Waste Transport and Disposal Agreement with

Browning-Ferris Group of Companies, and Proposed

Acquisition of Browning-Ferris Industries Ltd. by

Canadian Waste Services Holdings Ltd.

The Works Committee recommends the adoption of the following joint report (July 12, 1999) from the Commissioner of Works and Emergency Services and the City Solicitor:

Purpose:

The purpose of this report is to obtain the consent of Council, as provided for under the City's Waste Transport and Disposal Agreement with the Browning-Ferris group of companies, to the pending change in ownership of the companies, including in particular, the acquisition of Browning-Ferris Industries Ltd. ("Browning-Ferris Canada") by Canadian Waste Services Holdings Inc. ("Canadian Waste").

Funding Sources, Financial Implications and Impact Statement:

There are no financial implications if consent is granted, as the agreement and services would continue with the Browning-Ferris group of companies for the haulage to and disposal of solid waste at the Arbor Hills landfill in Michigan, although the companies would be owned and controlled by other waste management companies. In the event that consent was refused, the City would have to make alternate arrangements for the disposal of the quantity of waste presently being managed under the agreement.

Recommendations:

It is recommended that:

(1)Council consent to the change in ownership of the Browning-Ferris companies, as provided for under the City's Waste Transport and Disposal Agreement with the companies and on the basis set out in this report; and

(2)the Commissioner of Works and Emergency Services be authorized to execute any documents as may be required, in form satisfactory to the City Solicitor, to give effect to Recommendation No. (1).

Council Reference/Background/History:

By agreement, dated December 23, 1996 ("Waste Transport and Disposal Agreement"), Browning-Ferris Canada is contracted to transport and dispose of Toronto's solid waste to the Arbor Hills landfill in Michigan. The agreement expires at the end of 2002. The other parties to the agreement are Browning-Ferris Industries Inc., the United States parent company, as guarantor of the obligations under the agreement, and BFI Waste Systems of North America, Inc., the successor company to Browning-Ferris Industries of Southeastern Michigan Inc., the owner of the Arbor Hills landfill site where the City's waste is disposed.

The City has been provided with notice that there is a pending merger between Allied Waste Industries, Inc. and Browning-Ferris Industries Inc. (the parent BFI company), and further to that merger by related agreements, Canadian Waste, a subsidiary of Waste Management Inc., will be acquiring all of the shares of Browning-Ferris Canada. Under the provisions of the Waste Transport and Disposal Agreement, any change in control or ownership or the transfer of a controlling interest in the beneficial ownership of any of the BFI parties shall constitute a default under the agreement unless the City consents to the transfer. Such consent is not to be unreasonably withheld. The agreement further states that the City in its sole discretion may determine whether new ownership can adequately and faithfully render the services for the remaining term of the agreement.

Comments and/or Discussion and/or Justification:

Under the pending merger or amalgamation, all of the property rights, privileges and obligations of Browning-Ferris Industries Inc. and BFI Waste Systems of North America, Inc. are transferred to or become the property of the amalgamated company. Accordingly, the merger will not affect the rights and obligations in respect of the services to be provided for the disposal component of the agreement. In particular, the amalgamated company will assume the obligations of Browning-Ferris Industries Inc., as guarantor under the agreement, and BFI Waste Systems of North America, Inc. as owner of the Arbor Hills landfill site. Similarly, after the Canadian Waste share purchase transaction, BFI Canada as an entity remains bound to its rights and obligations under the agreement.

There is no basis for reasonably believing that the companies, with Allied Waste or Canadian Waste, as new owners, cannot adequately and faithfully render the services called for in the agreement. The services will continue to be carried out in the same manner, although with new ownership, and the disposal price is beneficial to the City. Canadian Waste, in addition, has offered to (i) provide the further guaranty of its parent, Waste Management Inc., to all of the obligations to be undertaken under the agreement, and (ii) reimburse the City for any costs reasonably and properly incurred in respect of any due diligence on an alternate site to the primary disposal site, in the event, as a result of the transactions, that alternate site is not available and another alternate site is required.

Therefore, it is in the interests of the City and recommended that the required consent under the agreement be given on the basis set out above.

Contact Name:

Angelos Bacopoulos392-8831

General Manager, Solid Waste Management Services

James Anderson

Director, Municipal Law, Legal Services