposit Agreement and article 3
hereof, the Company's Articles of Association (the "Articles") and the
provisions of or governing the Deposited Securities and other applicable laws,
the Holder of this Receipt shall be entitled to delivery, to him or upon his
order, of the Deposited Securities at the time evidenced by this Receipt.
Delivery of such Deposited Securities may be made by the delivery of (a)
certificates in the name of the Holder or as ordered by him or by certificates
properly endorsed or accompanied by proper instruments of transfer to the
Holder or as ordered by him and (b) any other securities, property and cash to
which the Holder is then entitled in respect of such Receipts to the Holder or
as ordered by him. Such delivery shall be made, as hereinafter provided,
without unreasonable delay and, at the option of the Holder hereof, either at
the office of the Custodian or at the Principal office of the Depositary,
provided that the forwarding of certificates evidencing Shares or other
Deposited Securities for such delivery shall be at the risk and expense of the
Holder.
(3) Transfers; Split-ups and Combinations. The transfer of this Receipt
is registrable on the books of the Depositary by the Holder hereof in person
or by duly authorized attorney, upon surrender of this Receipt to the
Principal Office
A-4
of the Depositary properly endorsed or accompanied by proper instruments of
transfer and funds sufficient to pay any applicable transfer taxes and the
expenses of the Depositary. This Receipt may be split into other Receipts or
may be combined with other Receipts into one Receipt, representing the same
aggregate number of ADSs as the Receipt or Receipts surrendered. As a
condition precedent to the execution and delivery, registration, registration
of transfer, split-up, combination or surrender of any Receipt, the delivery
of any distribution thereon or withdrawal of any Deposited Securities, the
Depositary or the Custodian may require (a) payment from the depositor of
Shares or presenter of the Receipt of a sum sufficient to reimburse it for any
tax (including any Stamp Tax) or other governmental charge and any stock
transfer or registration fee with respect thereto (including any such tax or
charge and fee with respect to Shares being deposited or withdrawn) and
payment of any applicable fees as provided in article (6) hereof, or in
Exhibit B to the Deposit Agreement, (b) the production of proof satisfactory
to it as to the identity and genuineness of any signature or other matter
contemplated by the Deposit Agreement and (c) compliance with (i) any laws or
governmental regulations relating to American Depositary Receipts or to the
withdrawal of Deposited Securities and (ii) such reasonable regulations, if
any, as the
A-5
Depositary and the Company may establish consistent with the provisions of the
Deposit Agreement, subject to article (22) hereof.
The Depositary may refuse to execute and to deliver Receipts, register
the transfer of any Receipt, or make any distribution of, or related to,
Deposited Securities until it has received such proof of citizenship, taxpayer
status, residence, exchange control approval or other information as it may
deem necessary or proper in accordance with applicable laws and regulations
and the terms of the Deposit Agreement, subject to article (22) hereof. The
delivery of Receipts against deposits of Shares generally or against deposits
of particular Shares may be suspended, or the delivery of Receipts against the
deposit of particular Shares may be withheld, or the registration of transfer
of Receipts in particular instances may be refused, the registration of
transfer generally may be suspended, during any period when the transfer books
of the Company, the Depositary or the Share Registrar are closed or if any
such action is deemed necessary or advisable by the Depositary or the Company,
in good faith, at any time or from time to time because of any requirement of
law, any government or governmental body or commission or any securities
exchange on which the Receipts or Shares are listed, or under any provision of
this Deposit Agreement or the
A-6
provision of or governing Deposited Securities, or any meeting of shareholders
of the Company or for any other reason, subject in all cases to article (22)
hereof. Notwithstanding any provision of the Deposit Agreement or the
Receipts to the contrary, the surrender of outstanding Receipts and withdrawal
of Deposited Securities may not be suspended or refused, except as permitted
in General Instruction IA(1) to Form F-6 (as such instruction may be amended
from time to time) under the Securities Act of 1933 in connection with (i)
temporary delays relating to the deposit of Shares in connection with voting
at a shareholders' meeting, or the payment of dividends, (ii) the payment of
fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign
laws or governmental regulations relating to the Receipts or to the withdrawal
of the Deposited Securities. Without limitation of the foregoing, the
Depositary shall not knowingly accept for deposit under the Deposit Agreement
any Shares or other Deposited Securities (a) that are required to be
registered under the provisions of the Securities Act of 1933, unless a
registration statement is in effect as to such Shares or other Deposited
Securities, or (b) that would thereby infringe any provisions of the Articles
of the Company
(4) Liability of Holder For Taxes. If any tax or other governmental
charge or assessment imposed under applicable
A-7
laws (including, without limitation, any Stamp Tax) shall become payable with
respect to the Receipt or any Deposited Securities evidenced by the Receipt,
such tax, other governmental charge or expense shall be payable by the Holder
of the Receipt to the Depositary. The Depositary may refuse, and the Company
shall be under no obligation, to effect any transfer of the Receipt, or
split-up or combination of the Receipt or, subject to article 22 hereof, any
withdrawal of Deposited Securities represented hereby until such payment is
made, and may withhold any dividends or other distributions or securities
receivable in respect of Deposited Securities, or may sell for the account of
the Holder hereof any part or all of the Deposited Securities represented by
the Receipt, and may apply such dividends or other distributions or the
proceeds of any such sale in payment of such tax, other governmental charge or
expense, the Holder of the Receipt remaining liable for any deficiency.
(5) Warranties by Depositor. Each person depositing Shares under the
Deposit Agreement shall be deemed thereby to represent and warrant that such
Shares and the certificates therefor are validly issued, fully paid,
non-assessable, that all preemptive rights, if any, with respect to such
Shares have been validly waived or exercised and that the person making such
deposit is duly authorized so to do. Each such person shall
A-8
also be deemed to represent that the deposit of Shares or sale of Receipts by
that person is not restricted, and that the Shares deposited by that person
are not Restricted Securities, under the Securities Act of 1933. In addition,
such person shall be deemed to represent that such Shares are not liable to
disenfranchisement or disposal by the Company pursuant to the Articles. Such
representations and warranties shall survive the deposit and withdrawal of
Shares and issuance and cancellation of Receipts in respect thereof.
(6) Charges of Depositary. The Depositary shall charge any party who
makes a deposit or to whom Receipts are issued (including, without limitation,
a deposit or issuance pursuant to a stock dividend or stock split declared by
the Company or an exchange of stock regarding the Receipts or Deposited
Securities or a distribution of Receipts pursuant to Section 4.04 of the
Deposit Agreement) or who makes a withdrawal or surrenders Receipts a fee of
$5.00 or less per 100 ADSs (or portion thereof) for such deposit, issuance,
withdrawal or surrender, respectively. In addition, Holders will pay the
charges and expenses of the Depositary in accordance with the terms of the
Deposit Agreement including Exhibit B thereof. The Company will pay the other
fees, charges and reasonable expenses of the Depositary and any Registrar,
co-transfer agent and
A-9
co-registrar, if any, under the Deposit Agreement, as agreed upon from time to
time between the Company and the Depositary. All charges may be changed by
agreement in writing between the Depositary and the Company at any time and
from time to time, subject to article (20).
(7) Filing Proofs, Certificates, and Other Information. Any person
presenting Shares for deposit or any Holder may be required from time to time
to file such proof of citizenship, taxpayer status, residence or exchange
control approval, compliance with applicable laws and the terms of the Deposit
Agreement or other information, to execute such certificates and to make such
representations and warranties, as the Depositary may deem necessary or proper
or as the Company may require by written request to the Depositary consistent
with its obligations thereunder. The Depositary may withhold the execution or
delivery or registration of transfer of this Receipt or the distribution or
sale of any dividend or distribution of rights or of the proceeds thereof or,
subject to article 22, the delivery of any Deposited Securities until such
proof or other information is filed or such certificates are executed to the
Depositary and the Company's satisfaction. The Depositary shall provide the
Company in a timely manner with copies, or originals if necessary and
appropriate, of (i) any such proofs of
A-10
citizenship, taxpayer status, residence or exchange control approval which the
Depositary receives, and (ii) any other information or documents which the
Company may reasonably request and which the Depositary shall request from the
Holders or any person presenting Shares for deposit.
(8) Disclosure of Beneficial Ownership. Notwithstanding any other
provision of this Receipt or the Deposit Agreement, the Holder agrees to be
bound by, and subject to the Articles, and to provide such information as the
Company may request in a disclosure notice (a "Disclosure Notice") given
pursuant to statutory provisions of English law or the Articles. Failure of
the Holder to provide in a timely fashion the information requested in any
Disclosure Notice may result in the withholding of certain rights in respect
of the Holder's ADSs (including voting rights and certain rights as to
dividends in respect of the Shares represented by such ADSs). The Depositary
agrees to use its reasonable efforts to comply with any instructions received
from the Company requesting that the Depositary take the reasonable actions
specified therein to obtain such information
In addition, any Holder who is or becomes directly or indirectly
interested (within the meaning of the Companies Acts
A-11
1985, as amended from time to time (the "Companies Act")) in 3% (or such other
amount as may be required by the Companies Act) or more of the outstanding
Shares, or is aware that another person for whom it holds such ADSs is so
interested, must within two business days (or such other period as may be
required by the Companies Act) after becoming so interested or so aware, and
thereafter upon any changes of at least 1% of the outstanding Shares, notify
the Company as required by the Companies Act.
(9) Title to Receipts. It is a condition of this Receipt, and every
successive Holder hereof by accepting or holding the same consents and agrees,
that title to this Receipt (and to the ADSs evidenced hereby), when properly
endorsed or accompanied by proper instruments of transfer, is transferable by
delivery with the same effect as in the case of a negotiable instrument under
the laws of the State of New York; provided, however, that the Depositary,
notwithstanding any notice to the contrary, may deem and treat the person in
whose name this Receipt is registered on the books of the Depositary as the
absolute owner hereof for the purpose of determining the person entitled to
distribution of dividends or other distributions or to any notice provided for
in the Deposit Agreement and for all other purposes.
A-12
(10) Validity of Receipt. This Receipt shall not be entitled to any
benefits under the Deposit Agreement or be valid or obligatory for any
purpose, unless this Receipt shall have been executed by the Depositary by the
manual signature of a duly authorized officer or, if a Registrar for the
Receipts shall have been appointed, such signature may be a facsimile if this
Receipt is countersigned by the manual signature of a duly authorized officer
of such Registrar.
(11) Available Information. The Company is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934 and accordingly
files certain reports with the Commission, which reports may be inspected and
copied by the Holders at the offices of the Commission in Washington, D.C.
Dated:
Countersigned CITIBANK, N.A.,
as Depositary
By: By:
-------------------------- -------------------------
Authorized Officer Vice President
The address of the Principal Office of the Depositary is 111 Wall Street,
5th Floor, New York, New York 10043.
A-13
(FORM OF REVERSE OF RECEIPT)
SUMMARY OF CERTAIN ADDITIONAL PROVISIONS
OF THE DEPOSIT AGREEMENT
(12) Dividends and Distributions; Rights. Whenever the Depositary or the
Custodian shall receive foreign currency, by way of dividends or other
distributions or the net proceeds from the sale of securities, property or
rights, which in the judgment of the Depositary can at such time be converted
on a reasonable basis into dollars distributable to the Holders entitled
thereto and transferable to the United States, the Depositary shall convert or
cause to be converted, by sale or in any other manner that it may determine,
such foreign currency into dollars, and shall transfer such dollars (net any
of its reasonable and customary expenses incurred in such conversion and any
expenses incurred on behalf of the Holder in complying with currency exchange
control or other governmental requirements) to the Holders entitled thereto
or, if the Depositary shall have distributed any warrants or other instruments
that entitle the holders thereof to such dollars, then to the holders of such
warrants and/or instruments upon surrender thereof for cancellation. Such
distribution may be made upon an averaged or other practicable basis without
regard to any distinctions among
A-14
Holders on account of any application of exchange restrictions or otherwise.
The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any Holder a fraction of one cent. Any such
fractional amount shall be rounded to the nearest whole cent and so
distributed to Holders entitled thereto. If in the judgment of the Depositary,
amounts received in foreign currency may not be converted on a reasonable
basis into United States dollars distributable to the Holders entitled
thereto, or may not be so convertible for all of the Holders entitled thereto,
the Depositary may in its discretion make such conversion, if any, and
distribution in United States dollars to the extent permissible to the Holders
entitled thereto and may distribute the balance of the foreign currency
received and not so convertible by the Depositary to, or hold (without
liability for interest thereon) such balance for the account of, the Holders
entitled thereto. If in the opinion of the Depositary any distribution other
than cash or Shares upon any Deposited Securities cannot be made
proportionately among the Holders entitled thereto, or if for any other reason
the Depositary deems such distribution not to be feasible, the Depositary may
adopt such method as it, with the reasonable approval of the Company, may deem
equitable and practicable for
A-15
the purpose of effecting such distribution, including the sale (at public or
private sale) of the securities or property thus received, or any part
thereof, and the net proceeds of any sale (net of taxes and expenses of the
Depositary as set forth in Exhibit B to the Deposit Agreement) shall be
distributed by the Depositary to the Holders entitled thereto as in the case
of a distribution received in cash. If any distribution upon any Deposited
Securities consists of a dividend in the form of Shares, the Depositary may
with the Company's approval, and shall if the Company shall so request, (i)
instruct the Company to deposit or cause such Shares to be deposited with and
registered in the name of the Custodian and (ii) distribute to the Holders of
record of outstanding Receipts entitled thereto, in proportion to the number
of ADSs representing such Deposited Securities held by them respectively,
additional Receipts for an aggregate number of ADSs representing the number of
Shares received as such dividend, subject to the terms of the Deposit
Agreement. In lieu of delivering Receipts for fractional ADSs in any such
case, the Depositary will sell the number of Shares represented by the
aggregate of such fractions and distribute the net proceeds, all in the manner
and subject to the conditions set forth in the Deposit Agreement. In the event
that the Company shall offer or cause to be offered to the holders of any
A-16
Deposited Securities any rights to subscribe for additional Shares or any
rights of any other nature, the Depositary may, after consultation with the
Company, and if requested in writing by the Company shall, either (a) make
such rights available to all Holders or certain Holders but not others by
means of warrants or otherwise, if lawful and feasible, or (b) if making such
rights available is not lawful or not feasible, or if the rights represented
by such warrants or other instruments are not exercised and appear to be about
to lapse, sell such rights or warrants or other instruments at public or
private sale, at such place or places and upon such terms as the Depositary
may deem proper, and allocate the proceeds of such sales, as in the case of a
cash distribution, for account of the Holder otherwise entitled thereto upon
an averaged or other practicable basis without regard to any distinctions
among such Holders because of exchange restrictions or the date of delivery of
any Receipt or Receipts, or otherwise. In the event the Depositary does not
receive such written notice, the Depositary will have discretion as to whether
such rights are to be made available to the Holders or in disposing of such
rights on behalf of such Holders or in allowing such rights to lapse. The
Depositary shall not be responsible for any failure to make such rights
available to Holders in general or any Holder in particular. If a Holder
A-17
wishes to exercise the rights allocable to the ADSs of such Holder, the
Depositary, upon the Holder's written request and subject to the terms and
conditions of the Deposit Agreement (including Section 4.05 thereof), will
make such rights available to such Holder.
Notwithstanding anything to the contrary in this Receipt, if registration
under the Securities Act of 1933 of the securities to which any rights relate
is required in order for the Company to offer such rights or such securities
to Holders and sell the securities represented by such rights, the Depositary
will not offer such rights to the Holders (i) unless and until a registration
statement under the Securities Act of 1933 covering such offering is in
effect, or (ii) unless the Company furnishes the Depositary an opinion of
counsel for the Company in the United States satisfactory to the Depositary or
other evidence satisfactory to the Depositary to the effect that the offering
and sale of such securities to the Holders of such Receipts are exempt from or
do not require registration under the provisions of the Securities Act of
1933.
(13) Record Dates. Whenever the Depositary shall receive notice of the
fixing of a record date by the Company for the determination of holders of
Deposited Securities entitled to receive any cash, or any rights to be issued
with respect to the
A-18
Deposited Securities, or whenever for any reason the Depositary causes a
change in the number of Shares that are represented by each ADS, or whenever
the Depositary shall receive notice of any meeting of holders of Shares or
other Deposited Securities, or whenever the Depositary shall find it necessary
or convenient in connection with the giving of any notice, solicitation of any
consent or any other matter, the Depositary will, after consultation with the
Company, fix a record date for the determination of the Holders who will be
entitled to receive such dividend, distribution, rights or the net proceeds of
the sale thereof, or to give instructions for the exercise of voting rights at
any such meeting, or to give or withhold such consent, or to receive such
notice or solicitation or to otherwise take action, or whose Receipt shall
evidence such changed number of Shares.
(14) Voting of Deposited Securities. As soon as practicable after receipt
of notice of any meeting or solicitation of consents or proxies from holders
of Shares or other Deposited Securities, the Depositary shall fix a record
date in respect of such meeting for the giving of instructions for voting such
consent or proxy and shall mail to Holders a notice which shall contain: (a)
such information as is contained in such notice of meeting, (b) a statement,
in a form provided by the Company, that the Holders at the close of business
on the
A-19
specified record date will be entitled, subject to any applicable provisions
of the laws of England and Wales, the Articles of the Company and the
provisions of or governing Deposited Securities (which provisions, if any,
shall be summarized in pertinent part), to instruct the Depositary as to the
exercise of the voting rights, if any, pertaining to the Shares or other
Deposited Securities represented by ADSs evidenced by their respective
Receipts, and (c) a brief statement as to the manner in which such
instructions may be given including an express indication that instructions
may be given to the Depositary to give a discretionary proxy to a person or
persons designated by the Company. Upon receipt of the written request of a
Holder (an "Instructing Holder") on such record date the Depositary shall
endeavor insofar as practicable and permitted under applicable law and the
provisions of the Articles of the Company and the provisions of the Deposited
Securities to vote or cause the Custodian to vote the Shares and/or other
Deposited Securities represented by ADSs evidenced by such Receipt in
accordance with the instructions set forth in such request. In the event a
poll is duly demanded and if no instructions are received, the Depositary will
deem, unless otherwise requested by the Company and unless otherwise provided
for in the Deposit Agreement, such Holders to have instructed the Depositary
to give a
A-20
discretionary proxy to the person designated by the Company; provided,
however, no discretionary proxy shall be given with respect to any proposition
as to which the Depositary has actual knowledge which (i) involves any
solicitation of opposing proxies or other substantial opposition, or (ii)
authorizes a merger, consolidation, or any other matter which may materially
affect the rights and privileges of the holders of Shares or the Holders.
Unless specifically instructed by at least five Holders or Holders
representing not less than 10% of the total voting rights of all Holders
having the right to vote at such meeting, the Depositary shall not join in
demanding a poll and, in such case, the Depositary shall follow the
instructions of the Instructing Holders holding Receipts evidencing a majority
of the ADSs held by all Instructing Holders.
Subject to the previous paragraph, neither the Depositary nor the
Custodian shall vote or attempt to exercise the right to vote the Shares or
other Deposited Securities represented by ADSs evidenced by a Receipt other
than in accordance with such written instructions. In accordance with the
Articles and the Companies Act, failure by a Holder, or a person holding an
interest in Shares through a Holder, to comply with the Company's request for
information of the nature referred to in article (8) may result, inter alia,
in withdrawal of the voting
A-21
rights of the Shares underlying the Receipts held by that Holder and thus of
the rights described in this article (14) to direct the voting of Deposited
Securities underlying such Receipts.
(15) Changes Affecting Deposited Securities. Upon any change in nominal or
par value, split-up, cancellation, consolidation or any other reclassification
of Deposited Securities, or upon any recapitalization, reorganization, merger or
consolidation or sale of assets affecting the Company or to which it is a party,
any securities which shall be received by the Depositary or a Custodian in
exchange for, in conversion of or replacement or otherwise in respect of,
Deposited Securities shall be treated as new Deposited Securities under the
Deposit Agreement, and ADSs shall thenceforth represent in addition to, or in
replacement or conversion of, existing Deposited Securities, the right to
receive new Deposited Securities so received in exchange, conversion,
replacement or otherwise, unless additional or new Receipts are delivered
pursuant to the following sentence. In any such case the Depositary may with the
Company's approval, and shall if the Company shall so request, execute and
deliver additional Receipts as in the case of a stock dividend on the Shares, or
call for the surrender of outstanding Receipts to be exchanged for new Receipts.
Notwithstanding the foregoing, in the event that any security so received may
not be
A-22
lawfully distributed to some or all Holders, the Depositary may, with the
Company's approval, and shall if the Company requests, sell such securities at
public or private sale, at such place or places and upon such terms as it may
deem proper, and may allocate the net proceeds of such sales for the account
of the Holders otherwise entitled to such securities upon an averaged or other
practicable basis without regard to any distinctions among such Holders and
distribute the net proceeds so allocated to the extent practicable as in the
case of a distribution received in cash.
(16) Reports; Inspection of Transfer Books. The Depositary will make
available for inspection by Holders at its Principal Office any reports and
communications, including any proxy soliciting material, received from the
Company which are both (a) received by the Depositary, the Custodian or the
nominee of either, as the holder of the Deposited Securities, and (b) made
generally available to the holders of such Deposited Securities by the
Company. The Depositary will also send to Holders copies of such reports when
furnished by the Company as provided in the Deposit Agreement. The Depositary
will keep books for the registration of Receipts and their transfer which at
all reasonable times will be open for inspection by the Company and Holders,
provided that such inspection shall not be for
A-23
the purpose of communicating with Holders in the interest of a business or
object other than the business of the Company or a matter related to the
Deposit Agreement or the Receipts.
(17) Withholding. Notwithstanding any other provision of the Deposit
Agreement, in the event that the Depositary determines that any distribution
in cash or other property (including Shares or rights to subscribe therefor)
is subject to any tax or other governmental charge or assessment which the
Depositary or the Custodian is obligated to withhold, the Depositary may
dispose of all or a portion of such property (including Shares and rights to
subscribe therefor) in such amounts and in such manner as the Depositary deems
necessary and practicable to pay such taxes, charges or assessments by public
or private sale, and the Depositary shall distribute the net proceeds of any
such sale or the balance of any such property after deduction of such taxes,
charges or assessments to the Holders entitled thereto (and net of fees of the
Depositary) in the manner specified in article (12) hereof.
(18) Liability of the Company and Depositary. Neither the Depositary nor
the Company nor any of their respective directors, employees, agents or
affiliates shall incur any liability to any Holder or any other person, if, by
reason of any
A-24
provision of any present or future law or regulation of the United States,
England and Wales or any other country, or of any other governmental or
regulatory authority or stock exchange, or by reason of any provision, present
or future, of the Articles of the Company or governing any Deposited
Securities, or by reason of any act of God or war or other circumstance beyond
its control, the Depositary, or its agents, or the Company, or its agents,
shall be prevented or forbidden from, or subjected to any civil or criminal
penalty or restraint on account of, or delayed in, doing or performing any act
or thing which by the terms of the Deposit Agreement it is provided shall be
done or performed; nor shall the Depositary, or its agents, or the Company, or
its agents, incur any liability to any Holder or other person by reason of any
non-performance or delay, caused as aforesaid, in the performance of any act
or thing which by the terms of the Deposit Agreement it is provided shall or
may be done or performed, or by reason of any exercise of, or failure to
exercise, any discretion provided for in the Deposit Agreement or the Articles
Where, by the terms of a distribution pursuant to Sections 4.02, 4.03, or 4.04
of the Deposit Agreement, or an offering or distribution pursuant to Section
4.05 or 4.09 of the Deposit Agreement, or for any other reason, such
distribution or offering may not be made available to Holders,
A-25
or some of them, and the Depositary may not dispose of such distribution or
offering on behalf of such Holders and make the net proceeds available to such
Holders, then the Depositary shall not make such distribution or offering, and
shall allow any rights, if applicable, to lapse. Neither the Company or its
agents nor the Depositary or its agents assumes any obligation or shall be
subject to any liability under the Deposit Agreement to Holders or other
persons, except that each of them agrees to perform its duties specifically
set forth in the Deposit Agreement without negligence or bad faith. The
Depositary shall not be subject to any liability with respect to the validity
or worth of the Deposited Securities. Neither the Depositary nor any of its
agents nor the Company nor any of its agents shall be (a) under any obligation
to appear in, prosecute or defend any action, suit or other proceeding in
respect of any Deposited Securities or in respect of this Receipt, which in
its opinion may involve it in expense or liability, unless indemnity
satisfactory to it against all expense (including fees and disbursements of
counsel) and liability be furnished as often as may be required, (and no
Custodian will be under any obligation whatsoever with respect to such
proceedings, the responsibility of the Custodian being solely to the
Depositary) or (b) liable for any action or inaction by it in reliance upon
the advice of or
A-26
information from legal counsel, accountants, any person presenting Shares for
deposit, any Holder, or any other person believed by it in good faith to be
competent to give such advice or information. The Depositary and its agents
shall not be responsible for any failure to carry out any instructions to vote
any of the Deposited Securities, or for the manner in which any such vote is
cast or effect of any such vote, provided that any such action or inaction is
in good faith. No disclaimer of liability under the Securities Act of 1933 is
intended by any provision of the Deposit Agreement. Subject to the further
terms and provisions of this article (18), Citibank, N.A. and its agents may
own and deal in any class of securities of the Company and its affiliates and
in Receipts. The Depositary may issue Receipts against evidence of rights to
receive Shares from the Company, or any custodian, registrar, transfer agent,
clearing agency or other entity involved in ownership or transaction records
in respect of the Shares. Such evidence of rights shall consist of written
blanket or specific guarantees of ownership of Shares furnished on behalf of
the holder thereof. Neither the Depositary nor the Custodian shall lend Shares
or Receipts; provided, however, that the Depositary reserves the right to (i)
issue Receipts prior to the receipt of Shares pursuant to Section 2.02 of the
Deposit Agreement and (ii) deliver Shares prior to the
A-27
receipt and cancellation of Receipts pursuant to Section 2.05 of the Deposit
Agreement, including Receipts which were issued under (i) above but for which
Shares may not have been received. The Depositary may receive Receipts in lieu
of Shares under (i) above and receive Shares in lieu of Receipts under (ii)
above. Each such transaction shall be (a) accompanied by (x) a written
representation by the person or entity (the "Applicant") to whom Receipts are
issued or Shares delivered that at the time the Depositary issues such
Receipts or delivers such Shares, the Applicant or its customer owns the
Shares or Receipts to be delivered to the Depositary, or (y) such evidence of
ownership of Shares or Receipts as the Depositary deems appropriate, (b)
subject to a written representation by the Applicant that it will hold such
Shares or Receipts in trust for the Depositary until their delivery to the
Depositary or custodian, reflect on its records the Depositary as owner of
such Shares or Receipts and deliver such Shares or Receipts upon the
Depositary's request, (c) at all times fully collateralized (marked to market
daily) with cash, United States government securities, or other collateral of
comparable safety and liquidity, (d) terminable by the Depositary on not more
than five (5) business days notice, and (e) subject to such further
indemnities and credit regulations as the Depositary deems appropriate. The
Depositary
A-28
intends that the number of Receipts issued by it under (i) above and
outstanding at any time, generally will not exceed thirty percent (30%) of the
Receipts issued by the Depositary and with respect to which Shares are on
deposit with the Depositary or custodian; provided, however, that the
Depositary reserves the right to change or disregard such limit from time to
time as the Depositary deems appropriate. The Depositary will also set limits
with respect to the number of Receipts and Shares involved in transactions to
be effected hereunder with any one person on a case by case basis as it deems
appropriate.
Collateral provided by an Applicant for Receipts or Shares, but not the
earnings thereon, shall be held for the benefit of the Holder. The Depositary
may retain for its own account any compensation received by it in connection
with the foregoing, including without limitation earnings on the collateral.
(19) Resignation and Removal of Depositary; Substitution of Custodian.
The Depositary may at any time resign as Depositary under the Deposit
Agreement by written notice of its election so to do delivered to the Company,
such resignation to be effective upon the appointment of a successor
depositary, reasonably satisfactory to the Company, and its acceptance of
A-29
such appointment as provided in the Deposit Agreement. The Depositary may at
any time be removed by the Company by written notice of such removal, such
removal to be effective upon the appointment of a successor depositary,
reasonably satisfactory to the Company, and its acceptance of such appointment
as provided in the Deposit Agreement. The Depositary may at any time appoint a
substitute or an additional custodian and the term "Custodian" shall also
refer to such substitute or additional custodian.
(20) Amendment of Deposit Agreement and Receipts. The form of the
Receipts and any provisions of the Deposit Agreement may at any time and from
time to time be amended by agreement between the Company and the Depositary in
any respect which they may deem desirable. Any amendment which shall impose or
increase any fees or charges (other than the fees of the Depositary for
deposit, the execution and delivery of Receipts and taxes or other
governmental charges), or which shall otherwise prejudice any substantial
existing right of Holders, shall not, however, become effective as to
outstanding Receipts until the expiration of three (3) months after notice of
such amendment shall have been given to the Holders of outstanding Receipts.
The parties hereto agree that any amendments which (i) are reasonably
necessary (as agreed by the Company and the
A-30
Depositary) in order for (a) the ADSs to be registered on Form F-6 under the
Securities Act of 1933 or (b) the ADSs or Shares to be traded solely in
electronic book-entry form and (ii) do not in either such case impose or
increase any fees or charges to be borne by Holders, shall be deemed not to
prejudice any substantial rights of Holders. Every Holder at the time any
amendment so becomes effective shall be deemed, by continuing to hold such
Receipt, to consent and agree to such amendment and to be bound by the Deposit
Agreement as amended thereby. In no event shall any amendment impair the right
of the Holder hereof to surrender this Receipt and receive therefor the
Deposited Securities represented hereby, except in order to comply with
mandatory provisions of applicable law.
(21) Termination of Deposit Agreement. The Depositary shall, at any time,
at the written direction of the Company, terminate the Deposit Agreement by
mailing notice of such termination to the Holders of all Receipts then
outstanding at least 30 days prior to the date fixed in such notice for such
termination. If 60 days shall have expired after (i) the Depositary shall have
resigned, or (ii) the Company shall have given notice of the removal of the
Depositary under the Deposit Agreement, and, in either case, a successor
depositary shall not have been appointed and accepted its appointment, the
Deposit
A-31
Agreement shall automatically terminate on said 60th day after delivery of
such notice. If any Receipts shall remain outstanding after the date of
termination, the Depositary thereafter shall discontinue the registration of
transfers of Receipts, shall suspend the distribution of dividends to the
Holders thereof, and shall not give any further notices or perform any further
acts under the Deposit Agreement, except the collection of dividends and other
distributions pertaining to Deposited Securities, the sale of rights and the
delivery of Deposited Securities, subject to Section 2.05 of the Deposit
Agreement, together with any dividends or other distributions received with
respect thereto and the net proceeds of the sale of any rights or other
property, in exchange for Receipts surrendered to the Depositary (after
deducting, or charging, the fees of the Depositary for the surrender of a
Receipt, any expenses for the account of the Holder in accordance with the
terms and conditions of the Deposit Agreement and any applicable taxes or
other governmental charges or assessments). At any time after the expiration
of six months from the date of termination, the Depositary may sell the
Deposited Securities then held under the Deposit Agreement and may thereafter
hold uninvested the net proceeds of any such sale, together with any other
cash then held by it under the Deposit Agreement, in an unsegregated
A-32
escrow account, without liability for interest, for the pro rata benefit of
the Holders whose Receipts have not theretofore been surrendered. Thereafter
the Depositary will be discharged from all obligations under the Deposit
Agreement, except to account for such net proceeds and other cash (after
deducting or charging such fees, expenses, taxes and charges as aforesaid).
Upon the termination of the Deposit Agreement, the Company shall be discharged
from all obligations under the Deposit Agreement except for its obligations to
the Depositary under Sections 5.08 and 5.09 of the Deposit Agreement.
(22) Compliance With U.S. Securities Laws. Notwithstanding any provisions
in this Receipt or the Deposit Agreement to the contrary, the Company and the
Depositary have each agreed that it will not exercise any rights it has under
the Deposit Agreement or the Receipt to prevent the withdrawal or delivery of
Deposited Securities in a manner which violate the United States securities
laws, including, but not limited to Instruction I A(1) of the General
Instructions to Form F-6 Registration Statement, as amended from time to time,
under the Securities Act of 1933.
A-33
(ASSIGNMENT AND TRANSFER SIGNATURE LINES)
NOTE: The signature to any endorsement hereon must correspond with the
name as written upon the face of this Receipt in every particular,
without alteration or enlargement or any change whatever.
If the endorsement be executed by an attorney, executor,
administrator, trustee or guardian, the person executing the
endorsement must give his full title in such capacity and proper
evidence of authority to act in such capacity, if not on file with
the Depositary, must be forwarded with this Receipt.
All endorsements or assignments of Receipts must be guaranteed by a
New York Stock Exchange member firm or member of the Clearing House
of the American Stock Exchange Clearing Corporation or by a bank or
trust company having an office or correspondent in the City of New
York.
A-34
EXHIBIT B
CHARGES OF THE DEPOSITARY
Service Rate By Whom Paid
------- ---- ------------
(1) Receipt of deposits Up to $5.00 per 100 Party who makes
and issuance of American Depositary relevant
Receipts (includ- Shares (or fraction deposit or to
ing, without limi- thereof) whom Receipts
tations, deposit or are issued
issuance pursuant
to stock dividend)
(2) Delivery of Depos- Up to $5.00 per 100 Party Surren-
ited Securities American Depositary dering Receipts
against surrender Shares (or fraction or making
of Receipts thereof) withdrawals
The Company after consultation and agreement between the Depositary
and the Company as to the amount and nature of such charges, will pay those
charges of the Depositary and those of any Registrar, co-transfer agent or
co-registrar not payable by the Holders plus reasonable out-of-pocket expenses
such as printing, translation, stationery, postage, insurance, cables, etc.,
incurred by the Depositary in the exercise of its duties and obligations under
the Deposit Agreement, in accordance with written agreements entered into
between the Depositary and the Company from time to time, provided that the
Company shall not in any circumstances pay the fees and charges listed in the
next paragraph.
B-1
In addition to the fees of the Depositary stated above and in the
Deposit Agreement, Holders will pay (i) taxes and other governmental charges,
(ii) such registration fees as may from time to time be in effect for the
registration of transfers of Shares generally on the share register of the
Company (or the appointed agent of the Company for the transfer and
registration of Shares) and accordingly applicable to transfers of Shares to
the name of the Depositary or the Custodian or their nominee or the person who
is making a withdrawal, on the making of deposits or withdrawals under the
Deposit Agreement, (iii) such cable, telex and facsimile transmission expenses
as are expressly provided in the Deposit Agreement to be at the expense of
persons depositing Shares or Holders, (iv) such expenses as are incurred in
the conversion of foreign currency by the Depositary pursuant to Section 4.06
of the Deposit Agreement, and (v) such fees and expenses as are incurred by
the Depositary (including without limitation expenses incurred on behalf of
Holders in connection with compliance with foreign exchange control
regulations) in delivery of Deposited Securities.
B-2
Exhibit (b)
OPERATING LETTER
----------------
AMERICAN DEPOSITARY RECEIPTS
----------------------------
FOR
---
ENGLISH SHARES
--------------
OPERATING LETTER:
- -----------------
AMERICAN DEPOSITARY RECEIPTS FOR ENGLISH SHARES
- -----------------------------------------------
Citibank N.A.
P.O. Box 78
London
WC2R 1HB
Gentlemen:
We hereby appoint you as our Custodian with respect to certain securities of
English Companies against which the legal entity created by us as Depositary
plans to issue American Depositary Receipts. We shall notify you in writing
of each specific security for which we will authorize you to act as Custodian
and this Operating Letter shall govern your and our duties and
responsibilities with respect to each such security.
Upon request, Citibank New York will furnish Citibank London with a particular
specimen ADR certificate for an underlying ordinary security when you deem
necessary. Likewise, Citibank London will endeavour to furnish a particular
Company specimen certificate for ordinary shares to Citibank New York when
Depositary deems necessary.
For the purpose of this letter, the following words and phrases will have the
respective meanings indicated:
COMPANY Any corporation whose common shares are officially
- ------- traded in England and for which you agree to act as
our Custodian.
NOMINEE National City Nominees Limited
- ------- P.O. Box 78
London WC2R 1HB
OPERATING LETTER This instrument signifying multilateral agreement to
- ---------------- contents therein between Depositary and Custodian.
CUSTODIAN Citibank N.A. London Main Office.
- ---------
DEPOSITARY Citibank N.A.
- ---------- ADR Department
111 Wall Street
New York
New York 10015
TRANSFER AGENT The organization authorized by Company to transfer
- -------------- its Common Shares, or if there is no such, then
Company.
ADR'S American Depositary Receipts for Common Shares.
- -----
COMMON SHARES Any class of security of a Company which we authorize
- ------------- you to accept for deposit hereunder.
Page 2 of 7
We hereby authorize you to establish such cash and security accounts as may be
required in the proper performance of your duties as such Custodian. You are
to be guided by this document, and you agree to accept Common Shares for
deposit with you as Custodian for our account and to be bound by the
provisions of this letter.
I. Deposit of Common Shares for the Issuance of ADR's
- ------------------------------------------------------
Common Shares presented to you as Custodian for deposit as the basis for the
issuance of ADR's must be accompanied by sufficient documentation to effect
transfer of such shares into the name of the Nominee.
Upon receipt of such shares and documentation you agree to satisfy yourselves,
by examination, that they are readily transferable although confirmation of
this fact by the Transfer Agent is not required prior to your cabling us (in
terms of paragraph III, sub-paragraph iii of this document) instructing
issuance of the ADR's. Having made such examination, as far as is
practicable, no further liability is yours in the event that such
documentation proves to be not genuine or subject to title defect. However
you agree to use your best efforts to obtain reimbursement for any losses
suffered in this respect.
The above-mentioned shares must be accompanied by:
(i) A transmittal letter completed and signed by the presentor of Common
Shares substantially in the form attached hereto as Exhibit I, even
though amended to take due account of local legal requirements, if
any.
(ii) Funds for the payment of any cable, telex, telephone or other charges
incurred at the depositor's request and not waived by you unless all
charges are for New York party in which case such charges are to be
advised to ourselves at the time of your request to issue ADR's in
order that we may collect same and reimburse you.
(iii) Funds for the payment of any charge made by Transfer Agent to
register the ownership of such Common Shares in the name of Nominee,
and evidence of payment of Stamp Tax as necessary.
You shall not accept Common Shares for deposit from the Company or any person in
control of the Company unless you shall have also received an opinion of U.S.
counsel (who shall be satisfactory to us) that such deposit and consequent
issuance of ADR's is exempt from or in accordance with, applicable U.S. laws and
regulations, or have advised us of the full circumstances of such deposit and
have received permission or instructions from us to accept such deposit.
II. Notification to Depositary to Issue ADR's
- ----------------------------------------------
Upon receipt by you of Common Shares for deposit you shall:
(i) Notify us immediately by tested telex or cable of the deposit of the
Common Shares, and/or request for issuance of ADR's. Such telex or
cable should incorporate the number of underlying shares and company,
the name of the presentor, the name of the deliveree, the deposit
number and any other salient information.
Page 3 of 7
(ii) Promptly lodge the Common Share certificates for transfer with the
Transfer Agent for registration into the name of the Nominee.
Upon receipt of Deposit Advices referred to in sub-paragraph (i) of this
paragraph (II) we shall issue and use our best efforts to deliver to the
persons named by you in the Deposit Advice ADR's evidencing the required
number of American Depositary Shares. We will advise you (via cable on same
day of communication with deliveree, if possible) of any issuances which for
any reason we are unable to complete. You will subsequently advise us (via
cable) as to the proper disposition of said issuances including providing
additional information to complete the transaction. The Common Shares are to
be held by you as Custodian for us, subject to our order. After notifying us
to whom or upon whose order the relative ADR's are to be issued and delivered,
you need not be concerned any further as to the interest, if any, therein of
the persons or corporations making the deposit.
Until further notice and upon agreement between Depositary and Custodian with
respect to operating procedures, advices to us of the deposit of Common Shares
with you should be numbered in one numerical sequence for each class of
securities for each Company.
You will ensure that you do not instruct the pre-release of ADR's in excess of
the mutually agreed percentage of shares physically held by yourselves unless
specifically agreed by us. Should you be unable to deliver Common Shares in
transferable order which you have advised us are on deposit with you for our
account in accordance with our request made as provided herein due to your
exceeding the aforementioned agreed percentage without our specific authority,
you agree to accept the liability for any loss suffered by us due to the non
delivery of such Common Shares except as prevented by force majeur.
III. Common Share Deposit in New York for ADR Issuance
- -------------------------------------------------------
Upon receipt of Common Shares and completed Letter of Transmittal (Exhibit I)
from a Customer for the issuance of ADR's, Citibank New York will:
(i) Issue a receipt to the Customer for receipt of Common Shares.
(ii) Forward Common Shares to Citibank London including proper
instructions for transfer.
Upon receipt of the Common Shares, Citibank London will:
(i) Perform proper examination of the Common Shares as defined in
paragraph I of this document.
(ii) Cable Citibank New York within 48 hours of receipt advising us of
acceptance and deposit of Common Shares with the Custodian or
rejection of such Common Shares while awaiting further instructions.
(iii) Promptly lodge the Common Share certificates, if acceptable, for
transfer with the Transfer Agent for registration in the name of the
Nominee and hold such shares to our direct order.
Page 4 of 7
Upon receipt of the cable from you signifying acceptance and deposit of the
Common Shares, or rejection of such shares, we will promptly issue and deliver
ADR's to the Depositor providing such Common Shares have been accepted by you,
or communicate the fact of non-acceptance and the reasons therefore to said
customer and obtain additional instructions.
IV. Release of Common Shares Upon Surrender & Cancellation of ADR's in New
- ---------------------------------------------------------------------------
York
- ----
We shall immediately notify you of the surrender of ADR's for cancellation
against release and delivery of underlying Common Shares in England, whereupon
you will withdraw certificates representing and corresponding number of Common
Shares of the appropriate class if there be more than one and deliver the
relative certificates in proper form for transfer to or on the order of the
person designated by our instructions and collect the charges, if any, other
than for cancellation of ADR's and cable expenses for advice to you, which may
be incurred by such delivery. You shall also collect or otherwise arrange for
payment by the deliveree of taxes or charges, if any, payable by the
transferor on such delivery unless advised to the contrary by ourselves.
We will advise you via tested telex or cable authorizing the release of Common
Shares by you to the appropriate parties. Such telex or cable will
incorporate the number of underlying shares and Company, the name of the party
requesting cancellation, the name of the deliveree, the delivery number and
any other salient information. We will use one numerical sequence of delivery
numbers for each class of securities and for each Company. You will advise us
(via cable on same day of communication with deliveree, if possible) of any
deliveries which for any reason you are unable to complete. We will
subsequently advise you (via cable) as to the proper disposition of said
deliveries including providing any additional information to complete the
transaction.
V. Monthly Share Reconciliation
- --------------------------------
You shall advise us of the number of Common Shares as at the close of business
on the last working day of the month. Such advice shall be given by airmailing
detailed ledgers of movements an balances to us within fifteen calendar days
after the month end. It will be our responsibility to ensure that all
balances reconcile. If there are no discrepancies, we will promptly confirm
balances. Otherwise we will promptly advise you of differences and request
additional information to reconcile.
VI. Share Reconciliation as of Record Date
- -------------------------------------------
You shall advise us by cable of the number of Common Shares under your control
as at the close of business on each Record Date. Such advice shall separately
indicate the number of shares registered in the name of the Nominee, the
number of shares which for any reason have not been transferred into the name
of the Nominee as at that date any other relevant information including
separate tabulation of shares pre-released. Additionally, such advice shall
indicate the last Deposit Advice number and Delivery Advice number utilised or
received by you. It will be our responsibility to ensure that all balances
reconcile. If there are no discrepancies, we will confirm balances.
Otherwise, we will advise you of differences and request additional
information to reconcile.
Page 5 of 7
VII. Announcements
- -------------------
Citibank London will:
(i) Ascertain and notify us by cable as soon as they are aware of the
intended record date to be used for determination of stockholders
entitled to vote at each annual meeting, each special meeting of
stockholders, of any recommendations of the Board of Directors of
Company as to any cash dividends, free distributions, rights
offerings or other distributions in respect of Common Shares. You
shall also cable advise us of any dividends, rights or other
distributions which may be declared payable or distributable and of
the relative record, and payment dates. Upon receipt by you of
information about such dates, you shall cable us immediately of such
notification since we will fix our record and payment dates to
confirm to those fixed by Company for such meetings and other
purposes. We must by SEC regulation inform the National Association
of Securities Dealers and any interested national security exchange
ten days prior to Company's and our record dates so that they may
inform their respective members. We shall promptly advise you of any
and all record and payment dates fixed by ourselves for the ADR's.
(ii) Notify us promptly of any other corporate action of any nature
affecting the Common Shares, and in any such event you will act in
accordance with our instructions to the extent permitted by local
law, regulation or practice.
VIII. Common Shares not transferred to Nominee on Record Date
- --------------------------------------------------------------
You shall, with respect to Common Shares held by you under your control or
owed to you as Custodian on a record date for a cash dividend or other
distribution and which Common Shares have not yet been transferred to the name
of the Nominee, take such action as may be required to ensure the collection
by you when due of the cash or other distribution applicable to the particular
Common Share.
You will utilise the relative funds, whether received from your counterparty
or not, to purchase U.S. dollars within three working days of the London
payment date and will immediately credit same to Head Office's Account. You
will advise us of the number of shares involved, the exchange rate and U.S.
dollars involved by telex or cable. Assuming you follow the procedures as
stated in this section you will not be liable for any loss which may be
suffered by ourselves in this respect.
IX. Cash Distribution
- ----------------------
All cash dividends and other cash distributions as may be paid to the Nominee
on Common Shares by Transfer Agent will be collected by you in Sterling in
accordance with standard English procedure.
Upon receipt of each dividend you will reconcile to the figures previously
agreed and notified under paragraph VI of this document. Any overage will be
Page 6 of 7
held in Sterling pending dividend claims. Any shortfall will be immediately
rectified by debiting a suitable receivables account of Citibank London. You
will then be holding at our disposal the dividend agreed upon under paragraph
VI of this document.
After deducting therefrom English taxes or governmental charges, if any, which
may be imposed by English Law, regulation or practice you will convert the net
Sterling proceeds of that dividend into U.S. dollars, deduct exchange
commission and advise us by cable of the number of relative shares, dividend
rate per share, tax withheld and exchange rate. The onus to clear any overage
or shortfall will be on yourself. You will credit the net proceeds in U.S.
dollars as stated in the cable advice to Head Office's Account or cable advise
currency conversion was not made, within three working days of receipt of
dividend check. Assuming you follow the procedures as stated in this section
you will not be liable for any loss which may be suffered by ourselves in this
respect.
X. Voting Rights
- -----------------
You will transmit to us notices of shareholders meetings and any other reports
or notices directed to its shareholders by Company, upon receipt thereof from
Company. You shall, also upon our instruction, to the extent permitted by
English law and regulation transmit proxies or such other voting instruments
as may be required to Company, in order to cause Common Shares to be voted in
accordance with the directions contained in such instructions. You should not
vote any Common Shares on deposit with you as to which you receive no
instruction from us.
XI. United Kingdom Dividend Tax
- --------------------------------
Until changed by law or tax convention you will forward any dividends to us
without further deduction of United Kingdom taxes. Changes in law or tax
convention may necessitate procedural amendments in this Operating Letter
designed to maximize the net dividends available to ADR holders. You are to
advise us of any proposed changes which may affect dividend payments or tax
withholding as soon as you are aware of same.
XII. Stock Dividend or Stock Split (Distribution in Stock)
- -----------------------------------------------------------
Should Company contemplate a stock dividend, you shall advise us as soon as
you are aware of same and inform us as to the percentage or ratio. Upon
receipt of your information, we will instruct you how to proceed with respect
to the additional Common Shares received on such stock dividend or stock
split.
XIII. Stock Subscription (Rights)
- ----------------------------------
In the event of a stock subscription, you shall notify us as soon as you are
aware of same and await our instructions which you shall follow to the extent
permitted by English law and regulation.
XIV. Payment of Custodian Fees
- -------------------------------
We shall remit to you on a mutually agreed basis that portion of the amounts
received by us in connection with either the deposit of Common Shares against
the issuance of ADR's or the withdrawal of Common Shares against the
cancellation of ADR's as we may agree upon with respect of each Company's
Common Shares.
Page 7 of 7
XV. Effective Date
- -------------------
These instructions shall supersede those agreed upon previously and become
operative on a mutually agreed date after both parties have signed and
exchanged this agreement.
XVI. Modification
- ------------------
The provisions of this letter may be cancelled, altered or modified by an
instrument in writing signed by the parties hereto or by tested cables
agreeing to such cancellation, alteration or modification, one signed by each
of the parties hereto.
If you are in agreement with the foregoing will you kindly so signify by
signing and returning to the counterpart of this Operating Letter provided for
that purpose.
Very truly yours,
Citibank N.A.
Date: June 30, 1980 By: /s/
------------- --------------------------
Title
Citibank N.A. London
Date: June 30, 1980 By: /s/
------------- --------------------------
Title
EXHIBIT I
---------
Page 1 of 2
(Name and address of broker
requesting issuance of ADR's) (Date)
Letter of Transmittal Covering Delivery
of Shares of Common Stock of
to Custodian and Issuance of American
Depositary Receipts by Citibank N.A.
_______________________________________
Gentlemen:
We deliver herewith certificates representing _____ shares of Common Stock of
____________________________________________ (the 'Company') for deposit with
you as Custodian pursuant to the terms of the American Depositary Receipts in
respect of such Common Stock issued by Citibank N.A., New York, and we hereby
request that American Depositary Receipts for such Common Stock be registered
in the name of and be delivered to or upon the written order of:
1. Name and address of person or persons in whose name American
Depositary Receipts to be registered:
______________________________________________________________
______________________________________________________________
______________________________________________________________
2. Name and address of person to whom American Depositary Receipt
to be delivered if different from 1 above:
______________________________________________________________
______________________________________________________________
______________________________________________________________
We request that you so instruct Citibank N.A. by (air mail) (cable at our
expense). In so doing, you will not be liable for mutilation, interruption,
omissions, errors, or delays incurred in the mails, or on the part of any
telegraph, cable or wireless company, or any employee thereof, or through any
cause beyond your control.
EXHIBIT I
---------
Page 2 of 2
We represent that the certificates for Common Stock delivered herewith are
genuine and that we are authorized by the true owner thereof to deposit the
said certificates with you and we warrant that when said certificates are
presented to the Company or its transfer agent for transfer to the name of the
nominee of Citibank N.A., such transfer will not be refused because of any
defect in the form of documentation or signatures on such certificates and the
accompanying instruments of transfer received from us or by reason of any
defect in the title we are purporting to transfer to you. If any of the above
representations prove to be false or incorrect, we will deliver to you
certificates representing shares of Common Stock which will satisfy the above
representation and warranties or, at your option, we will reimburse you for
any losses, liabilities or expenses incurred by you as a result thereof.
We hereby certify that: (1) neither the depositor nor the persons on whose
behalf securities are being presented for deposit against the issuance of
American Depositary Receipts is an 'issuer' of such securities or is directly
or indirectly acting for such 'issuer'; (2) neither the depositor nor such
other persons has purchased any of such securities from an 'issuer' with a
view to distribution or is proposing to offer or sell any of such securities
for an 'issuer' in connection with, the distribution of such securities; (3)
neither the depositor nor such other persons is participating, or has a direct
or indirect participation, in any such undertaking or in the direct or
indirect underwriting of any such undertaking; (4) such securities do not
constitute the whole or a part of an unsold allotment to or subscription by a
'dealer', as a participant in the distribution of such securities by the
Company issuing the same or by or through an 'underwriter'.
For the purpose of this certification the term 'issuer' includes not only the
Company but also any person directly or indirectly controlling, controlled by
or under the direct or indirect common control with the Company; the term
'dealer' means any person who engages either for all or part of his time,
directly or indirectly, as agent, broker, or principal, in the business of
offering, buying, selling, or otherwise dealing or trading in securities
issued by another person; the term 'underwriter' means any person who has
purchased from the 'issuer' the securities presented for deposit with a view
to, or offers or sells for the 'issuer' in connection with, the distribution
of any such securities, or participates or has a direct or indirect
participation in any such undertaking, or participates or has a participation
in the direct or indirect underwriting of any such undertaking, but the term
'underwriter' does not include a person whose interest is limited to a
commission from an underwriter or dealer not in excess of the usual and
customary distributors' or sellers' commission.
Attached hereto in support of the request deposit and issuance of American
Depositary Receipts please find:
1. Certificate(s) for _____ shares of Common Stock of the Company
(properly endorsed for transfer) (accompanied by appropriate
instruments of transfer).
Very truly yours,
Authorized signature.
Exhibit 3(e)
List of Managing Underwriters
-----------------------------
Merrill, Lynch & Co.
Kidder, Peabody & Co.
Exhibit (g)
POWER OF ATTORNEY
-----------------
Each person whose signature appears below hereby constitutes and appoints
Edwin G. Falkman, Bo Gabrielson, Ian B. Bird, and Herbert A. Getz, and each
them severally, acting alone and without the other, his true and lawful
attorney-in-fact with authority to execute and deliver in the name of each
such person any and all documents, papers, filings, certifications, notice,
application, forms, schedules, disclosures, statements, and other items, and
to take all other actions necessary, appropriate, or advisable in connection
with the public offering of shares (and American Depository Shares evidencing
shares) of WMI Waste Management International plc, including, but not limited
to, (i) filing with the Securities and Exchange Commission (the "Commission"),
together with any exhibits thereto and other documents therewith, any
Registration Statement necessary or advisable to enable the registrant to
comply with Securities Act of 1933, and any rules, regulations, and
requirements of the Commission in respect thereof, and all amendments
(including post-effective amendments) thereto, which amendments may make such
other changes in the Registration Statement as the aforesaid attorney-in-fact
executing the same deems appropriate; (ii) filing with the Commission,
together with any exhibits thereto and other documents therewith, any and all
registration statements and amendments thereto (including post-effective
amendments) which are necessary or advisable to enable the registrant to
comply with the Securities Exchange Act of 1934, and any rules, regulations,
and requirements of the Commission in respect thereof, together with such
other applications, forms, schedules, filings, and other documents as the
aforesaid attorney-in-fact executing the same deems appropriate in connection
with qualification, exemption, or registration under any applicable federal or
state securities laws; (iii) making applications to the New York Stock
Exchange, the London Stock Exchange, and any other stock exchange, filing such
applications together with such other documents or agreements relative to them
as the aforesaid attorney-in-fact executing the same deems appropriate; and
(iv) to do and perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
/s/ /s/
- ---------------------------- -----------------------------
Dean L. Buntrock Jean-Claude Jammes
/s/ /s/
- ---------------------------- -----------------------------
Sir William Barlow James E. Koenig
/s/ /s/
- ---------------------------- -----------------------------
Jan Ekman Giorgio Porta
/s/ /s/
- ---------------------------- -----------------------------
Edwin G. Falkman Phillip B. Rooney
/s/ /s/
- ---------------------------- -----------------------------
Donald F. Flynn Fritz Zopf
-------------------
It is proposed that this filing become effective under Rule 466
/ / immediately upon filing.
/ / on (Date) at (Time)
If a separate registration statement has been filed to register the
deposited shares, check the following box /X/
CALCULATION OF REGISTRATION FEE
-------------------------------
Proposed Proposed
Title of each maximum maximum
class of Amount aggregate aggregate Amount of
securities to to be price offering registration
be registered registered per unit* price** fee
- -------------------------------------------------------------------------------
American Depositary Shares 37,500,000 US$5.00 US$1,875,000 US$585.94
evidenced by American
Depositary Receipts, each
such Share representing two
Ordinary Shares, each of
10p per share of Waste
Management International plc
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
* Each unit represents 100 American Depositary Shares.
** Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(k), such estimate is computed on the basis of the
maximum aggregate fees or charges to be imposed in connection with the
issuance of such receipts evidencing such American Depositary Shares.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its
-2-
The Prospectus consists of the proposed form of American Depositary
Receipt, included as Exhibit A to the Form of Deposit Agreement filed
as Exhibit (a) to this Registration Statement
-4-
This Registration Statement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of
such counterparts shall constitute one and the same instrument.
-5-
American Depositary Receipts
for fully paid Ordinary Shares,
of 10p each
of
WASTE MANAGEMENT INTERNATIONAL plc
Item 1. DESCRIPTION OF SECURITIES TO BE REGISTERED
Cross Reference
Location in Form of American
Depositary Receipt ("Receipt
Item Number and Caption Filed Herewith as Prospectus
1. Name and address of Introductory Article
depositary
2. Title of American Depositary Face of Receipt, top center
Receipts and identity of
deposited securities
Terms of Deposit:
(i) The amount of deposited Face of Receipt, upper right corner
securities represented by
one unit of American
Depositary Receipts
(ii) The procedure for voting, Articles number 8, 13, 14 and 18
if any, the deposited
securities
(iii) The collection and Articles number 12 and 13
distribution of dividends
(iv) The transmission of notices, Articles number 11, 13, 14 and 16
reports and proxy soliciting
material
-6-
(v) The sale or exercise of rights Article number 12 and 18
(vi) The deposit or sale of Articles number 12 and 15
securities resulting from
dividends, splits or
plans of reorganization
(vii) Amendment, extension or Articles number 20 and 21
termination of the deposit
agreement
(viii) Rights of holders of Articles number 16 and 22
Receipts to inspect the
transfer books of the
depositary and the list of
holders of Receipts
(ix) Restrictions upon the right Articles number 2, 3, 4 and 7
to deposit or withdraw the
underlying securities
(x) Limitation upon the liability Articles number 12 and 16
of the depositary
3. Fees and Charges Article number 6
Item 2. AVAILABLE INFORMATION
Public reports furnished by issuer Article number 11
-7-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 3. EXHIBITS
(a) Form of Deposit Agreement among Citibank, N.A., as Depositary,
Waste Management International plc (the "Company") and all holders from time
to time of American Depositary Receipts issued thereunder ("ADRs").
(b) operating Letter dated June 30, 1980, between Citibank, N.A., as
Depositary, and Citibank, N.A. (London), as Custodian.
(d) Opinion of Parker Chapin Flattau & Klimpl, counsel for the
Depositary.
(e) List of Managing Underwriters.
(g) Powers of Attorney
Item 4. UNDERTAKINGS
(a) The Depositary undertakes to furnish promptly the following
information to the Commission semi-annually, beginning on or before six months
after the effective date of the registration statement:
(1) the following information in substantially the tabular form
indicated:
- ------------------------------------------------------------------------------
Number of American Number of ADSs Total Amount of Total Number of
Depositary Shares Evidence by ADRs ADSs Evidenced Holders of ADRs
("ADSs") Evidenced Retired During by ADRs Remaining at End of Six -
by ADRs issued Period Covered Outstanding at End Month Period
During Period by Report of Six-Month Period
Covered by Report
- ----------------- ---------------- ------------------- ---------------
- ------------------------------------------------------------------------------
(2) The name of each dealer known to the Depositary depositing shares
against issuance of ADRs during the period covered by the report.
II-1
(b) The Depositary hereby undertakes to make available at the
principal office of the Depositary in the United States, for inspection by
holders of the ADRs, any reports and communications received from the issuer
of the deposited securities which are both (1) received by the Depositary as
the holder of the deposited securities, and (2) made generally available to
the holders of the underlying securities by the issuer.
(c) The Depositary hereby undertakes to notify each registered holder
of an ADR at least thirty days before any change in the fee schedule.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, Citibank, N.A., on behalf of the legal entity created by the Deposit
Agreement dated as of April 1, 1992, among Citibank, N.A., as Depositary, the
Company and the holders from time to time of American Depositary Receipts
issued hereunder, certifies that it has reasonable grounds to believe that all
of the requirements for filing on Form F-6 are met and has duly caused to this
registration statement, or amendment thereto, to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York, March 18, 1992
CITIBANK, N.A.
By: /s/ Wim Budding
-------------------------
Name: Wim Budding
Title: Vice President
II-3
Pursuant to the requirements of the Securities Act of 1933, this
registration statement, or amendment thereto, has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
Dean L. Buntrock Director
Sir William Barlow Director
Jan Ekman Director
Edwin G. Falkman Director
(chief executive officer)
Donald F. Flynn Director
Jean-Claude Jammes Director
James E. Koenig Director
(chief financial and
accounting officer)
Giorgio Porta Director
Phillip B. Rooney Director
Fritz Zopf Director
By: /s/ Herbert A. Getz Authorized U.S. March 18, 1992
------------------- Representative
Herbert A. Getz and Attorney-in-Fact
for each of the
Directors
Index to Exhibits
-----------------
Sequentially
Exhibit Document Numbered Page
- ------- -------- -------------
(a) Deposit Agreement
(b) Operating Letter dated
June 30, 1980, between
Citibank, N.A., as
Depositary, and
Citibank, N.A. (London),
as Custodian
(e) List of Managing
Underwriters
(g) Powers of Attorney
II-7
Exhibit 17(c)(2)
Time Sensitive
Materials
Depositary's Notice of
Court Meeting and Extraordinary General Meeting of
Waste Management International plc
- --------------------------------------------------------------------------------
ADSs: American Depositary Shares evidenced by American
Depositary Receipts ("ADRs").
- --------------------------------------------------------------------------------
ADS CUSIP No.: 940906100.
- --------------------------------------------------------------------------------
ADS Record Date: September 1, 1998.
- --------------------------------------------------------------------------------
Meeting Specifics: .Court Meeting - October 7, 1998 at 10:00 A.M.
(local time) at the offices of Slaughter and May, 4
Coleman Street, London EC2V 5DB, England.
.Extraordinary General Meeting - October 7. 1998 at
10:30 A.M. (local time) at the offices of Slaughter
and May, 4 Coleman Street, London EC2V 5DB, England.
- --------------------------------------------------------------------------------
Meeting Agenda: Please refer to the Notices of Meetings enclosed.
- --------------------------------------------------------------------------------
ADS Voting Instructions On or before 10:00 A.M. (New York City time)
Deadline: on September 30,1998.
- --------------------------------------------------------------------------------
Deposited Securities: Ordinary Shares, par value U.K. 1Op per share, of
Waste Management International plc, a company organized
under the laws of England and Wales (the "Company").
- --------------------------------------------------------------------------------
ADS Ratio: 2 Ordinary Shares to 1 ADS.
- --------------------------------------------------------------------------------
Depositary: Citibank, N.A.
- --------------------------------------------------------------------------------
Custodian of Citibank, N.A. - London.
Deposited Securities:
- --------------------------------------------------------------------------------
Deposit Agreement: Deposit Agreement, dated as of April 1, 1992, by and
among the Depositary, the Company and the Holders of
ADRs evidencing ADSs issued thereunder.
- --------------------------------------------------------------------------------
To be counted, your Voting Instructions need to be received by the
Depositary prior to 10:00 A.M. (New York City time) on September
30, 1998.
The Company has announced that a Court Meeting convened by order of the
English High Court of Justice and an Extraordinary General Meeting of
Shareholders (the "Meetings") will be held at the date, times and location
identified above. Copies of the Notices of Meetings which describe the matters
to be addressed at each such Meeting are enclosed./1/
Voting through the Depositary
Holders of ADRs wishing to give voting instructions to the Depositary must
sign, complete and return the enclosed Voting Instructions in the enclosed pre-
addressed envelope prior to the ADS Voting Instructions Deadline. Any Holder who
requests the withdrawal of Deposited Securities upon the surrender of ADRs
between the ADS Record Date and the date of the Meeting will be required to
certify to the Depositary that no Voting Instructions have been or will be
delivered to the Depositary in respect of the ADSs represented by the ADRs so
surrendered.
Upon timely receipt of signed and completed Voting Instructions from a
Holder of ADRs, the Depositary shall endeavor insofar as practicable and
permitted under applicable law and the provisions of or governing the Deposited
Securities to cause the Custodian to vote (or to cause to be voted by means of
the appointment of a proxy or otherwise) the Deposited Securities in respect of
which Voting Instructions have been received in accordance with the instructions
contained therein.
Please note that in accordance with and subject to the terms of Section
4.08 of the Deposit Agreement, unless specifically instructed by at least five
Holders or Holders representing not less than 10% of the total voting rights of
all Holders having the rights to vote at such Meeting, the Depositary shall not
join in demanding a poll and, in such case, the Depositary shall follow the
instructions of the Instructing Holders (as defined in the Deposit Agreement)
holding ADRs evidencing a majority of the ADSs held by all Instructing Holders.
Please further note that Section 3.04 of the Deposit Agreement states that
under the UK Companies Act 1985, as amended (the "Companies Act"), any ADR
Holder who is or becomes directly interested in 3% (or such other amount as may
be required by the Companies Act) or more of the outstanding Deposited
Securities, or is aware that another person for whom it holds such ADRs is so
interested, must within two business days (or such other period as may be
required by the Companies Act) after becoming so interested or so aware, and
thereafter upon any change of at least 1% of the outstanding Deposited
Securities, notify the Company as required by the Companies Act. The Deposit
Agreement further provides that such ADR Holder agrees to be bound by and
subject to the Company's Articles of Association and to provide such information
as the Company may request in a disclosure notice given pursuant to statutory
provisions of English law and the Company's Articles of Association. Failure of
a Holder to provide such information in a timely fashion may, in the Company's
sole discretion, result in the withholding of certain rights in respect of such
Holder's ADSs (including, without limitation, voting rights).
- --------------------
/1/ As set forth in the Deposit Agreement, Holders of record of ADRs as of the
close of business on the ADS Record Date, will be entitled, subject to
applicable provisions of the laws of England and Wales and the Articles of
Association of the Company and the provisions of or governing the Deposited
Securities, to instruct the Depositary as to the exercise of the voting rights
pertaining to the Deposited Securities represented by such Holders' ADSs,
including instructions to give a discretionary proxy to a person designated by
the Company.
Attendance in Person or by Proxy
Holders of ADRs and beneficial owners of ADSs who wish to exercise their
voting rights directly as shareholders (rather than as ADR Holders or beneficial
owners) will be entitled to do so, subject to the requirements of the laws of
England and Wales and the Company's Articles of Association, upon timely
surrender to the Depositary of ADRs for cancellation and withdrawal of the
Deposited Securities represented thereby in accordance with the terms and
conditions of Section 2.05 of the Deposit Agreement. Defined terms used in this
Notice have the meanings assigned to such terms in the Deposit Agreement.
Section 2.05 of the Deposit Agreement provides that upon surrender at the
principal office of the Depositary at 111 Wall Street 5th Floor, New York, New
York 10043, of ADR(s) for the purpose of withdrawal of the Deposited Securities
represented thereby, and upon payment of (i) the fee of the Depositary for the
making of withdrawals and cancellation of ADR(s) (as set forth on Exhibit B to
the Deposit Agreement) and (ii) all taxes and governmental charges payable in
connection with such surrender and withdrawal, and subject to the terms and
conditions of the Deposit Agreement, the Company's Articles of Association and
the provisions of or governing the Deposited Securities and other applicable
laws, the Holder of such ADR(s) shall be entitled to delivery, to him/her or
upon his/her order, of the Deposited Securities at the time evidenced by such
ADR(s). Delivery of such Deposited Securities may be made by the delivery of (a)
certificates in the name of such Holder or as ordered by him/her or by
certificates properly endorsed or accompanied by proper instruments of transfer
to such Holder or as ordered by him/her and (b) any other securities, property
and cash to which such Holder is then entitled in respect of such ADR(s) to such
Holder or as ordered by him/her. Such delivery shall be made without
unreasonable delay and, at the option of the Holder, either at the office of the
Custodian or at the principal office of the Depositary, provided that the
forwarding certificates evidencing Deposited Securities for such delivery shall
be at the risk and expense of the Holder.
Please be advised that Holders of ADRs who wish to attend the Meetings must
become registered holders of Deposited Securities prior to 5:30 P.M. (London
time) on October 5, 1998, two days before the Meetings.
The information contained herein with respect to the Meetings has been
provided by the Company. Citibank, N.A. is forwarding this information to you
solely as depositary and in accordance with the terms of the Deposit Agreement
and disclaims any responsibility with respect to the accuracy of such
information. Citibank, N.A. does not, and should not be deemed to, express any
opinion with respect to the proposals to be considered at the Meetings. The
rights and obligations of Holders and beneficial owners of ADSs, the Company and
the Depositary are set forth in their entirety in the Deposit Agreement and
summarized in the ADRs. If you wish to receive a copy of the Deposit Agreement,
please contact the Depositary at the number set forth below.
If you have any questions about the way in which Voting Instructions may be
delivered to the Depositary, please contact Citibank, N.A. - ADR Shareholder
Services at (800) 422-2066.
Citibank, N.A., as Depositary
3
The Voting Instructions must be signed, completed and received at the indicated
address prior to 10:00 A.M. (New York City time) on September 30, 1998 for
action to be taken.
1998 VOTING INSTRUCTIONS AMERICAN DEPOSITARY SHARES
- --------------------------------------------------------------------------------
WASTE MANAGEMENT INTERNATIONAL plc (the "Company")
ADS CUSIP No.: 940906100.
ADS Record Date: September 1, 1998.
Meeting Specifics: Court Meeting - October 7, 1998, 10:00
A.M. (local time) at the offices of
Slaughter and May, 4 Coleman Street,
London EC2V 5DB, England.
Meeting Agenda: Please refer to the Notice of Court
Meeting enclosed.
Depositary: Citibank, N.A.
Deposit Agreement: Deposit Agreement, dated as of April
1, 1992.
Deposited Securities: Ordinary Shares, par value U.K. 10p
per share, of the Company.
Custodian: Citibank, N.A. - London.
The undersigned Holder, as of the ADS Record Date, of the American Depositary
Receipt(s) issued under the Deposit Agreement and evidencing the American
Depositary Shares identified on the reverse side hereof (such American
Depositary Shares hereafter the "ADSs"), acknowledges receipt of a copy of the
Depositary's Notice of Court Meeting and Extraordinary General Meeting and
hereby irrevocably authorizes and directs the Depositary to cause to be voted at
the Court Meeting (and any adjournments or postponements thereof) the Deposited
Securities represented by the ADSs in the manner indicated on the reverse side
hereof.
- --------------------------------------------------------------------------------
Please note that in accordance with and subject to the terms of Section 4.08 of
the Deposit Agreement, unless specifically instructed by at least five Holders
or Holders representing not less than 10% of the total voting rights of all
Holders having the rights to vote at such Meeting, the Depositary shall not join
in demanding a poll and, in such case, the Depositary shall follow the
instructions of the Instructing Holders (as defined in the Deposit Agreement)
holding ADRs evidencing a majority of the ADSs held by all Instructing Holders.
- --------------------------------------------------------------------------------
Please indicate on the reverse side hereof how the Depositary Securities are to
be voted.
The Voting Instructions must be marked, signed and returned on time in order to
be counted.
By signing on the reverse side hereof, the undersigned represents to the
Depositary and the Company that the undersigned is duly authorized to give the
Voting Instructions contained herein.
(DETACH HERE)
Waste Management International plc Court Meeting
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR the Scheme of Arrangement Against the Scheme of Arrangement
--- -------
[_] [_]
- --------------------------------------------------------------------------------
================================================================================
If these Voting Instructions are signed and timely returned to the Depositary
but no specific direction as to voting is marked above as to an issue, the
undersigned shall be deemed to have directed the Depositary to give voting
instructions "FOR" the unmarked issue.
- --------------------------------------------------------------------------------
Please sign your name to the Voting Instructions exactly as printed below. When
signing in a fiduciary or representative capacity, give full title as such.
Where more than one owner, each MUST sign. Voting Instructions executed by a
corporation should be in full corporate name by a duly authorized officer with
full title as such.
- --------------------------------------------------------------------------------
Please sign here exactly as your name(s) appear(s) to the left.
--------------------------------------------------------------
--------------------------------------------------------------
Dated---------------------------------------------------------
When signing as attorney, executor, administrator, trustee,
guardian or in another representative capacity, please give
full title.
(DETACH HERE)
The Voting Instructions must be signed, completed and received at the indicated
address prior to 10:00 A.M. (New York City time) on September 30, 1998 for
action to be taken.
1998 VOTING INSTRUCTIONS AMERICAN DEPOSITARY SHARES
================================================================================
WASTE MANAGEMENT INTERNATIONAL plc (the "Company")
ADS CUSIP No.: 940906100.
ADS Record Date: September 1, 1998.
Meeting Specifics: Extraordinary General Meeting - October 7, 1998 at
10:30 A.M. (local time) at the offices of Slaughter
and May, 4 Coleman Street, London EC2V 5DB, England.
Meeting Agenda: Please refer to the Company's Notice of Extraordinary
General Meeting enclosed.
Depositary: Citibank, N.A.
Deposit Agreement: Deposit Agreement, dated as of April 1, 1992.
Deposited Securities: Ordinary Shares, par value U.K. 10p per
share of the Company.
Custodian: Citibank, N.A. - London.
The undersigned Holder, as of the ADS Record Date, of the American Depositary
Receipt(s) issued under the Deposit Agreement and evidencing the American
Depositary Shares identified on the reverse side hereof (such American
Depositary Shares hereafter the "ADSs"), acknowledges receipt of a copy of the
Depositary's Notice of Court Meeting and Extraordinary General Meeting and
hereby irrevocably authorizes and directs the Depositary to cause to be voted
at the Extraordinary General Meeting (and any adjournments or postponements
thereof) the Deposited Securities represented by the ADSs in the manner
indicated on the reverse side hereof.
- --------------------------------------------------------------------------------
Please note that in accordance with and subject to the terms of Section 4.08 of
the Deposit Agreement, unless specifically instructed by at least five Holders
or Holders representing not less than 10% of the total voting rights of all
Holders having the rights to vote at such Meeting, the Depositary shall not join
in demanding a poll and, in such case, the Depositary shall follow the
instructions of the Instructing Holders (as defined in the Deposit Agreement)
holding ADRs evidencing a majority of the ADSs held by all Instructing Holders.
- --------------------------------------------------------------------------------
Please indicate on the reverse side hereof how the Deposited Securities are to
be voted.
The Voting Instructions must be marked, signed and returned on time in order to
be counted.
By signing on the reverse side hereof, the undersigned represents to the
Depositary and the Company that the undersigned is duly authorized to give the
Voting Instructions contained herein.
[DETACH HERE]
Waste Management International plc Extraordinary General Meeting
- --------------------------------------------------------------------------------
ISSUE FOR AGAINST
----- --- -------
1. Approval of Special Resolution to approve the proposed [_] [_]
Scheme of Arrangement and related matters.
================================================================================
If these Voting Instructions are signed and timely returned to the Depositary
but no specific direction as to voting is marked above as to an issue, the
undersigned shall be deemed to have directed the Depositary to give voting
instructions "FOR" the unmarked issue.
- --------------------------------------------------------------------------------
Please sign your name to the Voting Instructions exactly as printed below. When
signing in a fiduciary or representative capacity, give full title as such.
Where more than one owner, each MUST sign. Voting Instructions executed by a
corporation should be in full corporate name by a duly authorized officer with
full title as such.
- --------------------------------------------------------------------------------
Please sign here exactly as your name(s) appear(s) to the left.
--------------------------------------------------------------
--------------------------------------------------------------
Dated---------------------------------------------------------
When signing as attorney, executor, administrator, trustee,
guardian or in another representative capacity, please give
full title.
(DETACH HERE)
