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HomeMy WebLinkAboutMerger Waste Management of the Desert 4110 INTEROFFICE MEMORANDUM CITY OF PALM DESERT TO: CITY COUNCIL AND CITY MANAGER FROM: ENVIRONMENTAL CONSERVATION MANAGER SUBJECT: WASTE MANAGEMENT OF THE DESERT MERGER DATE: DECEMBER 12, 1991 RECOMMENDATION: By Minute Motion, approve the merger of Waste Management of the Desert, Inc. into Waste Management of California, Inc. BACKGROUND: Waste Management of the Desert, Inc. has requested the City Council to consider the approval of their merger into Waste Management of California, Inc. The City of Palm Desert Solid Waste and Recycling exclusive franchise agreement with Waste Management of the Desert, Inc. listed specific requirements for change of ownership transfer of the franchise . These requirements are listed in the Franchise Agreement Section VR. (Exhibit A) Waste Management of the Desert has indicated the merger will not cause a change in management, service, ownership, control or the contractors ability to perform. Attached is coorespondence from Waste Management of the Desert Inc. (Exhibit B) responding to the staff and the city attorney concerns (Exhibit C) . Staff recommends the City Council by Minute Motion approve the merger of Waste Management of the Desert, Inc . into Waste Management of California, Inc. 4,41•40 /John Wohlmuth Bruce Altman / Environmental Conservation Manager City Manager ,,,/// CITY COUNCIL ACTION: JW• la APPROVED 1/ DENIED RECEIVED OTHER MEETING DATE ` ) AYES: . NOES: 0 ABSENT: ABSTAIN: �( VERIFIED BY: . �1qq r71(-1QZI, Original on File with City Clerk' s Office 08/20/91 15.23 T 619 340 2732 PALM DESERT DIS 06 �/ t, if WASTE MANAGEMENT OF NORTH AMERICA, INC. WESTERN REGION OFFICE MEMORANDUM TO: Ray Burket- RECEIVED Carrol Hill AUG 0 ;31991 FROM: Dave Kelly Palm Desert DATE: August 6, 1991 Disposal Service SUBJECT: 1991 Year-End Mergers Waste Management of the Desert, Inc. It has been proposed that Waste Management of the Desert, Inc. be merged into Waste Management of California, Inc. This would result in a change of legal liability on the franchises and permits that we hold and would require approval by the appropriate regulatory bodies. Nevertheless, I know of no insurmountable obstacles which would prevent us from accomplishing this merger. Therefore, I would like us to explore the possibility of merging Waste Management of the Desert, Inc. into Waste Management of California, Inc. with the operations to be conducted under the assumed name Waste Management of the Desert. Please let me know if there are any insurmountable obstacles to this plan of action. We will need to give Oak Brook a green light on this subject by mid-November, DLK/cd ‘`,\ c\ cc: Jerry Caudle Greg Sangalis WaMe Management of the Dese . 41-575 Eclectic Street • P.O. Box 3876 A Waste Management Company. Palm Desert, California 92261-3876 619/324-1741 Mr. John Wohlmuth Environmental Conservation Manager CITY OF PALM DESERT 73-510 Fred Waring Drive Palm Desert, CA 92260 Dear John: In reference to your letter dated September 13, 1991, addressing the merger of Waste Management of the Desert, Inc. and Waste Management ofCalifornia, Inc. Please gg be advised there will be no impact on our ability to perform as agreed upon in our contract. The sole reason for this merger is to simplify the tax reporting requirements. There is no change in the officers of the corporation nor is there any change in local management or operational policies. The ability of Waste Management of California, Inc. dba Waste Management of the Desert to perform the requirements of our contract with the City of Palm Desert will be identical to our present liability and/or exposure. If additional information is required, please contact me at your earliest convenience. Sincerely, 2J n Lavender / 7/P. Special Projects JL:vlo cc: Ray Burke - Waste Management of the Desert Bruce Altman - City Manager - City of Palm Desert Doug Phillips - Best, Best & Krieger • Waste Management of the Deserill 41-575 Eclectic Street P.O. Box 3876 A Waste Management Company Palm Desert, California 92261-3876 619/324-1741 November 4, 1991 Mr. John M. Wohlmuth Environmental Conservation Manager City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 Re: Merger of Waste Management of the Desert, Inc. into Waste Management of California, Inc. Dear Mr. Wohlmuth: This letter is in response to your letters of September 13, 1991 and October 1, 1991. For purposes of streamling our corporate structure, eliminating duplicate corporate entities and reducing the number of tax returns and other regulatory filings that are required of our companies, we would like to merge Waste Management of the Desert, Inc., the company which presently renders service to the City of Palm Desert, with Waste Management of California, Inc., our primary California company which renders service to many cities throughout the state. As I understand it, you have concerns that emanate from Section V R (as opposed to the VI(r) mentioned in your October 1, 1991 letter) starting on page 18 of the Exclusive Franchise Contract to the Perform Refuse Collection Services dated March 1, 1990 between the City of Palm Desert and Waste Management of the Desert, Inc. In response to your letters, we can advise you that our desire is to transfer the franchise by means of a merger of the two above mentioned companies with the survivor being Waste Management of California, Inc. The result of that merger will cause no change as far as the City is concerned with respect to our ability to perform the services called for in our Contract with the City. There will be no change of management or service. Yet, the financial strength of your Contractor will be substantially enhanced because Waste Management of California, Inc. is a much larger company than Waste Management of the Desert, Inc. While the franchise would be held by a different company, Waste Management of California, Inc., there will be no change in the ownership or control of the company that serves as Contractor to the City. Waste Management of the Desert, Inc. and Waste Management of California, Inc. are sister companies. Both are wholly-owned subsidiaries of Waste Management of North America, Inc.,which is a wholly-owned subsidiary of Waste Management, inc., a publicly traded New York Stock Exchange company. A copy of Waste 411 A Waste Management Company Mr. John M. Wohlmuth November 4, 1991 Page 2 management's most recent annual report is enclosed. Both Waste Management of the Desert,Inc. and Waste Management of California, Inc.,due to their subsidiary relationship with Waste Management of North America, Inc., have access to the same array of services that you have enjoyed over the years of our relationship with the City. These services include insurance protection, bonding, financing and working capital, accounting assistance, billing, safety and environmental compliance reviews and the quality of efficient service that comes from nationwide experience. All of these functions will continue once the contract is transferred to Waste Management of California, Inc. Waste Management of California, Inc. is certainly willing to assume all responsibilities of Waste Management of the Desert, Inc. under the Contract, including the indemnification obligation. As mentioned previously, due to the fact that Waste Management of California, Inc. is a much larger company that Waste Management of the Desert, Inc., the City will benefit by having a company with greater net worth standing behind the obligations on the Contract including indemnification. As you can see from the above,while we are requesting a change as to the Contractor under the Contract, there will be no change in the ownership of the Contractor. It will still be Waste Management of North America, Inc., which is described at length in the enclosed annual report. Neither it nor any of its officers or directors has ever been the subject of any of the types of actions described in Section V R.2.a. of the Contract as in part referenced in your October 1, 1991 letter. We trust that this information answers the concerns addressed in your letter. Please contact me if we can be of further assistance. Very t ly yours, Ray Burke General Manager RB/ss O �{le7 i \` � S oq MI D ese e,s 01'' 73-510 FRED WARING DRIVE, PALM DESERT, CALIFORNIA 92260 TELEPHONE(619)346-0611 September 13, 1991 Mr. Ray Burke Mr. John Lavendar Waste Management of the Desert, Inc. 41-575 Eclectic Street Palm Desert, California 92260 Gentlemen: SUBJECT: WASTE MANAGEMENT OF THE DESERT, INC. MERGER At your request, the City has initiated the approval process for the merger of Waste Management of the Desert, Inc. and Waste Management of California, Inc. Our Deputy City Attorney, Doug Phillips, is reviewing the merger and the impact on our franchise agreement. Prior to any recommendation by the City Attorney' s office and City management staff to the City Council, we are respectfully requesting more information from your office. Please provide us all information on the impact this merger has on your ability to perform as agreed upon in the contract between Waste Management of the Desert and the City of Palm Desert. Your response must provide specific information on Waste Management of California' s ability to perform in the areas of indemnification ( i . e . the current lawsuit with Palm Springs Recycling) , insurance, bonding, and any other possible areas of concern by the City Attorney, staff and councilmembers. If you would like this item on the September 26, council agenda, please provide all requested information by September 17, 1991. • John Wohlmuth ' / Environmental Conservation Manager be cc: Bruce Altman Doug Phillips Art 11IN Mr ^ Oz%�T7. offr a ,75/ e 73-510 FRED WARING DRIVE, PALM DESERT, CALIFORNIA 92260 TELEPHONE (619) 346-0611 October 1 . 1991 Mr . Ray Burke Mr . John Lavender Waste Management of the Desert 41 -575 Eclectic Street Palm Desert , California 92261 - 3876 Gent i emen : SUBJECT: WASTE MANAGEMENT OF THE DESERT MERGER Thank you for the response to my letter dated September 13 , 199i . Unfortunately , your response did not address all of the City ' s concerns . The City ' s concerns hinge on the Solid Waste and Recycling Agreement Section VI ( r ) . Please provide the City of Palm Desert with information on whether ownership or control of the franchise will be changed . Specifically , if ten percent or more of the voting shares change as a result of the merger . If there is a change of ownership or control , then the City will need to review the following information about the new owner : a . criminal history : b . judgements for fraud and any pending lawsuits : c . proof of Financial solvency ; ( Dunn and Bradstreet financial analysis ) d . proof of ability to maintain and operate the solid waste and recycling system for balance of franchise term ( financial statements from the new owner ) ; e . wi1lingness of new owner ( Waste Management of California . Inc . ) to sign the franchise agreement . in conclusion . if there is a change in ownership as described in the agreement . please provide the City with the aforementioned Mr . Ray Burke Mr . John Lavender October 1 , 1991 information ; if there is no change of ownership . please provide the City with confirmation of same ownership in writing with back-up material . Thank you in advance for this information . As soon as we are able to review the information , staff will place this item on the City Council agenda for their consent to the merger . Sincereiy , John M . Wohlmuth Environmental Conservation Manager JMW/rnf cc : Bruce Altman Douglas Phillips SENT tlY,xerox ! elecopier /UAJ a-25-81 ; i;U5AM ; ol 6134UU514;; 1 BEST, BEST & KRIEGER A PAA7111Ai.*e wai.wswea►MORC$MONK ci111'ii4t10.+i LAWYERS RIVER:COE 3P700 $O16 HOPE DRIVE, 6WTE 311 (714) 666-1430 ONTARIO P09T ORRICE 90X 1660 (714) 969-656• RANCr1O MIRAGE, CALIFORNIA 92270 PALM BrRiNO3 TELEPFICNE (619) 566-2611 (61$) 325 7264 TELECOPIER (619) 340-66116 FACSIMILE TRANSMISSION COVER SHEET FAX # (619) 340-6698 DATE: ql Tcd 9 # FAXED TO: ` ( � TELEPHONE: TO: JQk, / 641.Y CAPTION OF DOCUMENT: SENDER: , # CLIENT # NO. of PAGES (INCLIIDIIIG COVER SHEET) THIS X SSAGE IS INTENDED FOR THE USE OF TEE INDIVIDUAL O$ INTITY TO EEICH IT II ADDREBflEDA AND MAY CONTAIN ;NFORMAtI0N TEAT =■ PRIVILEGED AND CON7IDJNTIA . IF YOU ARE NOT THE INTENDED RECIPIENT, OR THE EMPLOYEE OR AGENT RESPONSIBLE FOR DELIVERING THE MESSAGE TO THE INTENDED RECIPIENT, YOU ARE HEREBY NOTIFIED THAT ANY DISSEMINATION, DISTRIBUTION OR COPYING OP THIS COMMUNICATION IS STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE NOTIFY US IMMEDIATELY BY TELEPHONE AND RETURN THE ORIGINAL MESSAGE TO US AT THE ABOVE ADDRESS VIA THE U.S. POSTAL SERVICE. THANK YOU. MESSAGE: If there are any problems receiving this FAX transmittal, please call , at (619) 568.2611. 1.41m SENT BY:Xerox Teiecopier 7020 ; q-25-91 ; 7:05AM ; 6193406698- 6193400574;4 2 LAW OFFICIS OF BEST, BEST & KRIEGER September 20, 1991 MEMORANDUM TO: JOHN WOHLMUTH, ENVIRONMENTAL CONSERVATION MANAGER CITY 07 PAL* D38ERT FROM: DOUGLAS S. PHILLIPS, DEPUTY CITY ATTORNE RE: PROPOSED MERGER OF WASTE MANAGEMENT OF THE DESERT WITH WASTE MANAGEMENT OF CALIFORNIA I have reviewed the materials that you sent to me including the memo from waste Management of North America, Inc. dated August 6, 1991 and your memo of September 13 , 1991 as well as a recent letter received from Waste Management responding to your September 13, 1991 letter. I understand that Waste Management of the Desert, our garbage franchisee, desires to merge with Waste Management of California. The merger is for tax purposes. The officers of both entities are the same. The same persons would carry out the terms of the franchise agreement. The franchise agreement and the recycling agreement which is incorporated into the franchise agreement specifically addresses merger of a franchisee at Section VI (r) . I have photocopied pages 18 , 19 , 20 and 21 of the franchise agreement for your information. These provisions, in summary, provide that: (1) the merger may proceed only upon prior consent of the City Council and only under such conditions as the City Council may establish; (2) if ownership or control of the franchisee is changed (the franchise agreement provides that a ten percent change in the voting shares of the franchisee is a vary strong indication of a change in ownership) , it is subject to the consent of the City Council which consent shall not be unreasonably withheld; (3) if there is a change of ownership or control then in deciding whether to consent the change, the Council is entitled to review certain information about the new owner including criminal history, judgments for fraud or any pending lawsuits; proof of financial solvency and proof that the new owner is financially able to maintain and operate the garbage system for the balance of the franchise term; and finally, (4) the successor company is required to sign the franchise agreement. waste Management of the Desert should tell us whether there is a change in ownership or control of their company. If there is such change, then they need to provide the information outlined above to the Council so the council can decide whether or not to consent to the change of ownership or control. If there is no change of ownership, then the franchisee must obtain council C SD 15639 SENT SY:Xerox Telecopier 7020 : 9-25-91 ; 7:06AM ; 51534nM698-+ 5193400574;# 3 consent to the merger. There appears to be no limitation on the Council's decision to consent or not to consent the merger though, of course, their decision not to consent should not be arbitrary or discriminatory. Finally, if the Council consents to the merger waste Management of California must sign the franchise agreement. Should you have any questions or comments or should the Council have any questions or comments, please let me know immediately. oSP15639 S Ni dY:Xerox ieiecopler luru 0—co—ol 1 :uo44 tit J4uotio- ol041.4uoi4:; 4 Fees for refuse collection shall be set by resolution of the City Council and shall continue In full force and effect until amended by resolution of the City Council . Q• AUIGNS This Contract shall not be assignable by the CONTRACTOR without the prior written consent of the CITY, except that CONTRACTOR may assign this Contract to the wholly owned subsidiary. • CHANGE OF OWaERSH I P 1 . Transfer of Franchise. Any franchise granted hereunder shalt be a privilege to be held for the benefit of th*e public . The franchise cannot in any event be sold, transferred, leased, assigned or disposed of, including, but not limited to, by forced or voluntary sale, merger, consolidation, receivership or other means , without the prior consent of the grantor and then only under such conditions as the grantor may establish. if any transfer of the franchise occurs without the prior consent of the grantor , the franchise may , at grantor ' s sole option , be terminated Immediately. 2. Ownership or Control . The grantee shall promplty notify the grantor of any actual or proposed change in , or transfer of, or acquisition by any other party of, control of the grantee. The word "control " as used in this section, is not limited to major stockholders but Includes actual working control in whatever manner exercised. A rebuttable presumption that a transfer of control has occurred shall arise upon the acquisition 18 oENT dY;Xerox ieiecopier luzu I ;uiAM ; 01J4ufibyo-' o1d4uuo14;4 or accumulation by any person or group of persons of ten percent ( 10% ) of the voting shares of the grantee . Every change , transfer or acquisition of control of the grantee shall make the franchise subject to cancellation unless and until the grantor shal 1 • have consented thereto , which consent shall not be unreasonably withheld. For the purpose of determining whether it shall consent to such change, transfer or acquisition of control , the grantor may inquire into the qualification of the prospective controlling party, and the grantee shall assist the grantor in any such Inquiry. In seeking the grantor ' s consent to any change inn ownership or control , the grantee shall have the responsibility: a . To show to the satisfaction of the grantor whether the proposed purchaser, transferee or assignee (the "proposed transferee" ) , which in the case of a corporation shall include all officers , directors, employees and all persons having a legal or equitable interest in five percent ( 5%) or more of its voting stock , or any of the proposed transferee ' s principals : p. ( 1 ) Has ever been convicted or held liable for acts involving moral turpitude ( including, but not limited to, any federal or state agency, or violation of any tax or securities law) , or is presently under an Indictment , investigation or complaint charging such acts ; (2) Has ever had a Judgment in an action for fraud , deceit or misrepresentation entered 19 SENT BY;Xercx ie , ecopler 7020 ; y-25-91 ; 7:07AM ; 613406698, 61934005744 6 against it , her , him or them, by any court of competent jurisdiction ; or ( 3 ) Has pending any legal claim , lawsuits or administrative proceeding arising out of or involving a garbage system; b. To establish , to the satisfaction of the grantor , the financial solvency of the propolsed transfer by submitting all current financial data for the proposed transferee which the grantee was required to submit in its franchise application , and such other data as the grantor may request. c. To establish to the satisfaction of tWe grantor that the financial standing of the proposed transferee is such as shall enable it to maintain and operate the garbage system for the remaining term of the franchise. 3 . The grantor agrees that any financial insitut !on having a pledge of the franchise or its assets for the advancement of money for the construction and/or operation of the franchise shall have the right to notify the grantor that it or Its designee satisfactory to the grantor will take control and operate the garbage system. Further , the financial tnsitution shall also submit a plan for such operation that will insure continued service and compliance with all franchise obligations during the term the financial institution exercises control over the system. The financial institution shall not exercise control over the system for a period exceeding one ( 1 ) year unless extended by the grantor ! nits discretion and during the period of 20 SENT BY:Xerox Telecopier 7020 ; 9-25-91 ; 7:08AM ; 613406698- 6193400574;# 7 time it shall have the right to petition the grantor to transfer franchise to another grantee . If the grantor finds that the legal , financial character , technical and other public interest Qualities of the applicant are satisfactory, the grantor may transfer and assigned the rights and obligations of such franchise as in the public interest. The consent of the grantor to such transfer shall be not unreasonably withheld. 4 . In no event shall a transfer of ownership or control be approved without the successor in interest becoming a signatory to the franchise agreement . 5. BANKRUPTCY • If the CONTRACTOR shall at any time during the term of this Contract become Insolvent , or If proceedings In bankruptcy shall be instituted by or against the CONTRACTOR, or if the CONTRACTOR shall be adjudged bankrupt or insolvent by any Court , or If a receiver or trustee in bankruptcy or a receiver of any property of the CONTRACTOR shall be appointed in any suit or proceeding brought by or against the CONTRACTOR , or if the CONTRACTOR shall make an assignment for the benefit of creditors. then and in each and every case, this Contract and the rights and privileges granted thereby shall Immediately cease, terminate , and be forfeited and cancelled without notice and without suit or other proceeding. T. WAIVER OF PERFORMANCE The failure of either party to insist in any Instance upon a strict performance by the other party of any of 21