SCHEDULE 14A INFORMATION
 
  PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
                                     1934
 
Filed by the Registrant [X]
 
Filed by a Party other than the Registrant [_]
 
Check the appropriate box:
 
[_] Preliminary Proxy Statement           [_] CONFIDENTIAL, FOR USE OF THE
                                             COMMISSION ONLY (AS PERMITTED BY
                                             RULE 14A-6(E)(2))
 
[X] Definitive Proxy Statement
 
[_] Definitive Additional Materials
 
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
 
                        WHEELABRATOR TECHNOLOGIES INC.
               (Name of Registrant as Specified In Its Charter)
 
 
   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (check the appropriate box):
 
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
   Item 22(a)(2) of Schedule 14A.
 
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
   6(i)(3).
 
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
  (1) Title of each class of securities to which transaction applies: Common
      Stock, par value $.01 per share, of Registrant
 
  (2) Aggregate number of securities to which transaction applies: 52,719,241
 
  (3) Per unit price or other underlying value of transaction computed
      pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
      filing fee is calculated and state how it was determined): $16.50
 
  (4) Proposed maximum aggregate value of transaction: $869,867,476
 
  (5) Total fee paid: $173,973.
 
[X] Fee paid previously with preliminary materials.
 
[_] Check box if any part of the fee is offset as provided by Exchange Act
   Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
   paid previously. Identify the previous filing by registration statement
   number, or the Form or Schedule and the date of its filing.
 
  (1) Amount previously paid:
 
  (2) Form, Schedule or Registration Statement No.:
 
  (3) Filing Party:
 
  (4) Date Filed:
 
Notes:
 

 
                                      LOGO
                              4 LIBERTY LANE WEST
                          HAMPTON, NEW HAMPSHIRE 03842
 
                                                               February 27, 1998
Dear Wheelabrator Stockholder:
 
  You are cordially invited to attend a special meeting of stockholders of
Wheelabrator Technologies Inc. to be held at the Mellon Bank Building, 8
Loockerman Street, Dover, Delaware, on March 30, 1998, at 11:00 a.m., local
time.
 
  At this meeting, you will be asked to vote on the merger of Wheelabrator into
its majority stockholder, Waste Management, Inc. Currently, Waste Management
owns 67% of Wheelabrator's common stock and members of the public own the rest.
Waste Management would like to buy out the public stockholders of Wheelabrator
because, among other things, Waste Management will be able to more closely
coordinate the activities of the two companies and save the costs of operating
Wheelabrator as a separate public company.
 
  In the merger, you will receive $16.50 in cash for each share of Wheelabrator
common stock you own. The $16.50 per share price represents a 26.9% premium
over $13.00 per share, the closing market price of Wheelabrator common stock on
June 19, 1997, which was the last full trading day before Waste Management
announced that it wanted to buy out the other Wheelabrator stockholders. An
independent Special Committee formed by Wheelabrator's Board of Directors
negotiated this price with Waste Management. After the merger, Wheelabrator
will be a wholly-owned subsidiary of Waste Management.
 
  The Board of Directors of Wheelabrator, acting on the unanimous
recommendation of the Special Committee, has unanimously approved a merger
agreement with Waste Management. The Special Committee and the full Board of
Directors believe that the proposed acquisition is in the best interests of
Wheelabrator's stockholders. Therefore, the Board of Directors unanimously
recommends that you vote in favor of the merger agreement.
 
  The Wheelabrator Board of Directors formed the Special Committee because some
of the eight board members have conflicts of interest regarding the merger. Two
of the directors of Wheelabrator are currently directors of Waste Management.
One director of Wheelabrator is an officer of Wheelabrator. In addition, one
other individual was a director of Wheelabrator and Waste Management before
December 31, 1997, during the period when the merger was approved by
Wheelabrator's Board of Directors. These directors were faced with a conflict
of interest because they had to consider the best interests of both
Wheelabrator and Waste Management.
 
  In order to avoid these conflicts of interest, the Board formed the Special
Committee to evaluate the fairness of the merger to the stockholders of
Wheelabrator, excluding Waste Management and its affiliates. The Special
Committee is composed of two Wheelabrator board members who are not employees
of Wheelabrator or Waste Management and who do not have material commercial
relationships with Waste Management or its subsidiaries.
 
  The attached notice of meeting and proxy statement explain the proposed
merger and provide specific information concerning the Special Meeting. Please
read these materials carefully.
 
  Whether or not you plan to attend the Special Meeting, I urge you to
complete, sign and promptly return the enclosed proxy card to ensure that your
shares will be voted at the meeting. The merger is an important decision for
Wheelabrator and its stockholders. The merger cannot be completed unless a
majority of Wheelabrator stockholders not affiliated with Waste Management and
represented at the Special Meeting approve the merger agreement.
 
  On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR adoption of the merger agreement.
 
Sincerely,
 
LOGO
 
John M. Kehoe, Jr.
Chief Executive Officer and President
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.

 
                         WHEELABRATOR TECHNOLOGIES INC.
 
                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                           TO BE HELD MARCH 30, 1998
 
To the Stockholders:
 
  Notice is hereby given that a Special Meeting of Stockholders of Wheelabrator
Technologies Inc. will be held at the Mellon Bank Building, 8 Loockerman
Street, Dover, Delaware, on March 30, 1998, at 11:00 a.m, local time, for the
following purposes:
 
    1. To consider and act upon a proposal to adopt an Agreement and Plan of
  Merger among Wheelabrator, Waste Management, Inc. and WMI Merger Sub, Inc.
  WMI Merger Sub is a wholly owned subsidiary of Waste Management that was
  formed solely to implement the merger. If the Agreement and Plan of Merger
  is adopted by stockholders and the other conditions to the merger are
  satisfied or waived, each outstanding share of Wheelabrator's common stock,
  other than shares owned by Waste Management and its affiliates, will be
  converted into the right to receive $16.50 per share in cash, without
  interest.
 
    2. To transact such other business as may properly come before the
  meeting or any adjournment or postponement thereof.
 
  Any stockholder who does not wish to accept the merger consideration of
$16.50 per share and who properly demands appraisal under Delaware law will
have the right to have the fair value of his or her shares determined by the
Delaware Chancery Court. This appraisal right is subject to a number of
restrictions and technical requirements described in the attached proxy
statement.
 
  The close of business on February 10, 1998 has been fixed as the record date
for determination of the stockholders entitled to notice of and to vote at the
meeting or any adjournment thereof. Any stockholder will be able to examine a
list of holders of record, for any purpose related to the Special Meeting,
during the 10-day period before the meeting. The list will be available at the
offices of Wheelabrator Shareholder Services, Four Station Square, Suite 545,
Pittsburgh, Pennsylvania 15219; telephone (800) 443-6474.
 
  Stockholders may vote in person or by proxy. The proxy statement, which
explains the merger in detail, and the accompanying proxy card are attached to
this notice. Holders of record of common stock at the close of business on
February 10, 1998 will be entitled to vote at the meeting or any adjournment
thereof with respect to all matters described above. PLEASE SIGN, DATE AND MAIL
THE ENCLOSED PROXY PROMPTLY USING THE ENCLOSED, POSTAGE-PAID ENVELOPE.
 
                                          By Order of the Board of Directors,
 
                                          LOGO
 
                                          Thomas A. Witt
                                          Secretary
 
Hampton, New Hampshire
February 27, 1998

 
                        WHEELABRATOR TECHNOLOGIES INC.
                                PROXY STATEMENT
 
                               ---------------
 
                        SPECIAL MEETING OF STOCKHOLDERS
                         TO BE HELD ON MARCH 30, 1998
 
                               ---------------
 
                          QUESTIONS AND ANSWERS ABOUT
                                  THE MERGER
 
Q: WHAT WILL I RECEIVE IN THE MERGER?
 
A: Wheelabrator stockholders will receive $16.50 in cash in exchange for each
   share of Wheelabrator common stock. The Special Committee formed by
   Wheelabrator's Board of Directors negotiated this price with Waste
   Management.
 
Q: WHY IS THE BOARD OF WHEELABRATOR RECOMMENDING THAT I VOTE FOR THE MERGER
   AGREEMENT?
 
A: In the opinion of your Board, the merger is in the best interests of
   Wheelabrator and the price of $16.50 per share is fair from a financial
   point of view to Wheelabrator's stockholders who are not affiliated with
   Waste Management. For the merger to occur, a majority of Wheelabrator's
   stockholders not affiliated with Waste Management and represented at the
   Special Meeting must approve the merger. To review the background and
   reasons for the merger in greater detail, see page 4.
 
Q: WHAT DO I NEED TO DO NOW?
 
A: Please mail your signed proxy card in the enclosed return envelope as soon
   as possible, so that your shares may be represented at the Special Meeting.
 
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
 
A: No. After the merger is completed, we will send you written instructions
   for exchanging your share certificates.
 
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
   SHARES FOR ME?
 
A: Your broker will vote your shares only if you provide instructions on how
   to vote. You should follow the directions provided by your broker regarding
   how to instruct your broker to vote your shares.
 
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
 
A: Yes. Just send in a later dated, signed proxy card before the Special
   Meeting or attend the Special Meeting and vote.
 
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
 
A: We are working toward completing the merger as quickly as possible. We
   expect to complete the merger by April 30, 1998.
 
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
 
A: The merger generally will be taxable to you for federal income tax
   purposes. To review the tax consequences to stockholders in greater detail,
   see page 30.
 
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
 
A: We do not expect to ask you to vote on any other matters at the Special
   Meeting.
 
                      WHO CAN HELP ANSWER YOUR QUESTIONS
 
  If you have more questions about the merger or would like additional copies
of this Proxy Statement, you should contact: Wheelabrator Shareholder
Services, P.O. Box 1400, Pittsburgh, Pennsylvania 15230; telephone (800) 443-
6474.

 
                                    SUMMARY
 
  This summary highlights selected information from this document. This summary
may not contain all of the information that is important to you. To understand
the merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the other documents
to which we have referred you. See "Where You Can Find More Information" on
page 59 of this proxy statement. The actual terms of the merger are contained
in the merger agreement. The merger agreement is included in this proxy
statement as Appendix A.
 
                              THE SPECIAL MEETING
 
VOTING
 
  At the Special Meeting, the holders of Wheelabrator common stock will vote on
a proposal to adopt the merger agreement. Each share of common stock is
entitled to one vote. Delaware law requires that a majority of all outstanding
Wheelabrator shares vote to approve the merger, and Waste Management holds
enough shares to assure that majority. However, in order to ensure that the
stockholders not affiliated with Waste Management, as a group, are in favor of
the merger, Wheelabrator and Waste Management have agreed, as part of the
merger agreement, that a majority of Wheelabrator's nonaffiliated stockholders
represented at the Special Meeting must approve the merger for it to occur.
 
  The record date for determining who is entitled to vote at the Special
Meeting has been set at February 10, 1998. On the record date, there were
157,341,051 shares of common stock outstanding and entitled to vote held by
approximately 12,824 stockholders of record.
 
                                SPECIAL FACTORS
 
PURPOSE, STRUCTURE AND EFFECTS OF THE MERGER (PAGE 4)
 
  Waste Management's purpose for the merger is to acquire all of the remaining
stock in Wheelabrator it does not already own. Waste Management and
Wheelabrator structured the transaction as a merger because a merger is simpler
than any alternative structure. After the merger, Wheelabrator will be a
wholly-owned subsidiary of Waste Management.
 
RECOMMENDATION OF WHEELABRATOR'S BOARD OF DIRECTORS (PAGE 14)
 
  Wheelabrator's Board of Directors, acting on the unanimous recommendation of
its Special Committee, has unanimously approved the merger agreement and
recommends that you vote to adopt the merger agreement. Wheelabrator's Board of
Directors and its Special Committee believe that the merger is in the best
interests of Wheelabrator and that the $16.50 per share price is fair from a
financial point of view.
 
FACTORS CONSIDERED BY WHEELABRATOR'S BOARD OF DIRECTORS AND ITS SPECIAL
COMMITTEE (PAGE 12)
 
  In reaching their decision to recommend adoption of the merger agreement, the
Special Committee and the Board considered a number of factors. These include
the following:
 
  . The directors compared the historical and prospective market prices of
    Wheelabrator common stock with the per share price offered by Waste
    Management. This price represents a 26.9% premium over $13.00 per share,
    which was the closing price of the common stock on June 19, 1997, the
    last full trading day before Waste Management announced its intention to
    buy out the public stockholders of Wheelabrator.
 
  . The directors believed that $16.50 per share was the highest price that
    Waste Management would be willing to pay. The Directors formed this
    belief after the Special Committee's substantial negotiations with Waste
    Management to obtain the highest possible price.
 
  . The merger agreement specifically permits the Special Committee and the
    Board of Directors to withdraw their recommendations that stockholders
    vote in favor of the merger.
 
                                       1

 
GOLDMAN SACHS' AND LAZARD FRERES' FAIRNESS OPINIONS (PAGE 14)
 
  Each of Goldman Sachs and Lazard Freres delivered to the Wheelabrator Board
and its Special Committee a written opinion, dated December 8, 1997, that the
per share price Waste Management is paying is fair to the Wheelabrator public
stockholders from a financial point of view. Goldman Sachs' and Lazard Freres'
opinions are included as Appendices B-1 and B-2 to this proxy statement. Please
read these opinions.
 
INTERESTS OF WHEELABRATOR MANAGEMENT IN THE MERGER (PAGE 22)
 
  Almost all Wheelabrator Board members and officers own Wheelabrator common
stock or hold Wheelabrator stock options and, to that extent, their interest in
the merger is the same as yours. However, some of the officers and directors of
Wheelabrator have relationships, or interests in the merger, that are different
from your interests as a stockholder or that present a conflict of interest.
Some of these interests are described below. The Special Committee and the
Board were aware of these interests and considered them in recommending and
approving the merger.
 
  . Two of the members of the Board of Wheelabrator are also directors of
    Waste Management. One director of Wheelabrator is an officer of
    Wheelabrator. In addition, one other individual was a director of
    Wheelabrator and Waste Management before December 31, 1997 during the
    period when the merger was approved by Wheelabrator's Board of Directors.
    Other Wheelabrator directors have business relationships with Waste
    Management or one of its subsidiaries. These directors were faced with a
    conflict of interest because they had to consider the best interests of
    both Wheelabrator and Waste Management.
 
  . Wheelabrator management generally will have the right to convert their
    Wheelabrator stock options into Waste Management stock options.
 
  . Wheelabrator senior managers are expected to continue to hold their
    current positions with this company following the merger.
 
                                   THE MERGER
 
THE MERGER CONSIDERATION
 
  If the merger is completed, Waste Management will pay you $16.50 per share in
cash for your Wheelabrator common stock. The aggregate payment to be made to
all public stockholders of Wheelabrator will be approximately $869,867,476.
 
CONDITIONS TO THE MERGER (PAGE 26)
 
  There are a number of conditions that must be satisfied before both
Wheelabrator and Waste Management are obligated to complete the merger. The
most important of these mutual conditions are:
 
  . the majority of the public stockholders of Wheelabrator represented at
    the Special Meeting must approve the merger;
 
  . there can be no legal restraints or prohibitions that prevent completion
    of the merger; and
 
  . all governmental authorizations necessary for the merger's completion
    must have been obtained.
 
  There are additional conditions that Wheelabrator must meet before Waste
Management is obligated to complete the merger. The most important of these
conditions are:
 
  . Wheelabrator must comply with the merger agreement; and
 
  . the warranties Wheelabrator made in the merger agreement must be true.
 
  There are additional conditions that Waste Management must meet before
Wheelabrator is obligated to complete the merger. The most important of these
conditions are:
 
  . Waste Management must comply with the merger agreement; and
 
  . the warranties Waste Management made in the merger agreement must be
    true.
 
  The first three mutual conditions cannot be waived. The conditions that
Wheelabrator must meet can be waived by Waste Management, and the conditions
Waste Management must meet can be waived by Wheelabrator.
 
                                       2

 
TERMINATION OF THE MERGER AGREEMENT (PAGE 27)
 
  Either Wheelabrator or Waste Management may terminate the merger agreement
if:
 
  . the merger has not been completed by June 30, 1998;
 
  . the majority of the public stockholders of Wheelabrator represented at
    the Special Meeting do not adopt the merger agreement at the Special
    Meeting;
 
  . a law or final court order prohibits the merger; or
 
  . the other party fails to comply with the merger agreement.
 
APPRAISAL RIGHTS (PAGE 28)
 
  Any stockholder who does not wish to accept $16.50 per share in the merger
has the right under Delaware law to have the "fair value" of his or her shares
determined by the Delaware Chancery Court. This "right of appraisal" is subject
to a number of restrictions and technical requirements. Generally, in order to
exercise appraisal rights:
 
  . you must not vote in favor of the merger; and
 
  . you must make a written demand for appraisal before the vote on the
    merger.
 
  Merely voting against the merger will not protect your right of appraisal.
Appendix C to this proxy statement contains the Delaware appraisal statute.
 
FEDERAL INCOME TAX CONSEQUENCES (PAGE 30)
 
  You will be taxed on your receipt of the $16.50 per share to the extent that
the amount you receive exceeds your tax basis in your Wheelabrator stock.
Because determining the tax consequences of the merger can be complicated,
especially in light of recent changes in the federal tax laws governing capital
gains, you should consult your tax advisor in order to understand fully how the
merger will affect you.
 
                                       3

 
                               TABLE OF CONTENTS
 
                                                                         
INFORMATION CONCERNING THE SPECIAL MEETING.................................   1
  Time, Place, Date........................................................   1
  Purpose of the Special Meeting...........................................   1
  Record Date; Quorum; Outstanding Common Shares Entitled to Vote..........   1
  Vote Required; Certain Common Shares Voting in Favor of the Merger.......   1
  Action to Be Taken Under the Proxy.......................................   2
  Proxy Solicitation.......................................................   2
THE PARTIES................................................................   2
  The Company..............................................................   2
  Waste Management.........................................................   3
  Merger Sub...............................................................   4
SPECIAL FACTORS............................................................   4
  Purpose and Background of the Merger.....................................   4
  Recommendation of the Special Committee and Board of Directors of the
   Company;
   Fairness of the Merger..................................................  12
    The Special Committee..................................................  13
    The Board of Directors of the Company..................................  14
  Opinions of the Investment Bankers for the Special Committee.............  14
    Discounted Cash Flow Analysis and Other Valuation Components...........  15
    Analysis of Purchase Price and Comparison to Selected Transaction......  16
    Impact on Waste Management EPS Analysis................................  16
    Other Analyses.........................................................  17
  Opinion of Merrill Lynch.................................................  18
    Discounted Cash Flow Analysis..........................................  19
    Analysis of Selected Minority Buy-outs.................................  19
    Other Analyses.........................................................  20
  Certain Consequences of the Merger.......................................  21
  Plans for the Company after the Merger...................................  22
  Conduct of the Business of Waste Management and the Company If the Merger
   Is Not Consummated......................................................  22
  Interest of Certain Persons in the Merger; Certain Relationships.........  22
    Common Share Ownership.................................................  22
    Directors and Officers.................................................  23
    Indemnification and Insurance..........................................  23
  Litigation Regarding the Merger..........................................  23
THE MERGER.................................................................  24
  General..................................................................  24
    Merger Consideration...................................................  24
    Effective Time.........................................................  24
    Exchange and Payment Procedures........................................  24
    Transfer of Common Shares..............................................  25
    Treatment of Stock Options.............................................  25
  The Merger Agreement.....................................................  25
    Covenants..............................................................  25
    Representations and Warranties.........................................  26
    Conditions.............................................................  26
    Termination; Amendments; Withdrawal of Recommendations.................  27


 
                                       i

 
                                                                       
  Delaware Statutory Appraisal Rights....................................    28
  Certain Tax Considerations.............................................    30
  Accounting Treatment...................................................    30
  Fees and Expenses and Source of Funds..................................    31
  Regulatory Requirements................................................    31
SELECTED FINANCIAL DATA OF THE COMPANY...................................    32
  Recent Developments....................................................    33
    Asset Impairments and Equity Income Charges..........................    33
    Reclassification and Restatement of Rust's Equity Income.............    34
WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
 OF INCOME...............................................................    35
COMMON SHARE MARKET PRICE INFORMATION; DIVIDEND INFORMATION; SHARE
 PURCHASE INFORMATION FOR THE COMPANY....................................    37
CERTAIN FINANCIAL PROJECTIONS OF THE COMPANY.............................    38
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS...............    39
CERTAIN RELATIONSHIPS AND TRANSACTIONS...................................    40
  Land Option Agreement..................................................    40
  Second Amended and Restated Airspace Dedication Agreement..............    40
  Disposal Agreement.....................................................    41
  Restated Funding Agreement.............................................    41
  Intellectual Property Licensing Agreement..............................    42
  Amended and Restated Master Intercorporate Agreement...................    42
  WM International Agreements............................................    44
  Rust Transaction.......................................................    45
  Stock Option Plan Loans................................................    46
  Other Payments.........................................................    46
SECURITIES OWNERSHIP.....................................................    47
  Ownership of Common Shares.............................................    47
    By Waste Management, Certain Holders and the Directors and Executive
     Officers of Waste Management........................................    47
    By the Directors and Executive Officers of the Company...............    48
  Ownership of Waste Management Shares by Directors and Executive
   Officers of the Company...............................................    49
MANAGEMENT OF WASTE MANAGEMENT AND THE COMPANY...........................    50
  Directors of Waste Management..........................................    50
  Executive Officers of Waste Management.................................    54
  Directors of the Company...............................................    56
  Executive Officers of the Company......................................    57
PROPOSALS BY STOCKHOLDERS OF THE COMPANY.................................    58
INDEPENDENT PUBLIC ACCOUNTANTS...........................................    59
WHERE YOU CAN FIND MORE INFORMATION......................................    59
OTHER MATTERS............................................................    60
APPENDIX A--AGREEMENT AND PLAN OF MERGER.................................   A-1
APPENDIX B-1--OPINION OF GOLDMAN, SACHS & CO. ........................... B-1-1
APPENDIX B-2--OPINION OF LAZARD FRERES & CO. L.L.C. ..................... B-2-1
APPENDIX C--SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW..........   C-1
APPENDIX D--FINANCIAL PROJECTIONS........................................   D-1


 
                                       ii

 
                  INFORMATION CONCERNING THE SPECIAL MEETING
 
TIME, PLACE, DATE
 
  This Proxy Statement is being furnished to the holders of the outstanding
common shares, par value $.01 per share (the "Common Shares"), of Wheelabrator
Technologies Inc. (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Special
Meeting of stockholders of the Company to be held on March 30, 1998 at 11:00
a.m. local time, at the Mellon Bank Building, 8 Loockerman Street, Dover,
Delaware, including any adjournments or postponements thereof.
 
PURPOSE OF THE SPECIAL MEETING
 
  At the Special Meeting, holders of Common Shares will consider and vote upon
a proposal to approve and adopt the Merger Agreement and the Merger and to
transact such other business as may properly come before the meeting.
Additional information concerning the Special Meeting and the Merger Agreement
is set forth below and a copy of the Merger Agreement is attached hereto as
Appendix A. A special committee of independent directors of the Board of
Directors of the Company (the "Special Committee") has unanimously determined
that the terms of the Merger are fair from a financial point of view to the
holders of the Common Shares other than Common Shares owned by Waste
Management or any of its affiliates (all Common Shares not so owned by Waste
Management, Inc., a Delaware corporation ("Waste Management"), or any of its
affiliates being referred to herein as the "Nonaffiliated Shares"), and has
recommended that such holders and the Board of Directors vote for approval and
adoption of the Merger Agreement and the transactions contemplated thereby.
Acting on the unanimous recommendation of the Special Committee, the Board of
Directors of the Company has unanimously approved and adopted the Merger
Agreement and the Merger. THE SPECIAL COMMITTEE AND THE BOARD OF DIRECTORS OF
THE COMPANY UNANIMOUSLY RECOMMEND THAT STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. HOWEVER, STOCKHOLDERS OF THE
COMPANY SHOULD BE AWARE THAT CERTAIN OF THE MEMBERS OF THE BOARD OF DIRECTORS
OF THE COMPANY HAVE CONFLICTS OF INTEREST WITH RESPECT TO THE MERGER. See
"Special Factors--Conflicts of Interest."
 
RECORD DATE; QUORUM; OUTSTANDING COMMON SHARES ENTITLED TO VOTE
 
  The record date for the Special Meeting has been fixed as the close of
business on February 10, 1998 (the "Record Date"). Only holders of record of
Common Shares on the Record Date are entitled to notice of and to vote at the
Special Meeting. Holders of Common Shares on the Record Date are entitled to
one vote for each Common Share held on matters properly presented at the
Special Meeting. A stockholders' list will be available for examination by
holders of Common Shares, for any purpose related to the Special Meeting,
during the 10-day period preceding such meeting, at the offices of
Wheelabrator Shareholder Services, Four Station Square, Suite 545, Pittsburgh,
Pennsylvania 15219; telephone (800) 443-6474.
 
  At the close of business on the Record Date, there were 157,341,051 Common
Shares issued and outstanding, held of record by 12,824 registered holders.
The holders of a majority of the Common Shares entitled to vote who are
present in person or represented by proxy will constitute a quorum for the
transaction of business at the Special Meeting. Waste Management's
approximately 67% ownership of the outstanding Common Shares will be
sufficient to create a quorum at the Special Meeting.
 
VOTE REQUIRED; CERTAIN COMMON SHARES VOTING IN FAVOR OF THE MERGER
 
  Pursuant to the Delaware General Corporation Law (the "DGCL"), the Merger
Agreement must be approved and adopted by the affirmative vote of the holders
of a majority of the outstanding Common Shares (the "DGCL Vote Requirement").
Waste Management has agreed to vote its Common Shares for approval and
adoption of the Merger Agreement. As of the Record Date, Waste Management was
the owner of 104,621,810 Common Shares (approximately 67% of the outstanding
Common Shares). HOWEVER, AS SPECIFIED IN THE MERGER AGREEMENT, A CONDITION TO
CONSUMMATION OF THE MERGER IS THAT THE MERGER AGREEMENT BE APPROVED AND
 
                                       1

 
ADOPTED BY THE HOLDERS OF A MAJORITY OF THE NONAFFILIATED SHARES WHICH ARE
REPRESENTED AND ENTITLED TO VOTE AT THE SPECIAL MEETING (THE "INDEPENDENT VOTE
REQUIREMENT"). The Merger is also subject to other conditions. See "The Merger
Agreement--Conditions."
 
  Failure to return an executed proxy card or to vote in person at the Special
Meeting or voting to abstain will constitute, in effect, a vote against
approval and adoption of the Merger Agreement for purposes of the DGCL Vote
Requirement. Common Shares not represented in person or by proxy at the
Special Meeting will not be counted for purposes of determining whether the
Independent Vote Requirement has been satisfied. Failure to return an executed
proxy card or to vote in person at the Special Meeting will not affect the
Independent Vote Requirement, but voting to abstain will constitute, in
effect, a vote against approval and adoption of the Merger Agreement for
purposes of the Independent Vote Requirement.
 
ACTION TO BE TAKEN UNDER THE PROXY
 
  All proxies in the enclosed form that are properly executed and returned to
the Company's transfer agent, ChaseMellon Shareholder Services, on or before
the date of the Special Meeting, and not revoked, will be voted at the Special
Meeting or any adjournments or postponements thereof in accordance with any
instructions thereon, or, if no instructions are provided, will be voted FOR
adoption and approval of the Merger Agreement. Any stockholder who has given a
proxy pursuant to this solicitation may revoke it by attending the Special
Meeting and giving oral notice of his or her intention to vote in person,
without compliance with any other formalities. In addition, any proxy given
pursuant to this solicitation may be revoked prior to the Special Meeting by
delivering to the Secretary of the Company an instrument revoking it or a duly
executed proxy bearing a later date.
 
  Management of the Company does not know of any matters other than those set
forth herein which may come before the Special Meeting. If any other matters
are properly presented to the Special Meeting for action, it is intended that
the persons named in the enclosed form of proxy and acting thereunder will
vote in accordance with their best judgment on such matters. Such matters
could include an adjournment or postponement of the Special Meeting from time
to time in the event the Board of Directors of the Company or the Special
Committee determines that holders of Common Shares have not had sufficient
time to consider the Merger Agreement. If any such determination is made,
additional proxies may be solicited during such adjournment period.
 
PROXY SOLICITATION
 
  The expense of preparing and mailing this Proxy Statement and the proxies
solicited hereby will be borne by the Company. The expense of printing this
Proxy Statement will be borne equally by Waste Management and the Company. In
addition to the use of the mails, proxies may be solicited by officers and
directors and regular employees of the Company, without additional
remuneration, by personal interviews, written communication, telephone,
telegraph or facsimile transmission. The Company also will request brokerage
firms, nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of Common Shares held of record and will provide
reimbursement for the cost of forwarding the material in accordance with
customary charges. The Company has hired Reinhard Associates to coordinate the
solicitation of such proxies by and through such holders for a fee of
approximately $3,500 plus expenses.
 
                                  THE PARTIES
 
THE COMPANY
 
  The Company, an approximately 67% owned subsidiary of Waste Management,
provides an array of environmental products and systems, primarily in North
America. The Company has its principal executive offices at 4 Liberty Lane
West, Hampton, New Hampshire 03482. The telephone number of the Company is
(603) 929-3000.
 
  The Company is engaged in the ownership and operation of trash-to-energy,
waste-fuel and natural gas-fuel powered independent power, and biosolids
pelletizer facilities as well as providing biosolids land application
 
                                       2

 
services and air quality control equipment design and installation services,
primarily in North America. The Company develops, arranges financing for,
operates and owns facilities that dispose of trash and other waste materials
in an environmentally acceptable manner by recycling them into energy in the
form of electricity and steam. The Company is involved in the design,
manufacture and operation of facilities and systems used to treat and manage
biosolids resulting from the treatment of wastewater by converting them into
useful fertilizers, and to recycle organic wastes into compost material usable
for horticultural and agricultural purposes. The Company designs and installs
technologically advanced air pollution emission control equipment, including
systems which remove pollutants from the emissions of the Company's trash-to-
energy facilities as well as power plants and other industrial facilities.
 
  The Company owns 40% of the capital stock of Rust International Inc.
("Rust"). Rust is engaged in furnishing environmental and infrastructure
consulting and a variety of other on-site industrial and related services
primarily to clients in the public sector and in petrochemical, chemical,
energy, utility, pulp and paper, environmental services and other industries.
Rust also has an approximately 41% interest in NSC Corporation, a publicly
traded provider of asbestos abatement and other specialty contacting services
("NSC"), and an approximately 37% interest in OHM Corporation, a publicly
traded provider of environmental remediation services ("OHM"). On January 15,
1998, International Technology Corp. ("ITC") announced that it had agreed to
buy OHM for $365 million in cash and stock and $49 million in assumed debt.
Subject to certain regulatory requirements, ITC and OHM anticipate holding
shareholder meetings in April to vote on such transaction.
 
  The Company owns 12% of the capital stock of Waste Management International
plc ("WM International"), a subsidiary of Waste Management which provides
solid and hazardous waste management and related services internationally.
 
WASTE MANAGEMENT
 
  Waste Management is a leading international provider of waste management
services. The principal executive offices of Waste Management are located at
3003 Butterfield Road, Oak Brook, Illinois 60523. The telephone number of
Waste Management is (630) 572-8800.
 
  Waste Management was incorporated in Delaware in 1968 and subsequently
succeeded to certain businesses owned by its organizers and others. Shares of
the common stock of Waste Management, par value $1.00 per share ("Waste
Management Shares"), are listed on the NYSE under the trading symbol "WMX" and
also are listed on the Frankfurt Stock Exchange, the London Stock Exchange,
the Chicago Stock Exchange and the Swiss Stock Exchanges in Basle, Zurich and
Geneva.
 
  Through Waste Management of North America, Inc., a wholly owned subsidiary
of Waste Management ("WMNA"), Waste Management provides integrated solid waste
management services in North America to commercial, industrial, municipal and
residential customers, as well as to other waste management companies. These
services consist of solid waste collection, transfer, resource recovery and
disposal services. As part of these services, Waste Management is engaged in
providing, through its Recycle America(R) and Recycle Canada(R) and other
programs, paper, glass, plastic and metal recycling services to commercial and
industrial operations and curbside recycling services for such materials to
residences, and in removing methane gas from sanitary landfill facilities for
use in electricity generation. In addition, through WMNA, Waste Management
provides Port-O-Let(R) portable sanitation services to municipalities and
commercial and special event customers.
 
  Waste Management owns 60% of the capital stock of Rust, the other 40% of
which is owned by the Company.
 
  Waste Management owns 56% of the capital stock of WM International. The
Company owns 12% of WM International, and Rust owns another 12% of WM
International.
 
  Chemical Waste Management, Inc. ("CWM"), a wholly owned subsidiary of Waste
Management, is a provider of hazardous waste management services.
 
                                       3

 
MERGER SUB
 
  Merger Sub is a wholly owned subsidiary of Waste Management formed to
effectuate the Merger. Merger Sub has not engaged in any operations to date.
The principal executive offices of Merger Sub are located at 3003 Butterfield
Road, Oak Brook, Illinois 60523. The telephone number of Merger Sub is (630)
572-8800.
 
                                SPECIAL FACTORS
 
PURPOSE AND BACKGROUND OF THE MERGER
 
  In August 1988, Waste Management acquired approximately 22% of the common
stock of a predecessor of the Company in exchange for Waste Management's
trash-to-energy business and certain of its other assets. By virtue of a
merger between the Company and a subsidiary of Waste Management in September
1990, Waste Management increased its ownership interest in the Company to
approximately 55% of the Company's Common Shares. As a result of Common Share
repurchases by the Company over the course of 1994, 1995, 1996 and the first
several months of 1997, Waste Management's ownership of Common Shares
increased over time, on a percentage basis, to approximately 67% of the Common
Shares.
 
  In January 1995, the Board of Directors of Waste Management reviewed and
approved several management recommendations arising out of a comprehensive
review of its long-range strategic plans. Among the conclusions reached were
that Waste Management 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 Waste Management'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
Waste Management's corporate structure. An additional conclusion of the Board
was that the Company's waste-to-energy operations were a core business
integral to the operations of Waste Management's North American waste services
network, and that the Company's waste-to-energy technology and plant
operations experience were strategic assets important to the long-term success
of the consolidated enterprise.
 
  Following this meeting and from time to time through the fall of 1996, Dean
L. Buntrock and Phillip B. Rooney, then Chairman of the Board and President of
Waste Management, respectively, discussed with certain senior officers of
Waste Management and the Company, including John M. Kehoe, Jr., now the
President and Chief Executive Officer of the Company, the possibility that
Waste Management might consider making an offer to acquire all of the
outstanding Nonaffiliated Shares at a future time. During the fourth quarter
of 1996, the senior management of Waste Management, assisted by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), analyzed a wide range
of strategic options available to Waste Management, including transactions
involving the purchase of the Nonaffiliated Shares and the purchase of the
remaining shares of WM International that Waste Management did not already
own. In January 1997, the Board of Directors of Waste Management reviewed
management's conclusions and recommendations with respect to these options,
and concluded that Waste Management would be best served at that time by
expanding its efforts to divest certain business units identified as non-core
or under-performing, by continuing its efforts to control capital spending and
generating substantial free cash flow, and by expanding its share repurchase
program through the execution of a "Dutch Auction" style issuer tender offer.
 
  The Company's Board of Directors also met in January 1997 and approved a
management recommendation to increase the Company's own share repurchase
program to 25 million shares and to execute a "Dutch Auction" style issuer
tender offer later in the first quarter for up to $350 million of the
Company's shares. In taking this action, the Board considered the substantial
free cash flow that was expected from the sale of the Company's
 
                                       4

 
water process and manufacturing businesses in late 1996 and the then pending
divestiture of the Company's water and wastewater contract operations
business, as well as the unavailability of sufficiently attractive investment
opportunities in the Company's remaining core business to fully utilize the
Company's cash. By the time the Company's Board next met in mid-March 1997,
however, the Company's management had identified a substantial acquisition
opportunity in the Company's core business that previously had not been
available. At that meeting, the consensus of the Board was that the potential
transaction should be investigated further and that the Company's planned
Dutch Auction style issuer tender offer could be deferred if necessary to
enable management to conduct such an investigation. In late March, following
additional discussions among certain members of senior management of the
Company and Waste Management and members of the Company's Board of Directors,
the Company announced the indefinite deferral of its Dutch Auction style
issuer tender offer. During the first four months of 1997, approximately 5.1
million Common Shares were repurchased through open market transactions at an
aggregate cost of $67 million. At the Company's Board meeting in May 1997,
management was directed to continue developing a recommendation with respect
to the potential acquisition opportunity, although substantial questions had
emerged by then as to whether a transaction could ever be structured on terms
that would be acceptable to the Company. The Company's management determined
thereafter that pursuing the transaction further would not be feasible for the
Company.
 
  At the May 1997 meeting of the Board of Directors of Waste Management,
following a report by management indicating that substantial progress had been
made with respect to the two year business divestiture goal and certain of
management's operational improvement and cost reduction projects, the Board of
Directors of Waste Management directed senior management of Waste Management
to reevaluate the potential strategic alternatives with respect to the Company
and report to the Board on such alternatives. Senior management evaluated
selling Waste Management's existing ownership interest in the Company,
maintaining Waste Management's ownership interest in the Company and
purchasing the Nonaffiliated Shares. After consulting with Merrill Lynch,
senior management determined to recommend to the Board that Waste Management
acquire the Nonaffiliated Shares in a cash merger. In reaching this decision,
senior management believed that the complete integration of the Company's
trash-to-energy waste disposal business with that of Waste Management would
enable Waste Management to manage its North American core businesses as a
single enterprise, simplify Waste Management's corporate structure, reduce
overall operational and administrative costs and eliminate the expense of
running a separate publicly traded subsidiary, and streamline decision making.
 
  At a special meeting of Waste Management's Board of Directors held at Waste
Management's headquarters on June 20, 1997, Mr. Buntrock reviewed with the
Board the recommendation of Waste Management's senior management that Waste
Management offer to acquire the Nonaffiliated Shares at $15.00 per share in
cash. At such meeting, Mr. Buntrock outlined the potential advantages in
operating benefits, cost efficiencies and overall quality of customer service
that might be realized if the Company were to become a wholly owned subsidiary
of Waste Management. The Board also discussed the procedural aspects of such a
proposal and determined that, in view of Waste Management's position as a
controlling stockholder of the Company and certain directors of the Company
also serving as directors of Waste Management or having commercial
relationships with Waste Management, the proposal should contemplate the
formation of a committee of independent directors of the Company to evaluate
the proposal and negotiate any transaction with Waste Management or any other
party. The Board also determined that, although not required under applicable
law or the certificate of incorporation or by-laws of the Company, any such
transaction with Waste Management would be subject to the affirmative vote of
a majority of the Nonaffiliated Shares voting on the proposal. After
discussing these matters, Waste Management's Board of Directors approved the
making of a proposal to acquire, in a cash merger, all of the Nonaffiliated
Shares at $15.00 per share (the "Proposal"). Waste Management's Board of
Directors delegated to senior management the authority to determine and
negotiate the terms of a transaction on behalf of Waste Management, subject to
final approval by Waste Management's Board of Directors. The $15.00 price per
Nonaffiliated Share was based principally on historical trading prices for the
Common Shares, on premiums paid in selected minority buy-outs, on oral advice
received from Merrill Lynch and on the consideration of the Board of Directors
of Waste Management as to what would constitute an appropriate price to offer
the holders of the Nonaffiliated Shares.
 
                                       5

 
  Later that day, Mr. Buntrock delivered to Mr. Kehoe a letter on behalf of
the Board of Directors of Waste Management, the text of which follows:
 
Wheelabrator Technologies Inc.
4 Liberty Lane West
Hampton, New Hampshire 03842
Attention: John M. Kehoe, Jr.
 
Dear John:
 
  The Board of Directors of Waste Management, Inc. ("Waste Management") has
authorized me to extend an offer pursuant to which Waste Management would
acquire all of the outstanding shares of common stock of Wheelabrator
Technologies Inc. ("Wheelabrator") that Waste Management does not now own,
directly or indirectly. This transaction would be effected by means of a
merger between Wheelabrator and a wholly owned subsidiary of Waste Management
in which stockholders of Wheelabrator (other than Waste Management and its
subsidiaries) would receive $15.00 in cash in exchange for each whole share of
Wheelabrator common stock held. This exchange ratio reflects a premium of
approximately 15% over the closing price of Wheelabrator common stock on June
19, 1997.
 
  We anticipate that this offer will be referred to a special committee of
independent directors of Wheelabrator for their consideration. While Waste
Management is prepared to sign a straightforward merger agreement containing
only essential conditions and covenants and to proceed to a closing following
a meeting of Wheelabrator stockholders called to consider this proposal, we
are also prepared to negotiate all aspects of the proposed transaction with
the Wheelabrator special committee, including the possibility of offering a
form of consideration other than cash. We do expect, however, that the final
terms of any merger or other transaction agreement between our two companies
will be subject to the approval of both the committee of independent directors
of Wheelabrator and the holders of a majority of the outstanding shares of
Wheelabrator common stock (other than Waste Management and its subsidiaries)
voting on the proposal at a meeting of Wheelabrator stockholders.
 
  I and the other members of senior management of Waste Management would be
pleased to discuss this proposal with you or your representatives at any time.
Please let me know at your earliest convenience how you wish to proceed.
 
                                          Sincerely,
 
                                          /s/ Dean L. Buntrock
                                          Dean L. Buntrock
                                          Chairman of the Board
 
  Also on June 20, 1997, shortly before the close of the New York Stock
Exchange, Waste Management and the Company issued separate press releases
stating that Waste Management had offered to purchase all of the Nonaffiliated
Shares at a price of $15.00 per share, which price represented an
approximately 15% premium to the closing price of the Nonaffiliated Shares on
the NYSE on June 19, 1997, the last full trading day prior to the public
announcement of the Proposal.
 
  Shortly after the public announcement of the Proposal, several lawsuits were
initiated by Company stockholders against Waste Management, the Company and
the Company's directors alleging that the price offered for the Nonaffiliated
Shares by Waste Management was inadequate and that any negotiations leading up
to the Proposal were not conducted at arm's length. Specifically, since June
25, 1997, 20 putative stockholder action complaints and one putative
derivative action complaint have been filed in the Court of Chancery in and
for New Castle County, Delaware. Each of the stockholder action complaints
purports to be brought by a holder
 
                                       6

 
of Nonaffiliated Shares as a class action on behalf of all holders of
Nonaffiliated Shares, and the derivative action complaint purports to be
brought by two holders of Nonaffiliated Shares on behalf of the Company
(together, the "Stockholder Actions"). See "--Litigation Regarding the
Merger."
 
  On June 24, 1997, a special meeting of the Board of Directors of the Company
was held. All directors were present, in person or by teleconference. At the
meeting, Mr. Buntrock outlined the terms of the Proposal and Waste
Management's reasons for desiring to proceed with the transaction contemplated
by the Proposal (the "Proposed Transaction"). He then explained that due to
Waste Management's majority equity interest in the Company and the potential
for perceived conflicts of interest among certain directors and officers of
Waste Management and the Company, consideration of the Proposal and authority
to determine what actions might be appropriate with respect thereto should be
delegated to a special committee of the Board of Directors of the Company. Mr.
Buntrock also noted that the Proposal contained a condition to the effect that
the Proposed Transaction would require the affirmative vote of the holders of
a majority of the Nonaffiliated Shares voting on the Proposal. The Board of
Directors then approved the creation of a committee (the "Special Committee")
to give independent consideration to the Proposal. The Board of Directors
appointed Paul M. Meister and Lt. General Thomas P. Stafford, two Directors of
the Company who are not employees of the Company or Waste Management and have
no material commercial relationship with Waste Management or its subsidiaries,
as the members of the Special Committee. See "--Information Concerning
Directors and Executive Officers of the Company." The Special Committee was
delegated the full power and authority of the Board of Directors to determine
what actions with respect to the Proposed Transaction would be in the best
interests of the Company and the holders of the Nonaffiliated Shares,
including whether to consummate the Proposed Transaction or modify any of its
terms. The Board of Directors authorized the Special Committee to evaluate and
negotiate the terms of the Proposal with Waste Management and its
representatives, to consider and negotiate the terms of transactions other
than the Proposed Transaction as it deemed appropriate, to make a
recommendation to the full Board of Directors concerning the Proposal and to
cause the Proposed Transaction to be consummated on terms and conditions
approved by the Special Committee. The Special Committee was given the power
to retain independent legal advisors and investment bankers to assist it in
discharging these duties.
 
  On June 24, 1997, the Special Committee held its initial meeting by
teleconference. At the meeting, the Special Committee elected Mr. Meister as
the Chairman of the Special Committee and decided to retain Debevoise &
Plimpton ("Debevoise") as independent legal advisor in connection with its
evaluation and negotiation of the Proposed Transaction and any alternative
transactions.
 
  On June 25, 1997, the Special Committee met to discuss its retention of
independent investment bankers. The members of the Special Committee
discussed, among other considerations, the importance of selecting investment
bankers with the proper degree of expertise in the areas of mergers and
acquisitions, going private transactions and special committee procedures, as
well as some familiarity with the Company's business. The Special Committee
discussed the procedures to be followed in selecting investment bankers and
decided to solicit written proposals from a number of candidates.
Subsequently, written proposals were received from four investment bankers
solicited by the Special Committee based upon their general reputation and
experience in mergers and acquisitions and similar transactions.
 
  On July 7, 1997, the Special Committee met with representatives from
Debevoise by teleconference. A representative from Debevoise outlined the role
and duties of the Special Committee and the legal principles applicable to
actions taken by it in connection with its evaluation of the Proposed
Transaction. The Special Committee, along with the Company's senior management
and Debevoise, reviewed the written proposals received from four financial
institutions and considered a fifth candidate that did not submit a written
proposal. The Special Committee then discussed the relative merits of each of
the potential investment bankers. It was noted that Lazard Freres & Co. LLC
("Lazard Freres") had advised the Company on a variety of matters, over the
past 10 to 15 years, including the "Dutch Auction" style issuer tender offer
the Company had considered during the spring of 1997 and was, therefore,
familiar with the Company and the industry in which it operates.
 
  In the days following this meeting, members of the Special Committee
interviewed several of the firms that had submitted proposals.
 
                                       7

 
  On July 14, 1997, Waste Management announced publicly that Ronald LeMay had
been hired as Chairman of the Board and Chief Executive Officer of Waste
Management replacing Mr. Buntrock who had been serving as Acting Chief
Executive Officer since February 1997.
 
  At a July 18, 1997 Special Committee meeting, which was held by
teleconference, the Special Committee selected Lazard Freres and Goldman,
Sachs & Co. ("Goldman Sachs") as its investment bankers (the "Investment
Bankers"). For descriptions of the terms of the engagements of the Investment
Bankers, see "--Opinions of the Investment Bankers for the Special Committee."
The Investment Bankers were engaged to analyze and provide advice with respect
to the Proposal and with respect to any other strategic transaction which
might be considered by the Special Committee whether or not involving Waste
Management and to assist in any negotiations with respect to such
transactions. In addition, the Special Committee decided to retain Larry B.
Grimes, Esq. as an additional independent legal advisor to the Special
Committee.
 
  Over the next several weeks, the Investment Bankers commenced their
financial due diligence review of the Company and Debevoise carried out its
legal due diligence. In connection with their financial due diligence, the
Investment Bankers reviewed, among other things, certain historical business
and financial information relating to the Company, including Annual Reports on
Form 10-K of the Company, certain interim reports to stockholders and
Quarterly Reports on Form 10-Q of the Company, and certain other
communications from the Company to its stockholders (collectively, the
"Company's Public Documents"); certain financial forecasts and other non-
public financial and operating data concerning the businesses and operations
of the Company that were provided by the management of the Company; the
financial terms of certain business combinations; certain financial and stock
market information for certain other companies the stock of which is publicly
traded; and certain stock market information relating to the Company. The
Investment Bankers also met with members of the senior management of the
Company and Waste Management to discuss the past and current operations,
financial condition and prospects of the Company, including the financial
forecasts relating to both the Proposed Transaction and the possible synergies
and other financial benefits which Waste Management might realize as a result
of the Merger.
 
  In order to facilitate the financial due diligence, the Special Committee
requested that the Company prepare 20-year financial projections for the
Company's operating businesses, in addition to the three-year projections
customarily prepared by the Company. The final versions of these 20-year
management projections (the "Financial Projections"), and the assumptions
underlying them, are summarized in "Certain Projections of the Company" and on
Appendix D to this proxy statement.
 
  In connection with their legal due diligence, representatives of Debevoise
reviewed, among other things, certain books and records of the Company and of
Waste Management, including the minutes of meetings of the boards of directors
of both companies; the Company's Public Documents; the terms of the
contractual arrangements between the Company on the one hand and Waste
Management and/or other of Waste Management's affiliates on the other; and the
terms of the principal contractual arrangements with respect to the Company's
principal projects, including agreements relating to the financing thereof.
 
  On August 7, 1997, the Special Committee met with its Investment Bankers and
counsel at the offices of Lazard Freres. The Investment Bankers reviewed the
status of their financial due diligence, including further development of the
Financial Projections and their work with the Company's management to develop
and refine the Financial Projections, consider the value of certain assets
owned by the Company and consider certain other factors affecting the value of
the Company. In addition, the Special Committee and its advisors discussed
various approaches for evaluating the viability of other possible alternatives
to the Proposed Transaction, including a sale of the Company in its entirety
to a third party purchaser, a series of sales of individual projects of the
Company to third parties, and a recapitalization and other possible
restructuring transactions, whether or not involving a change in control. The
Special Committee also discussed with its advisors the financial performance
of the Company over the past several years, its prospects for future growth
and related matters, including the prospects for significant new waste-to-
energy projects, the prospects for further development of the independent
power business and the possibility for growth through acquisitions. The
Special Committee also discussed certain
 
                                       8

 
factors that might impact opportunities for growth, including legal
developments relating to the control of waste flows in interstate commerce,
trends relating to the deregulation of the power industry and possible
resulting pressure on power prices and other issues. The Special Committee's
advisors also discussed with the Committee their plans for the conduct of
further financial and legal due diligence.
 
  During the weeks following August 7, 1997, the Investment Bankers and legal
counsel continued their respective due diligence activities, including further
work on the Financial Projections.
 
  On August 22, 1997, the Special Committee met with its counsel and the
Investment Bankers at Debevoise's offices. The Investment Bankers discussed
the issues they were addressing in order properly to evaluate the Proposal and
the Investment Bankers and Debevoise reviewed the status of their respective
due diligence efforts. The Special Committee directed the Investment Bankers
to work with the Company's management to complete their financial analyses,
utilizing the Financial Projections.
 
  During the period from August 22 to September 18, 1997, the Investment
Bankers continued their financial due diligence, including further discussions
with senior management of the Company about the Company's business, financial
condition and prospects.
 
  On September 18, 1997, the Special Committee met by teleconference with its
counsel and the Investment Bankers. At this meeting, the Investment Bankers
reviewed certain preliminary financial and comparative analyses, including a
discounted cash flow analysis of the net present value as of year-end 1997 of
the operating businesses of the Company based upon the Financial Projections,
possible valuations of the Company's non-cash generating assets, the multiples
various prices per Nonaffiliated Share would represent to certain financial
measures, including the Company's operating income and earnings, an analysis
of the impact on the earnings of Waste Management of consummation of Waste
Management's acquisition of the Nonaffiliated Shares at various prices, and
certain information relating to other acquisition transactions. It was noted
by the Investment Bankers that their analyses were preliminary and subject to
revision because they were based on the Financial Projections and that the
Company's management was still working to refine the assumptions underlying
the Financial Projections. These analyses, in their final form, are described
in "--Opinions of the Investment Bankers for the Special Committee." The
Investment Bankers then reviewed the history of the Company's stock trading
prices. It was noted that the trading prices of the Common Shares in recent
years had significantly underperformed the Standard & Poor's 500 index. In
addition, the Special Committee and its advisors considered the viability of
various alternatives to the Proposed Transactions. The Special Committee and
its advisors also considered whether to include in any counter proposal to
Waste Management a term calling for Waste Management to exchange Waste
Management common stock for the Nonaffiliated Shares. The Special Committee
concluded that cash consideration was preferable because of the certainty
associated with the value of cash consideration. Following these discussions,
the Special Committee concluded that, although additional refinement of the
financial analyses was necessary, it was appropriate to initiate discussions
with Waste Management and directed the Investment Bankers to contact Merrill
Lynch.
 
  On September 25, 1997, representatives of the Investment Bankers met with
representatives of Waste Management and Merrill Lynch at the offices of Waste
Management. The Investment Bankers presented their preliminary analyses
relating to the value of the Company and reviewed the methodologies they had
used. The Merrill Lynch representatives indicated that, with certain
exceptions, the Financial Projections provided a reasonable basis for
discussion, but they disagreed with certain of the assumptions and
methodologies used by the Investment Bankers in arriving at their range of
valuations of the Company, including the applicable discount rates and assumed
growth rates used in modeling projected cash flows and valuing the Company's
future cash flows, the extent to which the Proposed Transaction might result
in synergies to Waste Management and the inclusion of certain non-operating
assets of the Company when valuing the Company. At the conclusion of the
meeting, the Merrill Lynch representatives agreed to evaluate and to prepare a
formal response to the Investment Bankers' analyses.
 
  During the period from September 26, 1997 to October 24, 1997, the
Investment Bankers worked with the Company's management to refine the
Financial Projections. Also during this period, Merrill Lynch worked with the
management of Waste Management to prepare its response to the analysis of the
Investment Bankers.
 
                                       9

 
  On October 24, 1997, representatives of the Investment Bankers met with
representatives of Waste Management and Merrill Lynch by teleconference for
the purpose of discussing further the valuation of the Company. Merrill Lynch
presented its preliminary valuation analyses, which included a discounted cash
flow analysis, incorporating the then existing draft of the Financial
Projections. Merrill Lynch's analysis reflected higher discount rates and
lower perpetuity growth rates than those used by the Investment Bankers. In
support of such assumptions, Merrill Lynch stated, among other things, that it
believed the Company had limited growth prospects in its core business, given
that significant portions of revenues were contract-based and, in addition,
that a number of contracts were due to expire over the next several years and
would likely be renewable only on terms less favorable than existing terms.
Merrill Lynch also stated that despite the Company's efforts over the past
several years to develop new projects as a platform for future growth,
prospects for such new business ("New Business") were uncertain and, even if
obtained on financially attractive terms, were unlikely to generate revenues
and net income for several years. In addition, Merrill Lynch disagreed with
the Investment Bankers as to the extent to which the Proposed Transaction
would yield synergy savings and disagreed concerning valuations with respect
to certain other assets held by the Company. See "Opinion of Merrill Lynch."
Merrill Lynch and the Investment Bankers also discussed the limited number of
comparable companies and transactions as well as the trading history of the
Common Shares. In this respect, Merrill Lynch stated its belief that the
trading value of the Common Shares over the past several years had to some
extent been supported by the fact that the Company had from time to time
repurchased significant amounts of its own Common Shares in publicly announced
open market repurchase programs and in privately negotiated buy-backs from
institutional investors, and the market's assumption that such repurchases and
buy-backs might continue and speculation that Waste Management might acquire
the Nonaffiliated Shares. Merrill Lynch stated that, as a result of the
foregoing, Merrill Lynch and Waste Management continued to believe that $15.00
per Nonaffiliated Share was a reasonable and appropriate price. In response,
the Investment Bankers stated that they believed that Waste Management should
consider paying a higher price. The Investment Bankers agreed to consult
further regarding the assumptions underlying the then existing draft of the
financial projections and the attainability of potential synergies.
 
  On October 29, 1997, Waste Management announced the resignation of Mr.
LeMay. On the same day, Robert S. Miller was appointed as Acting Chairman and
Chief Executive Officer of Waste Management. In a teleconference with
financial analysts and stockholders on October 30, 1997, Mr. Miller stated
that, notwithstanding the change in management, Waste Management was still
interested in acquiring the Nonaffiliated Shares on the terms outlined in the
Proposal.
 
  In early November 1997, representatives of Merrill Lynch contacted
representatives of Lazard Freres to indicate that Waste Management would be
willing to increase its offer to between $15.25 and $15.50 per Nonaffiliated
Share but that it was unlikely that Waste Management would further increase
its offer. The representatives of Lazard Freres responded that they believed
the Special Committee would likely view any offer below $17.00 per
Nonaffiliated Share unfavorably.
 
  On November 9, 1997, the Special Committee held a meeting with
representatives of the Investment Bankers and its counsel by teleconference,
during which they reviewed the negotiations that had occurred up until that
point, evaluated further strategies based on Waste Management's position at
that stage and discussed what impact the recent management changes and other
recent developments at Waste Management might have on the negotiating process.
Mr. Meister indicated that he and Mr. Miller had scheduled a meeting to occur
following the meeting of the Company's Board of Directors to be held the next
day.
 
  On November 10, 1997, Mr. Miller and Mr. Meister met to discuss the
Proposal. Messrs. Miller and Meister discussed their respective opinions as to
an appropriate price per Nonaffiliated Share. They agreed that they would
speak again after Merrill Lynch and the Investment Bankers had a further
opportunity to narrow their differences.
 
  On November 13, 1997, a representative of Merrill Lynch telephoned a
representative of Lazard Freres to discuss the respective preliminary
valuation analyses of the Investment Bankers and Merrill Lynch. At the
 
                                      10

 
conclusion of the call, the Merrill Lynch representative indicated that Waste
Management would be willing to raise its offer to $15.75 per Nonaffiliated
Share. The representative of Lazard Freres again responded that he expected
that this revised offer would not be acceptable to the Special Committee and
that the Special Committee continued to believe that the purchase price should
be in excess of $17.00 per Nonaffiliated Share.
 
  On November 14, 1997, the Special Committee met with representatives of the
Investment Bankers and its counsel by teleconference. The Special Committee
and its advisors discussed the course of negotiations and discussed whether
there were any viable alternative transactions. The Special Committee
concluded that a price of $15.75 per Nonaffiliated Share was inadequate. A
representative of Lazard Freres telephoned William C. Keightley, Vice
President--Finance of Waste Management, to report that the Special Committee
had concluded that a price of $15.75 per Nonaffiliated Share would be
inadequate.
 
  On November 21, 1997, a representative of Lazard Freres telephoned Mr.
Keightley and indicated that an offer of at least $17.00 per Nonaffiliated
Share might be acceptable to the Special Committee. Mr. Keightley stated that
Waste Management might be willing to offer $16.00 per Nonaffiliated Share. On
November 24, 1997, Mr. Keightley informed a representative of Lazard Freres
that Waste Management would be willing to raise its offer to approximately
$16.00 per Nonaffiliated Share.
 
  On November 25, 1997, Mr. Miller and Mr. Meister spoke by telephone. Mr.
Miller indicated that Waste Management might contemplate a transaction at
$16.33 per Nonaffiliated Share. Mr. Miller then urged Mr. Meister to consider
this proposal carefully with the Special Committee and stated he believed the
time was approaching when the transaction should either be concluded or
terminated.
 
  Later on November 25, 1997, the Special Committee met with representatives
of Debevoise and the Investment Bankers by teleconference. Mr. Meister related
his telephone conversation with Mr. Miller. The Special Committee and its
advisors discussed how to respond to the latest proposal and concluded that
the Special Committee should hold another meeting in person with its advisors
to discuss the proposal.
 
  Later on November 25, 1997, Mr. Meister telephoned Mr. Miller and stated
that he would communicate the Special Committee's response to the $16.33 offer
after the Special Committee had completed thorough consultations with its
advisors.
 
  On December 1, 1997, the Special Committee held a meeting at the offices of
Debevoise with representatives of its counsel and the Investment Bankers,
along with a representative of Fried, Frank, Harris, Shriver & Jacobson
("Fried, Frank"), special counsel to the Investment Bankers. The Special
Committee and its advisors noted the apparent absence of any viable
alternative transaction given that no third party had expressed meaningful
interest in exploring an alternative transaction and in light of Waste
Management's unwillingness to discuss a sale of its Common Shares to a third
party. Representatives of the Investment Bankers then reviewed revised draft
financial and comparative analyses which, among other things, presented
valuation analyses reflecting the revised Financial Projections. The Special
Committee determined that it would continue to negotiate with Waste Management
with a view to obtaining a price of at least $16.50 per Nonaffiliated Share.
 
  On December 2, 1997, Mr. Meister and Mr. Miller spoke by telephone. Mr.
Meister and Mr. Miller agreed to a transaction at a price per Nonaffiliated
Share of $16.50, subject to final approval by the Special Committee, receipt
by the Special Committee of written opinions from the Investment Bankers that
such consideration would be fair from a financial point of view to the holders
of the Nonaffiliated Shares, approval by the Boards of Directors of Waste
Management and the Company and agreement on the terms of a definitive Merger
Agreement.
 
  On December 2, 1997, Skadden, Arps, Slate, Meagher & Flom (Illinois)
("Skadden, Arps"), special counsel to Waste Management, delivered to Debevoise
a proposed Agreement and Plan of Merger (the "Merger Agreement") containing
further details of the Proposed Transaction. During the period from December
2, 1997 to December 4, 1997, representatives of Debevoise reviewed the terms
of the Merger Agreement and negotiated with Skadden, Arps resulting in
significant changes to the Merger Agreement.
 
 
                                      11

 
  On December 4, 1997, the Special Committee held a meeting at the offices of
Debevoise with representatives of Debevoise and the Investment Bankers, along
with representatives of Fried, Frank. Representatives of the Investment
Bankers each rendered an oral opinion that, as of such date, the $16.50 per
Nonaffiliated Share in cash to be received by the holders of the Nonaffiliated
Shares in the proposed Merger was fair from a financial point of view to such
holders. (These opinions were confirmed in writing as of December 8, 1997).
See "Opinions of the Investment Bankers for the Special Committee." A
representative of Debevoise reviewed the principal terms and conditions of the
proposed Merger Agreement and reported to the Special Committee on the status
of the Stockholder Actions.
 
  After a full discussion, the Special Committee determined that the terms of
the Merger and, subject to the satisfactory resolution of several open issues,
the proposed Merger Agreement, were fair to, and in the best financial
interests of, the holders of the Nonaffiliated Shares. After Debevoise
reiterated to the members of the Special Committee the details of their
fiduciary duties to the Company and the holders of the Nonaffiliated Shares,
the Special Committee unanimously adopted resolutions to recommend to the
Board of Directors of the Company that, subject to the satisfactory resolution
of the outstanding issues, it approve and adopt the Merger Agreement and to
recommend to the holders of the Nonaffiliated Shares that they vote to approve
and adopt the Merger Agreement.
 
  During the period from December 4, 1997 through December 7, 1997,
representatives of Debevoise continued to negotiate, and reached agreement on
the terms of, a definitive Merger Agreement with representatives of Skadden,
Arps and the parties resolved the outstanding issues to the satisfaction of
the members of the Special Committee.
 
  On December 8, 1997, the Board of Directors of Waste Management unanimously
determined that the Merger was fair to, and in the best interests of, Waste
Management and its stockholders, and adopted resolutions to approve and adopt
the Merger Agreement. At a meeting of the Board of Directors of the Company
later that day, representatives of the Investment Bankers reviewed the
financial terms of the Merger and their financial analyses and delivered their
respective written fairness opinions, representatives of Debevoise reviewed
the principal terms and conditions of the Merger Agreement and Mr. Meister
presented the recommendation of the Special Committee that the Board of
Directors of the Company approve the Merger. After full discussion, the Board
of Directors of the Company unanimously determined that the Merger was fair
to, and in the best interests of, the Company and the holders of the
Nonaffiliated Shares, and adopted resolutions to approve and adopt the Merger
Agreement and to recommend that such stockholders vote to approve and adopt
the Merger Agreement. The Merger Agreement was then executed and delivered by
authorized representatives of the Company, Waste Management and Merger Sub.
 
  On December 8, 1997, following the close of the New York Stock Exchange,
Waste Management and the Company issued separate press releases disclosing
that Waste Management and the Company had signed a definitive merger agreement
pursuant to which Waste Management would acquire all of the Nonaffiliated
Shares at a per share price of $16.50 in cash.
 
RECOMMENDATION OF THE SPECIAL COMMITTEE AND BOARD OF DIRECTORS OF THE COMPANY;
FAIRNESS OF THE MERGER
 
  At a meeting held on December 4, 1997, the Special Committee unanimously
determined (i) to recommend that the Board of Directors of the Company approve
and adopt the Merger Agreement and that the Board of Directors of the Company
recommend to the holders of the Nonaffiliated Shares that such stockholders
vote to approve and adopt the Merger Agreement; (ii) to recommend to the
holders of the Nonaffiliated Shares that such stockholders vote to approve and
adopt the Merger Agreement; and (iii) that the terms of the Proposed
Transaction are fair to, and in the best interests of, the holders of the
Nonaffiliated Shares. At a telephonic meeting of the Board of Directors of the
Company held on December 8, 1997, at which all of the directors of the Company
were present, the Board of Directors, based on the unanimous recommendation of
the Special Committee, unanimously (x) approved and adopted the Merger
Agreement; (y) determined to recommend to the holders of the Nonaffiliated
Shares that they vote to approve and adopt the Merger Agreement; and
 
                                      12

 
(z) determined that the terms of the Proposed Transaction are fair to, and in
the best interests of, the Company and the holders of the Nonaffiliated
Shares. See "--Purpose and Background of the Merger."
 
  The Special Committee. In determining to recommend to the Board of Directors
of the Company that it approve and adopt the Merger Agreement, and in
determining the fairness of the terms of the Proposed Transaction, the Special
Committee considered factors including the following, each of which, in the
Special Committee's view, supported the Special Committee's determination to
recommend the Proposed Transaction:
 
    (i) the financial condition, assets, results of operations, business and
  prospects of the Company, and the risks inherent in achieving those
  prospects, including the belief of management of the Company, as expressed
  to the Special Committee and which the Special Committee generally found to
  be reasonable, that (a) the existing business (the "Existing Business")
  will probably experience little if any growth and (b) the New Business
  presents growth opportunities, but such opportunities are somewhat
  speculative and most likely will not generate revenues until 2002. (See
  "Certain Financial Projections of the Company"; also see "--Purpose and
  Background of the Merger" for a description of the Special Committee's
  consideration of the reasonableness of management's views as to the
  probable future performance of the Company);
 
    (ii) the terms and conditions of the Merger Agreement, including the
  amount and form of consideration, the nature of the parties'
  representations, warranties, covenants and agreements, the limited number
  of conditions to the obligations of Waste Management (including the absence
  of a financing condition) and the rights of the Special Committee and Board
  of Directors, consistent with their fiduciary duties to the holders of the
  Nonaffiliated Shares, to withdraw their respective recommendations;
 
    (iii) the condition to the consummation of the Merger (which condition is
  not otherwise required by the DGCL or the Company's Restated Certificate of
  Incorporation or By-Laws) that the Merger receive the affirmative vote of
  the holders of at least a majority of the Nonaffiliated Shares represented
  at the Special Meeting;
 
    (iv) the history of the negotiations with respect to the Proposal that,
  among other things, led to an increase in Waste Management's offer from
  $15.00 to $16.50 per Nonaffiliated Share, and the belief of the members of
  the Special Committee that $16.50 per Nonaffiliated Share was the best
  price that could be obtained from Waste Management;
 
    (v) the fact that the $16.50 per Nonaffiliated Share to be received by
  the holders of the Nonaffiliated Shares in the Merger represented a premium
  of approximately 26.9% over the closing price of the common stock on June
  19, 1997, the last full trading day before the public announcement of the
  Proposal;
 
    (vi) the stock price and trading volume history of the Common Shares
  (including the fact that the Company had engaged in stock repurchase
  programs and the market's expectations that such buy-backs and programs
  might continue);
 
    (vii) the opinions of Goldman Sachs and Lazard Freres as to the fairness
  from a financial point of view of the $16.50 per Nonaffiliated Share to be
  received by the holders of the Nonaffiliated Shares and the analyses
  presented to the Special Committee by Goldman Sachs and Lazard Freres (see
  "--Opinions of the Investment Bankers for the Special Committee");
 
    (viii) the unwillingness of Waste Management to discuss a sale of its
  controlling stock ownership in the Company, as well as an absence of
  significant interest on the part of potential third party acquirors; and
 
    (ix) the availability of dissenters' rights under the DGCL to dissenting
  holders of Nonaffiliated Shares in the Merger.
 
  In light of the number and variety of factors the Special Committee
considered in connection with its evaluation of the Proposed Transaction, the
Special Committee did not find it practicable to assign relative weights to
the foregoing factors, and, accordingly, the Special Committee did not do so.
 
  Although the Special Committee did consider historical trading prices of the
Common Shares, the Special Committee did not consider trading prices of the
Common Shares for the period following the announcement of
 
                                      13

 
the Proposal because it believed that such prices reflected anticipation of
the possibility of the purchase of the Nonaffiliated Shares by Waste
Management.
 
  The Special Committee regularly consulted with Goldman Sachs and Lazard
Freres during the course of its work in connection with its analysis of the
Company and the evaluation of the Proposal. The Special Committee believes
that the analyses of Goldman Sachs and Lazard Freres are reasonable.
 
  The Special Committee believes that the Proposed Transaction is procedurally
fair because: (i) the Special Committee consisted of disinterested directors
appointed to represent the interests of, and to negotiate on an arm's-length
basis with Waste Management on behalf of, the holders of the Nonaffiliated
Shares; (ii) the Special Committee retained and was advised by independent
legal counsel; (iii) the Special Committee retained Goldman Sachs and Lazard
Freres as independent investment bankers to assist it in evaluating the
Proposal; and (iv) the Merger Agreement contains a condition to the
consummation of the Merger that the Merger Agreement and the Merger be
approved by the affirmative vote of the holders of at least a majority of the
Nonaffiliated Shares represented at the Special Meeting. In addition, the
Special Committee believes that the Proposed Transaction is procedurally fair
because the $16.50 per Nonaffiliated Share price and the other terms and
conditions of the Merger Agreement resulted from active arm's-length
bargaining between the Special Committee and Waste Management.
 
  The members of the Special Committee have had ongoing contact with the
Company's management concerning developments with respect to the Company,
including financial results and ITC's offer to acquire OHM, since December 8,
1997. However, such developments have not affected the Special Committee's
determination with respect to the fairness of the Proposed Transaction, nor
have such developments led the members of the Special Committee to conclude
that an additional meeting of the Special Committee was warranted. The Special
Committee has not received and is not relying on updated opinions of the
Investment Bankers.
 
  The Board of Directors of the Company. The Board of Directors, at a meeting
held on December 8, 1997, considered the unanimous recommendation of the
Special Committee, as well as the factors (enumerated above) considered by the
Special Committee, and unanimously determined that the Proposed Transaction is
fair to, and in the best interests of, the Company and the holders of the
Nonaffiliated Shares, approved and adopted the Merger Agreement, and
recommended that such stockholders vote to approve and adopt the Merger
Agreement. The members of the Board of Directors are aware of developments
with respect to the Company, including its financial results and ITC's offer
to acquire OHM, since December 8, 1997. The Board of Directors has not met to
reconsider its determination with respect to the fairness of the Proposed
Transaction or its recommendation to the holders of the Nonaffiliated Shares.
 
OPINIONS OF THE INVESTMENT BANKERS FOR THE SPECIAL COMMITTEE
 
  The Special Committee of the Board of Directors of the Company has retained
Goldman Sachs and Lazard Freres to act as its investment bankers with respect
to the Merger and related matters. At a meeting of the Special Committee on
December 4, 1997, Goldman Sachs and Lazard Freres delivered oral opinions to
the Special Committee. These opinions were confirmed in writing on December 8,
1997. The opinions of Goldman Sachs and Lazard Freres state that, based upon
the matters set forth in the opinions, the $16.50 per Nonaffiliated Share in
cash to be received by the holders of Nonaffiliated Shares in the Merger is
fair from a financial point of view to the holders of Nonaffiliated Shares.
 
  THE FULL TEXTS OF THE WRITTEN OPINIONS OF GOLDMAN SACHS AND LAZARD FRERES
DIRECTED TO THE SPECIAL COMMITTEE AND DATED AS OF DECEMBER 8, 1997, WHICH SET
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW
UNDERTAKEN IN CONNECTION WITH THE OPINIONS, ARE ATTACHED HERETO AS APPENDICES
B-1 AND B-2, RESPECTIVELY, AND ARE INCORPORATED BY REFERENCE. THE OPINIONS OF
GOLDMAN SACHS AND LAZARD FRERES WERE DELIVERED TO THE SPECIAL COMMITTEE FOR
ITS USE IN CONNECTION WITH ITS CONSIDERATION OF THE MERGER AGREEMENT AND ARE
NOT INTENDED TO BE, AND DO NOT CONSTITUTE, A RECOMMENDATION TO ANY STOCKHOLDER
OF THE COMPANY AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE
MERGER AGREEMENT. THE SUMMARY OF THE OPINIONS OF GOLDMAN SACHS AND LAZARD
FRERES SET FORTH HEREIN IS
 
                                      14

 
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXTS OF THE OPINIONS.
HOLDERS OF NONAFFILIATED SHARES ARE URGED TO, AND SHOULD, READ THE OPINIONS OF
GOLDMAN SACHS AND LAZARD FRERES IN THEIR ENTIRETY.
 
  In connection with rendering their opinions, Goldman Sachs and Lazard Freres
reviewed and analyzed, among other things, the financial terms and conditions
of the Merger Agreement; certain historical business and financial information
relating to the Company, including Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company for the five years ended December 31,
1996, certain interim reports to stockholders and Quarterly Reports on Form
10-Q of the Company, and certain other communications from the Company to its
stockholders; certain internal financial analyses and forecasts and other non-
public financial and operating data concerning the businesses and operations
of the Company that were prepared by the management of the Company; the
financial terms of certain business combinations, in the waste-to-energy
industry specifically and other industries generally, as well as those
involving the acquisition of companies by significant or controlling
stockholders; certain financial and stock market information for certain other
companies the stock of which is publicly traded; reviewed the potential impact
of the Merger on Waste Management's earnings per share; and reviewed certain
stock market information relating to the Company. Goldman Sachs and Lazard
Freres also met with members of the senior management of the Company and Waste
Management to discuss the past and current operations, financial condition and
prospects of the Company, including the financial forecasts relating to the
Company. In addition, Goldman Sachs and Lazard Freres considered such other
information, financial studies, analyses, and investigations and financial,
economic and market criteria that they considered relevant.
 
  In light of Waste Management's majority stock ownership position in the
Company and the absence of any indication that Waste Management would support
a sale of the Company or other alternatives to the Merger involving a third
party, an active solicitation of third party interest in a transaction
involving the Company was not practicable and Goldman Sachs and Lazard Freres
engaged in only limited exploratory activities in this regard.
 
  Goldman Sachs and Lazard Freres each 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 Waste Management 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 Merger to Waste Management, each of
Goldman Sachs and Lazard Freres 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 their
opinions, they assumed no responsibility for and expressed no view as to such
forecasts or estimates or the assumptions upon which they are based. In
addition, the opinions do not address the Company's underlying business
decision to enter into the Merger Agreement. The opinions of Goldman Sachs and
Lazard Freres are 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 opinions.
 
  The following is a summary of the material analyses performed by Goldman
Sachs and Lazard Freres which were reviewed with the Special Committee in
connection with their providing their opinions.
 
  Discounted Cash Flow Analysis and Other Valuation Components. Goldman Sachs
and Lazard Freres estimated the net present value as of year-end 1997 of the
future cash flows of the Company using the projections provided by the
Company. In conducting this analysis, Goldman Sachs and Lazard Freres
distinguished between the Company's Existing Business, which consists of
existing projects having reasonably predictable cash flows because they are
contract-based, and potential New Business, which is higher risk with less
certain cash flows, the majority of which is not projected to start until 2009
through 2015. Applying discount rates ranging from 8.5% to 11.0% and
perpetuity growth rates for cash flow ranging from negative 1.0% to positive
3.0%, this analysis indicated a discounted cash flow valuation of the Existing
Business as of year-end 1997 ranging from approximately $1.8 billion to
approximately $2.6 billion (and, based upon approximately 156.7 million Common
Shares outstanding, ranging from approximately $11.32 to $16.54 per Common
Share). In light of the higher risk associated with the New Business, higher
discount rates than those used in respect of the Existing Business
 
                                      15

 
were used. Applying discount rates ranging from 10.0% to 12.0% and perpetuity
growth rates ranging from 0% to 4.0%, this analysis indicated a discounted
cash flow valuation of the New Business as of year-end 1997 ranging from
negative values to approximately $585 million (or ranging from negative values
to approximately $3.74 per Common Share), with the most relevant range
considered to be between $100 and $150 million (or between approximately $.64
and $.96 per Common Share). It was noted during the presentation to the
Special Committee that higher discount rates than those applied to the
valuation of the New Business could be justified in order to reflect the risks
regarding the achievement of the projected cash flow and lower present value
ranges would result. In addition, other assets owned by the Company which do
not contribute to cash flow, including ownership of approximately 40% of Rust,
a majority owned subsidiary of Waste Management, direct and indirect (through
the Company's interest in Rust) ownership of approximately 16.8% of WM
International, a majority owned subsidiary of Waste Management, and real
estate, were estimated to have aggregate values having a median of
approximately $441 million or approximately $2.81 per Common Share. Using a
range of between $100 million and $150 million for the New Business, this
analysis indicates that the sum of the estimated net present values as of
year-end 1997 of the future cash flows of the Existing Business and the New
Business and of the estimated value of other Company assets not contributing
to cash flow would range from approximately $2.34 billion to approximately
$3.19 billion. Based upon approximately 156.7 million Common Shares
outstanding, this analysis implied a range of approximately $14.77 to $20.31
per Common Share.
 
  Analysis of Purchase Price and Comparison to Selected Transaction. A per
share price of $16.50, which represents a 10% premium to the initial Waste
Management proposal of $15.00 per share and an approximately 27% premium to
the market price per Common Share on June 19, 1997, one day prior to the first
public announcement of the Proposal, results in an aggregate equity valuation
for the Company of approximately $2.6 billion, based on approximately 157
million Common Shares outstanding. Adding $315 million of net Company debt
estimated as of year-end 1997 results in an enterprise value of approximately
$2.9 billion. These Company enterprise values were then used to compare
various multiples of enterprise value to certain financial measures for the
Company to similar multiples calculated for the acquisition by Ogden
Corporation of the publicly owned equity in its 84% owned subsidiary, Ogden
Projects, Inc. pursuant to a merger agreement dated as of September 27, 1994
(the "Ogden Acquisition"). The Ogden Acquisition involved the only publicly
traded company other than the Company believed to have significant waste-to-
energy operations and was, therefore, considered to have relevance in
comparison to the Company and the Merger. However, the Ogden Acquisition was
negotiated in late 1994 and, therefore, is not necessarily indicative of
current market conditions. Moreover, a comparison of the terms of the Merger
with only one transaction necessarily is limited in significance. This
analysis indicated that the enterprise value of the Company as a multiple of
(i) both estimated 1997 and 1998 sales were approximately 2.8x at a price of
$16.50 per share as compared to 3.1x for the enterprise value in the Ogden
Acquisition as a multiple of the latest twelve months sales preceding the
agreement for that transaction, (ii) estimated 1997 earnings before interest,
taxes, depreciation and amortization ("EBITDA") was approximately 7.4x based
upon a price of $16.50 per share as compared to the multiple of enterprise
value to latest twelve months EBITDA of 8.8x in the Ogden Acquisition, (iii)
estimated 1998 EBITDA was approximately 7.8x at a price of $16.50 per share,
(iv) estimated 1997 earnings before interest and taxes ("EBIT") was
approximately 9.6x based on a $16.50 per share price as compared to the
multiple of enterprise value to latest twelve months EBIT of 11.0x in the
Ogden Acquisition, and (v) estimated 1998 EBIT was approximately 10.0x at a
price of $16.50 per share. In addition, the Company's equity value based on a
$16.50 per share price as a multiple of estimated 1997 and 1998 net income of
approximately 14.4x and 15.6x, respectively, were compared to the 10.3x
multiple of equity value in the Ogden Acquisition to latest twelve months net
income preceding the agreement for that transaction.
 
  Impact on Waste Management EPS Analysis. Goldman Sachs and Lazard Freres
reviewed the possible impact of the Merger on the earnings per share of Waste
Management based upon various possible acquisition prices for the Company,
publicly available estimates of Waste Management earnings per share available
from Institutional Brokers Estimate System, a data service that compiles
estimates of securities research analysts, as of December 1, 1997 and the
Company's projections for 1997 and 1998, and certain other assumptions.
Assuming approximately 455 million shares of common stock of Waste Management
outstanding, the Merger resulting in annual goodwill amortization for Waste
Management relating to the Company of $11.6 million, and a cost of borrowing
for Waste Management of 7.125%, a purchase price of $16.50 per Common Share
would
 
                                      16

 
result in an increase of $.03 in 1997 and $.02 in 1998 in Waste Management
earnings per share or accretion of approximately 1.7% and .9% in such years.
Acquisition prices per Common Share ranging from $15.00 to $21.00 were
reviewed and, based on the same assumptions, indicated accretion (or dilution)
in Waste Management earnings per share ranging from $.04 or 2.4% at an
acquisition price of $15.00 per share to ($.01) or (.6%) at an acquisition
price of $21.00 per share in 1997 and from $.03 or 1.5% to ($.02) or (1.1%) in
1998. These calculations did not take into account any synergies or cost
savings realizable following the Merger. This analysis was not intended to
project the actual impact of the Merger on Waste Management's earnings per
share, which will depend on many factors, including the future financial
performance of Waste Management and the Company, Waste Management's cost of
borrowing, various accounting adjustments, and the level of synergies and cost
savings resulting from the Merger. Instead, the analysis was intended to
provide an estimate of the sensitivity of Waste Management's earnings per
share to the price per Common Share to be paid by Waste Management.
 
  Other Analyses. Goldman Sachs and Lazard Freres reviewed information
regarding the historical price and trading volume for the Common Shares and
the institutional and other ownership of Common Shares. Certain stock market
and financial information relating to selected public companies, including
independent power producers, solid waste disposal companies, and utilities,
also was reviewed; however, none of these companies was considered directly
comparable to the Company. Goldman Sachs and Lazard Freres also reviewed the
financial terms of selected transactions involving the acquisition by
significant or controlling stockholders of the equity they did not already
own.
 
  The summary set forth above does not purport to be a complete description of
the analyses performed by Goldman Sachs and Lazard Freres, although it is a
summary of the material financial and comparative analyses provided to the
Special Committee in connection with the delivery of their opinions.
 
  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 opinions of Goldman Sachs and Lazard Freres. In
arriving at their fairness determinations, Goldman Sachs and Lazard Freres
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 Goldman Sachs and
Lazard Freres providing their opinions to the Special Committee as to the
fairness from a financial point of view of the consideration to be received in
the Merger by the holders of Common Shares (other than Waste Management and
its affiliates) 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 Goldman Sachs and Lazard Freres 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 transactions contemplated by the Merger Agreement.
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 and the existence of only one acquisition transaction involving a
publicly traded company similar to the Company. 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, Goldman Sachs and
Lazard Freres made, and were provided estimates and forecasts by the Company
and Waste Management 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, Waste Management and their
advisors. Similarly, analyses based upon forecasts of future results
 
                                      17

 
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, Waste Management or their
advisors, none of the Company, Waste Management, Goldman Sachs and Lazard
Freres or any other person assumes responsibility if future results or actual
values are materially different from these forecasts or assumptions. The
opinions of Goldman Sachs and Lazard Freres necessarily were 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 opinions. The foregoing
summary is qualified by reference to the written opinions of Goldman Sachs and
Lazard Freres set forth in Appendices B-1 and B-2, respectively, to this Proxy
Statement.
 
  As described above, the opinions and presentation of Goldman Sachs and
Lazard Freres to the Special Committee were only one of many factors taken
into consideration by the Special Committee in making its determination to
approve the Merger Agreement. In addition, the terms of the Merger Agreement
were determined through negotiations between the Special Committee and Waste
Management and were approved by the Special Committee. Although Goldman Sachs
and Lazard Freres provided advice to the Special Committee during the course
of these negotiations, the decision to enter into the Merger Agreement and to
accept the consideration to be received in the Merger was solely that of the
Special Committee and the Board of Directors of the Company.
 
  Each of Goldman Sachs and Lazard Freres is an internationally recognized
investment banking firm and is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements, leveraged buyouts,
recapitalizations, and valuations for estate, corporate and other purposes.
 
  The Special Committee selected Lazard Freres and Goldman Sachs to act as its
investment bankers because of their expertise and reputations in investment
banking and mergers and acquisitions.
 
  In connection with the services of Goldman Sachs and Lazard Freres as
investment bankers to the Special Committee with respect to the Merger and
related matters, the Company has agreed to pay each of Goldman Sachs and
Lazard Freres (i) a fee of $500,000 payable in cash upon the earlier of (x)
consummation of the Merger and (y) February 7, 1998, if no transaction has
been consummated by that time for any reason (including not having reached
agreement with Waste Management on a transaction), and (ii) a transaction fee
payable upon consummation of the Merger (or any other transaction involving a
sale of the Company) based upon the extent to which the price to be paid per
Nonaffiliated Share is in excess of $15.00, the price of Waste Management's
original proposal, which in the case of a per Nonaffiliated Share price of
$16.50 would be an additional $650,000. In addition, the Company has agreed to
reimburse each of Goldman Sachs and Lazard Freres for their reasonable out-of-
pocket expenses (including the fees and disbursements of their attorneys) and
to indemnify each of them and certain related persons against certain
liabilities, including certain liabilities under the federal securities laws,
arising out of its engagement.
 
  Lazard Freres has from time to time in the past provided investment banking
services to the Company for which it has received fees. In addition, more than
three years prior to the date of this Proxy Statement, Lazard Freres provided
services to an affiliate of Waste Management, for which it received fees. In
the ordinary course of business, Goldman Sachs, Lazard Freres and their
respective affiliates may actively trade in the securities of the Company and
Waste Management for their own account and for the accounts of their customers
and, accordingly, may at any time hold a long or short position in such
securities.
 
OPINION OF MERRILL LYNCH
 
  Waste Management engaged Merrill Lynch to act as Waste Management's
financial advisor in connection with the Merger. Waste Management retained
Merrill Lynch to act solely as Waste Management's financial advisor, and not
as a financial advisor to the Company, to assist Waste Management in analyzing
the Merger, and to advise Waste Management with respect to, and if requested
by Waste Management, to assist in negotiating the terms of, the Merger.
Merrill Lynch also rendered an opinion for Waste Management assessing whether
the merger consideration to be paid by Waste Management was fair from a
financial point of view to Waste Management.
 
 
                                      18

 
  In connection with its engagement as Waste Management's financial advisor,
Merrill Lynch: (1) reviewed the publicly available business and financial
information relating to the Company and Waste Management that Merrill Lynch
deemed relevant; (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 expected to result from the Merger (the "Expected
Synergies") furnished to Merrill Lynch by the Company and Waste Management;
(3) conducted discussions with members of senior management and
representatives of the Company and Waste Management concerning the matters
described above, as well as their respective businesses and prospects before
and after giving effect to the Merger and the Expected Synergies; (4) reviewed
the market prices and valuation multiples for the Common 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
Merger 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 Waste Management and their financial
and legal advisors; (8) reviewed the potential pro forma impact of the Merger
on Waste Management; (9) reviewed a draft dated December 8, 1997 of the Merger
Agreement; 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.
 
  On December 8, 1997, Merrill Lynch furnished the Board of Directors of Waste
Management with a written report summarizing the types of analyses performed
by Merrill Lynch (the "Merrill Lynch Report") and met with the Board of
Directors of Waste Management to discuss the Merger. The Merrill Lynch Report
was based, in part, on the Company's projections, as adjusted by Waste
Management. The data contained in the Merrill Lynch Report were intended
solely to provide additional information for the use and benefit of the Board
of Directors of Waste Management, and were not prepared for the purpose of
addressing the merits of the underlying business decision by Waste Management
to engage in the Merger. A copy of the Merrill Lynch Report has been filed as
an exhibit to the Schedule 13E-3 filed with the Securities and Exchange
Commission with respect to the Merger and may be inspected and copied from the
Securities and Exchange Commission.
 
  The following is a summary of the various types of analyses presented to the
Board of Directors of Waste Management in the Merrill Lynch Report:
 
  Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow analysis for Existing Business, New Business, and incremental synergies,
based upon certain operating and financial assumptions, forecasts and other
information provided by the management of Waste Management and the Company.
Merrill Lynch primarily relied upon this analysis in determining the fairness
to Waste Management of the consideration to be paid in the Merger. For
purposes of the Existing Business analysis, Merrill Lynch used discount rates
of 8% to 10%, which resulted in an enterprise value of $2,051 to $2,445
million, and a per Common Share value of $13.09 to $15.60 (based upon 156.7
million Common Shares). For purposes of the New Business analysis, Merrill
Lynch used discount rates of 10% to 12%, which resulted in an enterprise value
of $25 to $202 million, and a per Common Share value of $0.16 to $1.29. For
purposes of incremental synergies, Merrill Lynch used discount rates of 8% to
10%, which resulted in an enterprise value of $89 to $116 million, and per
Common Share value of $0.57 to $0.74. Additionally, Merrill Lynch performed a
valuation analysis for non-operating assets, which resulted in a total
estimated value of $341 to $486 million, and a per Common Share value of $2.18
to $3.10. Merrill Lynch subtracted aggregate estimated net debt (short- and
long-term debt, minus cash and investment held by a Trustee) of $315.4
million, estimated net debt per Common Share value of $2.01, from enterprise
value to determine equity value. Merrill Lynch selected a representative range
of $14.00 to $19.00 per Common Share implied by this analysis for the Common
Shares to be acquired.
 
  Analysis of Selected Minority Buy-outs. Merrill Lynch analyzed minority buy-
out transactions involving cash repurchases of remaining interests over $100
million from January 1, 1989 to the present. Merrill Lynch analyzed the
premium paid to the price of the stock one day prior to, and four weeks prior
to, the announcement
 
                                      19

 
of the proposed merger. The analysis resulted in a high premium of 63.7% one
day prior, and 60.0% four weeks prior, to the announcement. The mean premium
was 22.1% one day prior, and 24.6% four weeks prior, to the announcement. The
median premium was 19.2% one day prior, and 25.7% four weeks prior, to the
announcement. The low premium was (17.8%) one day prior, and (5.9%) four weeks
prior, to the announcement. Merrill Lynch selected a representative range of
$15.00 to $16.00 per Common Share implied by this analysis for the Common
Shares to be acquired.
 
  Other Analyses. Merrill Lynch analyzed actual and estimated financial
information for five publicly-traded independent power producers that Merrill
Lynch considered to some extent comparable to the Company, although not
necessarily representative of truly comparable companies. Based on this
analysis, Merrill Lynch selected representative ranges of $14 to $17 per
Common Share implied by price/earnings multiples analysis, and $15 to $21 per
Common Share implied by EBITDA multiples analysis for the Common Shares to be
acquired. Merrill Lynch also reviewed publicly-available information for five
recent acquisitions that Merrill Lynch considered to some extent comparable to
the merger of Merger Sub with the Company, although not necessarily
representative of truly comparable transactions. Moreover, the Merrill Lynch
Report noted that purchases of entire companies may not be valid indicators of
the fair value of the minority block of the Company. Merrill Lynch selected
representative ranges of $22 to $26 per Common Share implied by this analysis
for the Common Shares to be acquired. Merrill Lynch gave little weight to
these two analyses because it believed that they were not reliable indicators
of the value of the Common Shares to be acquired given the limited similarity
of the companies and the acquisitions in the analyses to the Company, and
because Merrill Lynch believed that discounted cash flow analysis was a more
reliable indicator of value in the context of the Merger.
 
  The foregoing summary does not purport to be a complete description of the
analysis performed by Merrill Lynch in connection with the Merrill Lynch
Report. Merrill Lynch believes that its analysis and the summary set forth
above must be considered as a whole and that selecting portions of its
analysis, without considering all factors and analyses, could create an
incomplete view of the process underlying the analyses set forth in the
Merrill Lynch Report. The Merrill Lynch Report was prepared solely for the
purposes discussed above and does not purport to be an appraisal or
necessarily reflect the prices at which businesses or securities actually may
be sold. Analyses based upon projected 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, as they are based upon numerous factors or
events beyond the control of the parties or their respective advisors, none of
Waste Management's personnel or any other person assumes responsibility if the
future results are materially different from those projected.
 
  In preparing the Merrill Lynch Report, 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 or been furnished with any such
evaluation or appraisal. 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 Synergies furnished to or discussed with Merrill Lynch by the Company
or Waste Management, Merrill Lynch assumed that they had been reasonably
prepared and reflected the best currently available estimates and judgment of
the Company's or Waste Management's management as to the expected future
financial performance of the Company or Waste Management, as the case may be,
and the Expected Synergies. Merrill Lynch also assumed that the final form of
the Agreement would be substantially similar to the last draft it reviewed.
 
  The Merrill Lynch Report 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 Report. Merrill
Lynch assumed that in the course of obtaining any necessary regulatory or
other consents or approvals (contractual or otherwise) for the Merger, 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 Merger.
 
 
                                      20

 
  Merrill Lynch is acting as a financial advisor to Waste Management in
connection with the Merger and will receive a fee from Waste Management for
its services, a significant portion of which is contingent upon the
consummation of the Merger. In addition, Waste Management has agreed to
indemnify Merrill Lynch for certain liabilities arising out of its engagement.
Merrill Lynch is currently engaged by Waste Management to act as its financial
advisor and has, in the past, provided financial advisory and financing
services to Waste Management and its affiliates 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 Common Shares, as well as securities of Waste Management 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 has from time to time acted as an agent on behalf of the Company in
connection with Common Share repurchase programs and assisted in the sale of
certain equity securities issued by third parties.
 
  Merrill Lynch's engagement with Waste Management was formalized in an
engagement letter ("Engagement Letter"), dated December 3, 1997. Pursuant to
the Engagement Letter, Waste Management agreed to pay Merrill Lynch for its
investment banking services a cash fee upon the closing of the Merger during
the period of Merrill Lynch's retention, which will be equal to the aggregate
fees payable to the investment banking firms representing the Company. Waste
Management also agreed to reimburse Merrill Lynch for reasonable out-of-pocket
expenses and reasonable fees and disbursements of its legal counsel. Under the
terms of the Engagement Letter, Merrill Lynch is to act as financial adviser
to Waste Management in connection with the Merger, and in the event of a
tender or exchange offer for the securities of the Company, Merrill Lynch will
act as sole dealer manager and an agreement will be entered into between Waste
Management and Merrill Lynch evidencing such arrangement, including provisions
for additional fees, all of which will be credited against any fee payable
pursuant to the Engagement Letter. In addition, Waste Management has agreed to
indemnify Merrill Lynch against certain liabilities.
 
CERTAIN CONSEQUENCES OF THE MERGER
 
  Pursuant to the Merger Agreement, following approval and adoption of the
Merger Agreement and subject to the fulfillment or waiver of certain
conditions, Merger Sub will be merged with and into the Company, and the
Company will continue as the surviving corporation of the Merger. The shares
of Merger Sub will be converted in the Merger into Common Shares. Upon
consummation of the Merger, the Company will be a wholly-owned subsidiary of
Waste Management. Therefore, following the Merger, the holders of the
Nonaffiliated Shares no longer will share in the future earnings or growth of
the Company or benefit from any increases in the value of the Company, and
they no longer will bear the risk of any decreases in the value of the
Company.
 
  Because the holders of the Nonaffiliated Shares will have no continuing
interest in the Company following the Merger, the common stock will no longer
meet the requirements of the New York Stock Exchange (the "NYSE") for
continued listing and will therefore be delisted from the NYSE.
 
  The Common Shares are currently registered under the Securities Exchange Act
of 1934 (the "Exchange Act"). Registration of the Common Shares 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, including the obligation to comply with the proxy rules of Regulation 14A
under Section 14. Accordingly, less information will be required to be made
publicly available than presently is the case.
 
  At the Effective Time of the Merger, certain unexercised options to purchase
Common Shares pursuant to certain stock option plans in which certain Company
employees and directors participate will be converted into options to purchase
Waste Management shares pursuant to the terms of such plans. See "The Merger--
The Merger Agreement--Treatment of Stock Options."
 
  The directors of Merger Sub immediately prior to the Merger will be the
directors of the Company immediately after the Merger. The officers of the
Company immediately prior to the Effective Time will be the officers of the
Company as the surviving corporation of the Merger. The Certificate of
Incorporation and By-
 
                                      21

 
Laws of Merger Sub immediately prior to the Effective Time will be the
Certificate of Incorporation and By-Laws of the Company immediately after the
Merger.
 
PLANS FOR THE COMPANY AFTER THE MERGER
 
  Except as otherwise described in this Proxy Statement, Waste Management has
not, as of the date of this Proxy Statement, approved any specific plans or
proposals for any extraordinary corporate transaction involving the Company
after the Merger, any sale or transfer of a material amount of assets of the
Company after the Merger or material change in the Company's corporate
structure or business. However, as noted above under "Background of the
Merger--Development of and Reasons for the Merger Proposal," one of the
reasons for Waste Management proposing to engage in the Merger 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 Waste Management or certain of its subsidiaries. Waste Management
intends after the Merger to cause the Company to engage in such transactions
and material changes as may be appropriate in Waste Management's judgment in
order to achieve such efficiencies. In addition, while Waste Management does
not have any present intention to sell or transfer any material amount of
assets of the Company, Waste Management's plans may change at any time, and
Waste Management 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 Waste Management or any one or more of its subsidiaries or to any
other parties as warranted by future conditions. Waste Management may also, as
warranted in light of future conditions, study the possibility of changing the
Company's Board of Directors by changing the number or term of directors and
may also cause changes in the Company's dividend policy, indebtedness or
capitalization, including the payment of dividends and repayment of
indebtedness to Waste Management.
 
CONDUCT OF THE BUSINESS OF WASTE MANAGEMENT AND THE COMPANY IF THE MERGER IS
NOT CONSUMMATED
 
  If the Merger is not consummated, the business and operations of Waste
Management and the Company are each expected to continue to be conducted
substantially as they are currently being conducted. The Company anticipates
that it will continue to be controlled by Waste Management.
 
  If the Merger is not consummated, Waste Management may purchase additional
Common Shares on terms more or less favorable to the holders of the
Nonaffiliated Shares than the terms of the Merger or sell Common Shares, from
time to time, in each case subject to availability at prices deemed acceptable
to Waste Management, pursuant to a merger transaction, tender offer, open
market or privately negotiated transactions or otherwise. However, currently
Waste Management has made no determination as to any future transactions if
the Merger is not consummated.
 
INTEREST OF CERTAIN PERSONS IN THE MERGER; CERTAIN RELATIONSHIPS
 
  In considering the recommendation of the Special Committee and of the Board
of Directors of the Company, the stockholders of the Company should be aware
that certain officers and directors of the Company have certain interests in
the Merger or certain relationships, including those referred to below, that
present actual, potential or the appearance of potential conflicts of interest
in connection with the Merger. The Special Committee and the Board of
Directors were aware of these potential or actual conflicts of interest and
considered them along with other matters described under "--Recommendation of
the Special Committee and the Board of Directors of the Company, Fairness of
the Merger."
 
 Common Share Ownership
 
  Directors and executive officers of the Company (including any person who
served as a director or executive officer of the Company at any time during
1997) beneficially owned as of February 1, 1998 less than 1% of the
outstanding Common Shares and approximately 1% of the outstanding Waste
Management Shares. Directors and executive officers of Waste Management owned
as of February 1, 1998 less than 1% of the outstanding Common Shares and less
than 1% of the outstanding Waste Management Shares. All Common Shares held by
such directors and executive officers at the Effective Time will be converted,
upon consummation of the Merger, along with all
 
                                      22

 
other publicly held Common Shares (other than Dissenting Shares), into the
right to receive the Merger Consideration. Waste Management and the Company
believe that the present intention of their respective directors and executive
officers who own Common Shares, and of the trustees of Waste Management's
Retirement Savings Plan and of the Company's Savings and Retirement Plan, is
to vote all Common Shares as to which they possess voting power for approval
and adoption of the Merger Agreement. See "Securities Ownership--Ownership of
Common Shares" and "Securities Ownership--Ownership of Company Shares by
Directors and Executive Officers of the Company."
 
 Directors and Officers
 
  Robert S. Miller is a director of the Company and Waste Management. Donald
F. Flynn is a director of the Company and Waste Management. John M. Kehoe,
Jr., a director of the Company, is the President and Chief Executive Officer
of the Company. Dean L. Buntrock was a director of the Company and Waste
Management prior to December 31, 1997. Kay Hahn Harrell, a director of the
Company, serves Waste Management as an investor relations consultant under an
agreement which expires in April 1999. Edward J. Noha, a director of the
Company, is Chairman of the Board of CNA Financial Corporation, affiliates of
which provide property and casualty insurance to Waste Management and its
subsidiaries including the Company.
 
  Mr. Paul M. Montrone, a director of Waste Management, and Mr. Meister are
business associates. Mr. Montrone is Chairman, President, Chief Executive
Officer and a director, and Mr. Meister is Senior Vice President-Chief
Financial Officer, of Fisher Scientific International Inc. ("Fisher
Scientific"). In addition, Waste Management and its consolidated affiliates,
as a group, acquire certain products and services from Fisher Scientific,
which in the aggregate in 1997 amounted to less than 0.05% of the gross
revenues of either Waste Management or Fisher Scientific. Mr. Montrone is also
Chairman, a director and a significant shareholder, and Mr. Meister is a
director, of the General Chemical Group Inc. In addition, Mr. Montrone and Mr.
Meister have a number of other business relationships. See "Management of
Waste Management, the Company and Merger Sub."
 
  Neither Mr. Meister nor General Stafford will be paid a fee or receive other
compensation for serving on the Special Committee.
 
 Indemnification and Insurance
 
  Waste Management has agreed to cause the Company to maintain for not less
than six years such director and officer liability insurance as is available
for 175% of the annual premiums paid by Waste Management during the twelve
months ending June 30, 1997. Waste Management has also agreed that all rights
to indemnification now existing in favor of the present directors or officers
of the Company and its subsidiaries as in effect on the date of the Merger
Agreement shall continue for a period of six years beyond the Merger. See "The
Merger--The Merger Agreement--Covenants."
 
LITIGATION REGARDING THE MERGER
 
  Shortly after the public announcement of the Proposal, the Stockholder
Actions were initiated by Company stockholders against Waste Management, the
Company and the Company's directors alleging that the price offered for the
Nonaffiliated Shares by Waste Management was inadequate and that any
negotiations leading up to the Proposal were not conducted at arm's length.
Specifically, since June 25, 1997, 20 putative stockholder action complaints
and one putative derivative action complaint have been filed in the Court of
Chancery in and for New Castle County, Delaware. Each of the stockholder
action complaints purports to be brought by a holder of Nonaffiliated Shares
as a class action on behalf of all holders of Nonaffiliated Shares, and the
derivative action complaint purports to be brought by two holders of
Nonaffiliated Shares on behalf of the Company. These lawsuits seek injunctive
relief and unspecified money damages. The complaints allege, among other
things, that the defendants have breached their fiduciary duties to the
Company's minority stockholders because the initially proposed merger
consideration was inadequate and unfair. Waste Management and the Company
believe that their actions and those of the Company's Board of Directors (and
its Special Committee) in connection with the proposed Merger have been in
accordance with Delaware law.
 
                                      23

 
                                  THE MERGER
 
  The following includes a description of certain provisions of the Merger
Agreement and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached hereto as Appendix A and is
incorporated herein by reference.
 
GENERAL
 
 Merger Consideration
 
  In the Merger, all Nonaffiliated Shares, other than shares dissenting under
the DGCL ("Dissenting Shares"), will be converted, by virtue of the Merger and
without any action on the part of such stockholder, into the right to receive
$16.50 in cash (the "Merger Consideration"). By virtue of the Merger, Common
Shares held by Waste Management and its subsidiaries will be cancelled.
 
  The Merger Consideration was determined as the result of the Proposal and
subsequent negotiation thereof by the Special Committee with the management of
Waste Management. See "Special Factors--Purpose and Background of the Merger,"
"--Recommendation of the Special Committee and the Board of Directors of the
Company; Fairness of the Merger," "--Opinions of the Investment Bankers for
the Special Committee," "--Opinion of Merrill Lynch" and Appendices B-1 and B-
2.
 
 Effective Time
 
  The Effective Time will occur upon the filing of the Certificate of Merger
with the Secretary of the State of Delaware. The Certificate of Merger will be
filed as soon as practicable after requisite approval and adoption of the
Merger Agreement and the Merger by the shareholders of the Company at the
Special Meeting are obtained and the other conditions precedent to the
consummation of the Merger have been satisfied, or if permissible, waived. See
"--The Merger Agreement--Conditions."
 
 Exchange and Payment Procedures
 
  As soon as practicable after the Effective Time, the Paying Agent will mail
to each record holder (other than Waste Management or holders of Dissenting
Shares) of an outstanding certificate or certificates representing Common
Shares as of the Effective Time, a letter of transmittal and instructions for
use in effecting the surrender of such certificates for exchange for the
Merger Consideration. Upon surrender to the Paying Agent of a certificate
representing Common Shares, together with such letter of transmittal, duly
executed, the holder of such certificate shall be entitled to receive in cash
$16.50 per share. Until surrendered in accordance with the foregoing
instructions, each certificate representing Common Shares will represent for
all purposes only the right to receive such cash payment.
 
  STOCKHOLDERS OF THE COMPANY SHOULD NOT SEND THEIR COMMON SHARES CERTIFICATES
NOW AND SHOULD SEND THEM ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN LETTERS OF
TRANSMITTAL TO BE MAILED TO STOCKHOLDERS AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE TIME. IN ALL CASES, THE MERGER CONSIDERATION WILL BE PROVIDED ONLY
IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THIS PROXY STATEMENT AND SUCH
LETTERS OF TRANSMITTAL.
 
  Waste Management and the Company strongly recommend that certificates for
Common Shares and letters of transmittal be transmitted only by registered
United States mail, return receipt requested, appropriately insured. Holders
of Common Shares whose certificates are lost will be required at the holder's
expense to furnish a lost certificate affidavit and bond acceptable in form
and substance to Harris Trust Company of New York, the Company's Paying Agent.
 
  Any Merger Consideration not validly claimed by stockholders of the Company
will be subject to surrender to governmental entities pursuant to applicable
abandoned property, escheat or similar laws. Neither the Paying Agent nor any
party to the Merger Agreement will be liable to any holder of certificates
formerly representing Common Shares for any amount paid to any such
governmental entity.
 
                                      24

 
  Waste Management will pay all charges and expenses of the Paying Agent in
connection with the Merger and the payment and issuance of the Merger
Consideration.
 
  Any questions concerning exchange and payment procedures and requests for
letters of transmittal may be addressed to the Paying Agent at Wall Street
Plaza, 88 Pine Street, 19th Floor, New York, NY 10005.
 
 Transfer of Common Shares
 
  No transfer of Common Shares will be made on the stock transfer books of the
Company after the close of business on the day immediately prior to the
Effective Date. If, on or after the Effective Date, certificates for Common
Shares are presented, they will be cancelled and exchanged for the right to
receive $16.50 per share in cash as provided in the preceding section of this
Proxy Statement.
 
 Treatment of Stock Options
 
  The Merger Agreement provides that each outstanding option to acquire Common
Shares under the 1986 Stock Plan for Executive Employees of the Company, the
1988 Stock Plan for Executive Employees of the Company, the Company's 1991
Stock Option Plan for Non-Employee Directors and the Company's 1992 Stock
Option Plan, in each case as such plan may have been amended (collectively,
the "Stock Option Plans"), will (in certain cases subject to receiving the
consent of the option holder), upon consummation of the Merger, be converted
by virtue of the Merger and without any action on the part of the holder
thereof into the right to purchase on exercise thereof a number of Waste
Management Shares at a price which preserves the value of the outstanding
options. See the Merger Agreement attached as Appendix A. Holders of certain
options on Common Shares, holding an aggregate of 3,344,484 options on Common
Shares, will be entitled to receive the Merger Consideration unless such
option holders consent to the option adjustment described above in lieu of
receiving the Merger Consideration.
 
THE MERGER AGREEMENT
 
 Covenants
 
  The Company has agreed in the Merger Agreement to submit the Merger
Agreement for consideration by the stockholders of the Company at the Special
Meeting and to recommend to the stockholders of the Company the approval of
the transactions contemplated by the Merger Agreement.
 
  The Company has agreed in the Merger Agreement that it will not, and Waste
Management and Merger Sub have agreed in the Merger Agreement that they will
not, cause the Company to, split, combine, subdivide or reclassify any shares
of the capital stock of the Company prior to the Effective Time or declare a
stock dividend or other stock distribution in Common Shares or non-voting
common stock of the Company with a record date prior to the Effective Time.
Waste Management has agreed to vote its Common Shares in favor of the Merger.
Merger Sub agreed not to engage in any activities prior to the Effective Time
except as provided in the Merger Agreement. Waste Management also has agreed
to cause the Company to maintain for not less than six years such director and
officer liability insurance as is available for 175% of the annual premiums
paid by the Company during the 12 month period ending June 30, 1997 and that
all rights to indemnification now existing in favor of the present directors
or officers of the Company and its subsidiaries as in effect on the date of
the Merger Agreement shall continue for a period of six years beyond the
Merger.
 
  Waste Management and the Company have agreed in the Merger Agreement (i) to
prepare and file with the Commission this Proxy Statement and the Schedule
13E-3 and otherwise to make all necessary filings and take all necessary
actions in order to comply with federal and state securities laws applicable
to all the transactions contemplated by the Merger Agreement; (ii) to consult
with each other in advance of making public announcements concerning the
Merger; and (iii) to use all reasonable efforts to take or cause to be taken
all action and to do or cause to be done all things necessary or advisable to
consummate the transactions contemplated by the Merger Agreement. The Company
has agreed to afford to Waste Management and its representatives reasonable
access to information needed for the purpose of evaluating the transactions
contemplated by the Merger Agreement.
 
                                      25

 
 Representations and Warranties
 
  The Merger Agreement contains various representations and warranties of the
Company to Waste Management and Merger Sub, including with respect to the
following matters: (i) the due organization and valid existence of the Company
and its subsidiaries and similar corporate matters; (ii) the capitalization of
the Company; (iii) the due authorization, execution and delivery of the Merger
Agreement and its binding effect on the Company; (iv) regulatory filings and
approvals, and the lack of conflicts between the Merger Agreement and the
transactions contemplated thereby with the Company's Certificate of
Incorporation or By-laws, contracts to which it or its subsidiaries are
parties, or any law, rule, regulation, order, writ, injunction or decree
binding upon the Company or its subsidiaries; (v) the accuracy of the
Company's SEC filings and financial statements; (vi) the absence of certain
changes or undisclosed liabilities; (vii) certain litigation matters; (viii)
the opinions of the Special Committee's Investment Bankers; (ix) the accuracy
of the information provided by the Company for inclusion in this Proxy
Statement and the Schedule 13E-3; and (x) compliance with law. Such
representations and warranties are subject, in certain cases, to specified
exceptions and qualifications.
 
  The Merger Agreement also contains representations and warranties of Waste
Management and Merger Sub to the Company, including with respect to the
following matters: (i) the due organization and valid existence of each of
Waste Management and Merger Sub and similar corporate matters; (ii) the
ownership of Common Shares by Waste Management; (iii) the due authorization,
execution and delivery of the Merger Agreement by Waste Management and Merger
Sub, and its binding effect on them; (iv) regulatory filings and approvals,
and the absence of conflicts of the Merger Agreement and the transactions
contemplated thereby with the Certificate of Incorporation or by-laws of each
of Waste Management and Merger Sub, or with any contract binding upon Waste
Management and Merger Sub, or with any law, rule, regulation, order, writ,
injunction or decree binding upon any of such parties; (v) Waste Management
and Merger Sub's access to cash funds sufficient to consummate the
transactions contemplated by the Merger Agreement; (vi) the formation and
absence of prior activities of Merger Sub; (vii) the accuracy of the
information provided by Waste Management and Merger Sub for inclusion in this
Proxy Statement and the Schedule 13E-3; and (viii) the absence of brokers and
finders entitled to payment from the Company. Such representations and
warranties are subject, in certain cases, to specified exceptions and
qualifications.
 
 Conditions
 
  The obligations of the Company, Merger Sub and Waste Management to
consummate the Merger are subject to the fulfillment or waiver (if
permissible) at or prior to the Effective Time of certain conditions,
including (i) the satisfaction of the DGCL Vote Requirement and the
Independent Vote Requirement; (ii) there not being in effect any statute,
rule, regulation, executive order, decree, ruling or injunction or other order
of a court or agency directing that the transactions contemplated by the
Merger Agreement not be consummated; and (iii) all required governmental
consents and approvals having been obtained and continuing to be in effect at
the Effective Time, except for failures which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect (as
defined below) on Waste Management (assuming the Merger had taken place).
 
  The obligation of the Company to effect the Merger is subject to the
fulfillment or waiver (if permissible) at or prior to the Effective Time of
the following conditions: (i) the representations and warranties of Waste
Management and Merger Sub in the Merger Agreement being true when made and as
of the Effective Time (except for permitted changes), except for such failures
to be true which are not reasonably likely to have a Material Adverse Effect;
(ii) Waste Management and Merger Sub having performed in all material respects
their material obligations contained in the Merger Agreement to be performed
or complied with by Waste Management or Merger Sub at or prior to the
Effective Time; and (iii) the delivery to the Company of certificates of Waste
Management and Merger Sub to the effect that the conditions set forth in (i)
and (ii) have been fulfilled.
 
  The obligations of Waste Management and Merger Sub to effect the Merger are
subject to the fulfillment or waiver (if permissible) at or prior to the
Effective Time of the following conditions: (i) the representations and
warranties of the Company in the Merger Agreement (including without
limitation the representation that the
 
                                      26

 
Company has not suffered any Material Adverse Effect since December 8, 1997)
being true when made and as of the Effective Time (except for permitted
changes), except for such failures to be true which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect; (ii)
the Company having performed in all material respects its material obligations
contained in the Merger Agreement to be performed or complied with by the
Company at or prior to the Effective Time; and (iii) the delivery to Waste
Management and Merger Sub of a certificate of the Company to the effect that
the conditions set forth in (i) and (ii) have been fulfilled.
 
  As used in the Merger Agreement, the term "Material Adverse Effect" means
with respect to the Company any adverse change in the financial condition,
business or properties of the Company and its subsidiaries (to the extent
owned by the Company) which is material to the Company and its subsidiaries
(to the extent owned by the Company), taken as a whole, and, with respect to
Waste Management, any adverse change in the financial condition, business or
properties of Waste Management and its subsidiaries (to the extent owned by
Waste Management), which is material to Waste Management and its subsidiaries
(to the extent owned by Waste Management), taken as a whole. Waste Management
has advised the Company that the asset impairments and charges recorded by the
Company in the fourth quarter of 1997 do not constitute a Material Adverse
Effect.
 
  The Merger Agreement provides that the parties thereto may waive compliance
in whole or in part with any of the conditions contained therein to the extent
permitted by law, provided that any such waiver by the Company must be
approved by the Special Committee. As of the date of this Proxy Statement, the
Company, Waste Management and Merger Sub have no present intention of waiving
any material conditions under the Merger Agreement.
 
 Termination; Amendments; Withdrawal of Recommendations
 
  The Merger Agreement provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval by the stockholders of the Company: (i) by mutual written consent of
Waste Management, Merger Sub and the Company (with the concurrence of the
Special Committee); (ii) by any of Waste Management, Merger Sub or the Company
(with the concurrence of the Special Committee in the case of termination by
the Company) if (a) any court of competent jurisdiction in the United States
or some other governmental body or regulatory authority shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and nonappealable, (b) the Merger
shall not have been consummated by June 30, 1998, provided that the right to
terminate the Merger Agreement in such event is not available to any party
whose failure to fulfill any of its obligations under the Merger Agreement
results in the failure of the Merger to occur on or before such date, or (c)
the Merger Agreement and the Merger shall have been voted on by stockholders
of the Company at the Special Meeting and the vote shall not have been
sufficient to satisfy the DGCL Vote Requirement or the Independent Vote
Requirement; (iii) by Waste Management or Merger Sub if the Company shall have
failed to perform in any material respect any of its material obligations
under the Merger Agreement theretofore to be performed by the Company, which
failure to perform has not been cured within 30 days following receipt by the
Company of notice of such failure to perform from Waste Management; and (iv)
by the Company with the concurrence of the Special Committee if Merger Sub or
Waste Management shall have failed to perform in any material respect any of
their material obligations under the Merger Agreement theretofore to be
performed by Waste Management or Merger Sub, which failure to perform has not
been cured within 30 days following receipt by Waste Management of notice of
such failure to perform from the Company.
 
  The Merger Agreement provides that it may be amended by the parties thereto
at any time before or after approval thereof by the stockholders of the
Company, but, after such approval, no amendment which by law requires further
approval by such stockholders can be made without such further approval. Any
amendment of the Merger Agreement requires the consent of the Special
Committee.
 
  The Merger Agreement permits the Special Committee or the Board of Directors
of the Company at any time prior to the Effective Time to withdraw, modify or
change any recommendation and declaration regarding the Merger or the Merger
Agreement, or recommend and declare advisable any other offer or proposal, if
in the
 
                                      27

 
opinion of the Special Committee or the Board of Directors after consultation
with its counsel the failure to so withdraw, modify or change its
recommendation and declaration would be inconsistent with its fiduciary duties
to its stockholders under applicable law.
 
DELAWARE STATUTORY APPRAISAL RIGHTS
 
  Holders of Common Shares are entitled to appraisal rights under Section 262
of the DGCL. A person having a beneficial interest in Common Shares held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
 
  THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE
FULL TEXT OF SECTION 262, WHICH IS REPRINTED IN ITS ENTIRETY AS APPENDIX C TO
THIS PROXY STATEMENT. All references in Section 262 and in this summary to a
"stockholder" are to the record holder of the Common Shares as to which
appraisal rights are asserted. As used herein, "Surviving Corporation" means
the Company as the corporation surviving the Merger.
 
  Under the DGCL, holders of Common Shares who do not wish to accept pursuant
to the Merger the consideration provided for in the Merger Agreement and who
follow the procedures set forth in Section 262 will be entitled to have their
Common Shares appraised by the Delaware Court of Chancery and to receive
payment in cash of the "fair value" of such shares, exclusive of any element
of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, as determined by such court.
 
  Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the Special Meeting, the
corporation, not less than 20 days prior to the meeting, must notify each of
its stockholders entitled to appraisal rights that such appraisal rights are
available and include in such notice a copy of Section 262. This Proxy
Statement shall constitute such notice to the holders of Common Shares and the
applicable statutory provisions of the DGCL are attached to this Proxy
Statement as Appendix C. Any stockholder who wishes to exercise such appraisal
rights, or who wishes to preserve his right to do so, should review the
following discussion and Appendix C carefully because failure to timely and
properly comply with the procedures specified will result in the loss of
appraisal rights under the DGCL.
 
  A holder of Common Shares wishing to exercise his appraisal rights must
deliver to the Secretary of the Company, before the vote on the Merger
Agreement at the Special Meeting, a written demand for appraisal of his Common
Shares and must not vote his shares of stock in favor of approval and adoption
of the Merger Agreement. Because a proxy which does not contain voting
instructions will, unless revoked, be voted for approval and adoption of the
Merger Agreement, a holder of Common Shares who votes by proxy and who wishes
to exercise his appraisal rights must (i) vote against approval and adoption
of the Merger Agreement or (ii) abstain from voting on approval and adoption
of the Merger Agreement. Neither voting (in person or by proxy) against,
abstaining from voting on or failing to vote on the proposal to approve and
adopt the Merger Agreement will constitute a written demand for appraisal
within the meaning of Section 262. The written demand for appraisal must be in
addition to and separate from any such proxy or vote. In addition, a holder of
Common Shares wishing to exercise his or her appraisal rights must hold of
record such shares on the date the written demand for appraisal is made and
must continue to hold such shares until the Effective Time.
 
  Only a holder of record of Common Shares is entitled to assert appraisal
rights for the Common Shares registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the holder of record, fully
and correctly, as his or her name appears on the stock certificates. If the
Common Shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity, and if the Common Shares are owned of record by more than one
person, as in a joint tenancy and tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including
one or more joint owners, may execute a demand for appraisal on behalf of a
holder of record; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in
 
                                      28

 
executing the demand, the agent is agent for such owner or owners. A record
holder such as a broker who holds Common Shares as nominee for several
beneficial owners may exercise appraisal rights with respect to the Common
Shares held for one or more beneficial owners while not exercising such rights
with respect to the Common Shares held for other beneficial owners; in such
case, the written demand should set forth the number of Common Shares as to
which appraisal is sought and when no number of Common Shares is expressly
mentioned the demand will be presumed to cover all Common Shares held in the
name of the record owner. Stockholders who hold their Common Shares in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a nominee. All
written demands for appraisal should be delivered to Thomas A. Witt, Secretary
of the Company, either in person or by mail (certified mail, return receipt
requested, being the recommended form of transmittal) addressed to him at
Wheelabrator Technologies Inc., 3003 Butterfield Road, Oak Brook, Illinois
60523.
 
  Within ten days after the Effective Time, the Surviving Corporation must
send a notice as to the effectiveness of the Merger to each former stockholder
of the Company who has made such a written demand for appraisal and who has
not voted in favor of approval and adoption of the Merger Agreement. Within
120 days after the Effective Time, but not thereafter, the Surviving
Corporation, or any stockholder who is entitled to appraisal rights under
Section 262 and has complied with the requirements of Section 262, may file a
petition in the Delaware Court of Chancery demanding a determination of the
fair value of the Common Shares. The Surviving Corporation is under no
obligation to and has no present intention to file a petition in respect to
the appraisal of the fair value of the Common Shares. Accordingly, it is the
obligation of the stockholders to initiate all necessary action to perfect
their appraisal rights within the time prescribed in Section 262.
 
  Within 120 days after the Effective Time, any stockholder who has complied
with the requirements under Section 262 for exercise of appraisal rights will
be entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of Common Shares with respect to
which demands for appraisal have been received and which have not voted in
favor of approval and adoption of the Merger Agreement, and the aggregate
number of holders of such shares. Such statements must be mailed within ten
days after a written request therefor has been received by the Surviving
Corporation.
 
  If a petition for appraisal is duly filed by a holder of Common Shares and a
copy thereof is delivered to the Surviving Corporation, the Surviving
Corporation will then be obligated within 20 days to provide the Delaware
Court of Chancery with a duly verified list containing the names and addresses
of all holders of Common Shares who have demanded appraisal of their shares.
After notice to such holders of Common Shares, the Delaware Court of Chancery
is empowered to conduct a hearing upon the petition to determine those holders
of Common Shares who have complied with Section 262 and who have become
entitled to appraisal rights under that section. The Delaware Court of
Chancery may require the holders of Common Shares who have demanded payment
for their shares to submit their stock certificates to the Register in
Chancery for a notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Delaware Court
of Chancery may dismiss the proceedings as to such stockholder.
 
  After determining the stockholders entitled to an appraisal, the Delaware
Court of Chancery will appraise the "fair value" of their Common Shares,
exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. Stockholders
considering seeking appraisal should be aware that the fair value of their
Common Shares as determined under Section 262 could be more than, the same as
or less than the consideration they would receive pursuant to the Merger
Agreement if they did not seek appraisal of their Common Shares and that
investment banking opinions as to fairness from a financial point of view are
not necessarily opinions as to fair value under Section 262. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings. In addition, Delaware courts have decided that the statutory
appraisal remedy, depending on factual circumstances, may or may not be a
dissenter's exclusive remedy. The Court also will determine the amount of
interest, if any, to be paid upon the amounts to be received
 
                                      29

 
by persons whose Common Shares have been appraised. The costs of the action
may be determined by the Court and taxed upon the parties as the Court deems
equitable. The Court also may order that all or a portion of the expenses
incurred by any stockholder in connection with an appraisal, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts utilized in the appraisal proceeding, be charged pro rata against the
value of all of the Common Shares entitled to appraisal.
 
  Any holder of shares who has duly demanded an appraisal in compliance with
Section 262 will not be entitled, after the Effective Time, to vote the Common
Shares subject to the appraisal demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends
or other distributions, other than the Merger Consideration, payable to
holders of record of Common Shares as of a date prior to the Effective Time).
 
  If any stockholder who demands appraisal of his Common Shares under Section
262 fails to perfect, or effectively withdraws or loses, his right to
appraisal as provided in the DGCL, the Common Shares of such stockholder will
be converted into the right to receive the Merger Consideration in accordance
with the Merger Agreement. A stockholder will fail to perfect, or effectively
lose or withdraw, his right to appraisal if he votes for approval and adoption
of the Merger Agreement (or submits a proxy without voting instructions) or if
no petition for appraisal is filed within 120 days after the Effective Time of
the Merger or if the stockholder delivers to the Company (or, after the
Effective Time, to the Surviving Corporation) a written withdrawal of his
demand for appraisal and an acceptance of the Merger, except that any such
attempt to withdraw made more than 60 days after the Effective Time will
require the written approval of the Surviving Corporation.
 
  FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
 
CERTAIN TAX CONSIDERATIONS
 
  The following is a summary of certain of the expected federal income tax
consequences of the receipt of cash in the Merger in exchange for Common
Shares. Such tax treatment may vary depending upon a stockholder's particular
situation. This summary does not discuss all of the tax consequences which may
be relevant to certain types of stockholders of the Company subject to special
treatment under the federal income tax laws (such as individual retirement
accounts and other tax-deferred accounts, life insurance companies, tax-exempt
organizations, dealers in securities and foreign persons). Accordingly,
stockholders of the Company should consult their own tax advisers with respect
to the particular consequences to them of the receipt of cash in the Merger,
including the applicability and effect of any state, local or foreign tax laws
to which they may be subject and of any legislative or administrative changes
in law.
 
  The Merger will be a taxable transaction to the public stockholders of the
Company. Each such stockholder will recognize gain or loss measured by the
difference between the amount of cash received by the stockholder in the
Merger and the stockholder's basis in the Common Shares exchanged therefor. If
the Common Shares are held by such stockholder as capital assets, the gain or
loss will be capital gain or loss (which will be long term if the Common
Shares are held for more than 18 months).
 
ACCOUNTING TREATMENT
 
  Waste Management will treat the Merger as a purchase of the approximately
33% minority interest in the Company.
 
                                      30

 
FEES AND EXPENSES AND SOURCE OF FUNDS
 
  The estimated aggregate costs and fees of Waste Management, Merger Sub and
the Company in connection with the Merger and related transactions are as
follows:
 
                                                            
      Investment Banking Fees and Expenses.......................... $4,750,000
      Filing Fees...................................................    173,973
      Legal Fees and Expenses.......................................  1,000,000
      Printing, Mailing and Proxy Solicitation Fees.................    250,000
      Accounting Fees...............................................     10,000
      Miscellaneous.................................................    316,027
                                                                     ----------
          Total..................................................... $6,500,000
                                                                     ==========

      
 
  The Merger Agreement calls for such fees and expenses to be paid by the
party which incurred them, except for financial printing costs, which shall be
borne equally by Waste Management and the Company.
 
  The Company currently expects that approximately $869,867,476 (excluding any
stock options which may be exercised and exchanged for cash) will be required
to pay the Merger Consideration to the holders of the Nonaffiliated Shares
(assuming no such holder exercises dissenters' rights). Funds required by
Waste Management to complete the Merger will come from Waste Management's
working capital, bank borrowings, sale of short-term promissory notes or the
underwritten sale of notes or bonds.
 
REGULATORY REQUIREMENTS
 
  Except for the filing of the Merger Certificate with the Secretary of State
of the State of Delaware after the approval and adoption of the Merger
Agreement pursuant to the DGCL, and compliance with federal and state
securities laws, neither Waste Management nor the Company is aware of any
material United States federal or state or foreign governmental regulatory
requirement necessary to be complied with or approval that must be obtained in
connection with the Merger.
 
                                      31

 
                    SELECTED FINANCIAL DATA OF THE COMPANY
 
  The following selected financial data of the Company should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations" of the Company incorporated by reference into the Form 10-K
Annual Report of the Company for the year ended December 31, 1996, as amended,
and the quarterly report on Form 10-Q of the Company for the nine-month period
ended September 30, 1997, as amended, which Form 10-K and 10-Q Reports are
incorporated by reference herein. The Company's quarterly reports for 1997 and
Form 10-K for 1996 were amended and refiled with the SEC in the first quarter
of 1998. The historical financial data for the Company as of December 31,
1992, 1993, 1994, 1995 and 1996 and for the periods then ended have been
derived from financial statements audited by Arthur Andersen LLP, independent
public accountants. See notes to the Company's Consolidated Financial
Statements incorporated by reference into the Company's Form 10-K Reports for
the year ended December 31, 1996, as amended, for further discussion of the
basis of presentation and principles of consolidation.
 
                WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
 
                 SELECTED CONSOLIDATED FINANCIAL INFORMATION:
              (000'S OMITTED IN TABLE, EXCEPT PER SHARE AMOUNTS)
 


                                                                                       AS OF AND FOR
                                                                                      THE NINE MONTHS
                               AS OF AND FOR THE YEARS ENDED DECEMBER 31,           ENDED SEPTEMBER 30,
                         --------------------------------------------------------- ----------------------
                            1992        1993        1994        1995       1996       1996        1997
                         ----------  ----------  ----------  ---------- ---------- ----------  ----------
                                     (RESTATED)  (RESTATED)  (RESTATED) (RESTATED) (RESTATED)  (RESTATED)
                                                                          
OPERATING DATA:
Revenue................. $1,230,983  $  828,520  $  926,879  $  956,088 $  952,312 $  706,589  $  754,092
Income from continuing
 operations............. $  173,342  $  146,361  $  159,043  $  129,384 $  110,501 $  131,268  $  120,488
Extraordinary items..... $  (42,230)        --          --          --         --         --          --
Net income.............. $  134,152  $  160,060  $  185,996  $  137,821 $    3,840 $  115,643  $  121,698
PER SHARE DATA:
Weighted average and
 dilutive potential
 common shares
 outstanding during the
 period.................    188,600     189,100     190,000     185,100    169,500    171,600     159,000
Diluted earnings per
 Common Share from
 continuing operations.. $     0.92  $     0.77  $     0.84  $     0.70 $     0.65 $     0.76  $     0.76
Net income.............. $     0.71  $     0.85  $     0.98  $     0.74 $     0.02 $     0.67  $     0.77
Dividends per Common
 Share.................. $     0.04  $     0.08  $     0.10  $     0.11 $     0.12 $     0.12  $     0.12
BALANCE SHEET DATA:
Working capital......... $  206,270  $  (14,650) $  (48,067) $   32,286 $  186,480 $  (82,562) $  351,418
Total assets............ $2,905,015  $2,977,745  $3,099,606  $3,067,929 $3,046,783 $3,032,431  $3,026,540
Net due (to) from Waste
 Management............. $  222,500  $   14,900  $  (53,163) $   37,349 $  280,158 $  (75,192) $  406,612
Long-term debt.......... $  857,330  $  777,111  $  735,855  $  703,855 $  800,153 $  750,993  $  804,403
Stockholders' equity.... $1,039,343  $1,283,796  $1,422,941  $1,448,287 $1,145,880 $1,251,275  $1,163,235
Book value per share.... $     5.57  $     6.80  $     7.64  $     8.07 $     7.10 $     7.76  $     7.43

- - - --------
 . Certain prior period amounts have been reclassified to conform with the
  current year presentation.
 . Certain amounts in 1993, 1994, 1995 and 1996 and for September 30, 1996 and
  1997 have been restated to reflect the impact of the amended filings noted
  above.
 . 1992 income from continuing operations includes a $47.0 million nontaxable
  gain related to the initial public offering of shares by WM International.
 . Beginning in 1993, the Company no longer consolidates the financial results
  of certain businesses contributed to form, in part, Rust. Revenue from the
  contributed businesses amounted to approximately $554.7 million in 1992.
  Beginning in 1993, the Company's share of Rust's net income is included in
  equity in earnings of affiliates.
 . 1993 income from continuing operations includes a $7.7 million nontaxable
  gain related to issuance of stock by Rust and a $6.5 million increase in the
  income tax provision due to revaluing deferred income taxes as a result of
  the enactment of the Omnibus Budget Reconciliation Act of 1993.
 . During 1995, 1996 and 1997, the weighted average Common Shares outstanding
  decreased due to stock repurchases.
 . During the fourth quarter of 1996, the Company began implementing a plan to
  divest its water business, which was completed during the first quarter of
  1997. Accordingly, these businesses have been segregated as discontinued
  operations in the financial statements.
 
                                      32

 
RECENT DEVELOPMENTS
 
  On February 18, 1998, the Company reported its earnings for the three months
and the year ended December 31, 1997. For the three months ended December 31,
1997, the Company reported revenue of $244.5 million, loss from continuing
operations for the period of $66.1 million, or $.42 per share (on a diluted
basis), and fourth quarter 1997 net loss of $31.9 million, or $.20 per share.
Fourth quarter 1997 net loss included an extraordinary loss on refinancing of
project debt of $.8 million. In the fourth quarter of 1996, the Company had
revenue of $245.7 million, loss from continuing operations of $20.8 million,
or $.13 per share, and net loss of $111.8 million, or $.69 per share. As
discussed below, the 1996 amounts reflect restatements and reclassifications
of equity income from Rust. Excluding asset impairments and charges to equity
income in the fourth quarter of 1997 (discussed below) and charges to equity
income in the fourth quarter of 1996, income from continuing operations was
$.26 per share in 1997 compared with $.17 per share in 1996.
 
  For the fiscal year ended December 31, 1997, the Company's revenue totaled
$998.5 million, income from continuing operations was $54.4 million, or $.34
per share, and net income was $89.8 million, or $.56 per share. Fiscal year
1996 revenue was $952.3 million, income from continuing operations was $110.5
million, or $.65 per share, and net income was $3.8 million, or $.02 per
share. Excluding asset impairments and charges to equity income in both years,
the Company's per share income from continuing operations for the 1997 fiscal
year was $1.04 per share compared with $.95 in 1996.
 
  The Company's construction revenue totaled $13.2 million in the fourth
quarter of 1997 and $60.2 million for the 1997 fiscal year. The Company
reported no construction revenue in 1996.
 
  The Company's cash flow from operations for the 1997 fiscal year totaled
approximately $174 million, compared with $266 million for the prior year.
Capital expenditures related to continuing operations for the 1997 fiscal year
totaled approximately $26 million, compared with $33 million in 1996.
Depreciation and amortization expense related to continuing operations for the
1997 fiscal year was $88 million versus $91 million in the prior year. As of
December 31, 1997, cash and cash equivalents totaled $471 million and long-
term debt was $841 million compared with $306 million and $836 million,
respectively, at December 31, 1996.
 
  Asset Impairments and Equity Income Charges. During the fourth quarter of
1997, the Company recorded a $57.2 million charge, before minority interest
and income taxes, to revalue certain long-lived assets in accordance with
accounting standards for impaired assets. Approximately $47.1 million of the
impairment loss related to the Ridge Generating Station independent power
plant in Florida. "Other income, net" includes a $5.2 million offset to this
loss to reflect a minority partner's interest in the facility. Revaluation of
an undeveloped land parcel and writedown of a composting facility accounted
for the remainder of the impairment charge. These charges reduced fourth
quarter 1997 earnings from continuing operations and net income by $31.9
million or $.20 per share.
 
  In the fourth quarter of 1997, WM International recorded a charge relating
primarily to its operations in Argentina, Germany and Italy, plus severance
and reorganization costs in a number of countries. The WM International charge
reduced the Company's fourth quarter 1997 equity income from continuing
operations by $13.8 million, or $.09 per share. The Company directly and
indirectly owns 16.8% of WM International.
 
  Also during the fourth quarter, Rust, which is 40% owned by the Company,
recorded charges principally to reflect the following:
  . restatement of certain discontinued operations as continuing operations
    (see below);
 
  . asset impairments, primarily in Rust's environmental and infrastructure
    consulting business;
 
  . adjustments to the carrying value of Rust's equity investment in OHM; and
 
  . write-off of goodwill and other impaired assets in Rust's core continuing
    operations, primarily its industrial cleaning services business.
 
                                      33

 
  The Rust charges reduced the Company's fourth quarter 1997 income from
continuing operations by $61 million, or $.39 per share and net income by $26
million or $.17 per share.
 
  Reclassification and Restatement of Rust's Equity Income. During the fourth
quarter of 1997, Rust reclassified to continuing operations the results of
operations from certain businesses (including the environmental and
infrastructure consulting business) that previously were reported as
discontinued operations in the fourth quarter of 1996 and during the first
three quarters of 1997. Although Rust is continuing to pursue its plan to
divest these businesses, accounting standards require such a reclassification
in the event that the divestiture does not occur within one year from the date
on which the businesses were first reported as discontinued operations.
Accordingly, in the fourth quarter of 1997, the Company reclassified its
equity income relating to these businesses to continuing operations and
restated certain prior periods to reflect the changes.
 
  In connection with Waste Management's previously announced decision to
restate its financial results for prior periods, certain restatements were
made by Rust, which is 60% owned by Waste Management and 40% owned by the
Company. The restatements include adjustments relating to the
reclassifications described above and to the carrying value of certain of
Rust's equity investments and businesses held for sale. Accordingly, the
Company amended in the first quarter of 1998 its 1996 Annual Report on Form
10-K and 1997 Quarterly Reports on Form 10-Q for the first, second and third
quarters to reflect the changes in its equity income resulting from these
restatements.
 
  The effect of the restatements on a per share basis is summarized below:
 


                                                                 1996 1995 1994
                                                                 ---- ---- ----
                                                                  
Income from Continuing Operations:
  As Originally Reported........................................ $.65 $.73 $.79
  Restated...................................................... $.65 $.70 $.84
Net Income:
  As Originally Reported........................................ $.04 $.75 $.97
  Restated...................................................... $.02 $.74 $.98

 
                                      34

 
                WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
             FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 AND 1997
                    (000S OMITTED, EXCEPT PER SHARE AMOUNTS)
 


                                                               1996      1997
                                                             --------  --------
                                                                 
Revenue..................................................... $952,312  $998,543
Operating expenses..........................................  618,779   663,742
Asset impairment loss.......................................      --     57,227
Selling and administrative expenses.........................   43,949    44,199
Interest expense............................................   57,514    55,358
Interest income.............................................   (6,054)  (21,748)
Equity in loss of affiliates................................   24,318    69,178
Other (income), expense, net................................    1,357    (4,533)
                                                             --------  --------
  Income from continuing operations before income taxes.....  212,449   135,120
Income tax provision........................................  101,948    80,707
                                                             --------  --------
  Income from continuing operations.........................  110,501    54,413
Discontinued operations:
  Gain on disposal of discontinued operations less
   applicable income taxes of $78.0 million.................      --      1,210
  Income from discontinued operations
   less applicable income taxes of $9.2
   million in 1996..........................................    8,039       --
  Equity income from Rust discontinued operations...........    2,854       --
  Equity in provision for gain (loss) on disposal
   of Rust discontinued operations.......................... (117,554)   34,916
                                                             --------  --------
    Income before extraordinary item........................    3,840    90,539
Extraordinary loss on refinancing of debt,
 net of tax benefit of $0.5 million.........................      --       (776)
                                                             --------  --------
    Net income.............................................. $  3,840  $ 89,763
                                                             ========  ========
Weighted average common shares outstanding..................  168,900   158,700
                                                             ========  ========
Basic earnings (loss) per common share:
  Continuing operations..................................... $   0.65  $   0.34
  Gain on disposal of discontinued operations...............      --       0.01
  Income from discontinued operations.......................     0.05       --
  Equity gain (loss) from Rust discontinued operations......    (0.68)     0.22
  Extraordinary loss........................................      --        --
                                                             --------  --------
    Net income.............................................. $   0.02  $   0.57
                                                             ========  ========
Diluted earnings (loss) per common share:
  Continuing operations..................................... $   0.65  $   0.34
  Gain on disposal of discontinued operations...............      --       0.01
  Income from discontinued operations.......................     0.05       --
  Equity gain (loss) from Rust discontinued operations......    (0.68)     0.22
  Extraordinary loss........................................      --      (0.01)
                                                             --------  --------
    Net income.............................................. $   0.02  $   0.56
                                                             ========  ========

 
                                       35

 
                WHEELABRATOR TECHNOLOGIES INC. AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
             FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1997
                    (000S OMITTED, EXCEPT PER SHARE AMOUNTS)
 


                                                             1996       1997
                                                           ---------  --------
                                                                
Revenue................................................... $ 245,723  $244,451
Operating expenses........................................   164,139   160,346
Asset impairment loss.....................................       --     57,227
Selling and administrative expenses.......................    11,535    13,725
Interest expense..........................................    14,753    14,708
Interest income...........................................    (1,889)   (7,134)
Equity in loss of affiliates..............................    47,360    72,032
Other income, net.........................................      (815)   (4,266)
                                                           ---------  --------
  Income (loss) from continuing operations before income
   taxes..................................................    10,640   (62,187)
Income tax provision......................................    31,407     3,888
                                                           ---------  --------
  Loss from continuing operations.........................   (20,767)  (66,075)
Discontinued operations:
  Income from discontinued operations less applicable
   income taxes of $1.8 million in 1996...................     1,064       --
  Equity income from Rust discontinued operations.........     1,900       --
  Equity in provision for gain (loss) on disposal of Rust
   discontinued operations................................   (94,000)   34,916
                                                           ---------  --------
  Loss before extraordinary item..........................  (111,803)  (31,159)
Extraordinary loss on refinancing of debt, net of tax
 benefits of $0.5 million.................................       --       (776)
                                                           ---------  --------
    Net loss.............................................. $(111,803) $(31,935)
                                                           =========  ========
Weighted average common shares outstanding................   161,500   157,300
                                                           =========  ========
Basic earnings (loss) per common share:
  Continuing operations................................... $   (0.13) $  (0.42)
  Income from discontinued operations.....................      0.01       --
  Equity gain (loss) from Rust discontinued operations....     (0.57)     0.22
  Extraordinary loss......................................       --        --
                                                           ---------  --------
    Net loss.............................................. $   (0.69) $  (0.20)
                                                           =========  ========
Diluted earnings (loss) per common share:
  Continuing operations................................... $   (0.13) $  (0.42)
  Income from discontinued operations.....................      0.01       --
  Equity gain (loss) from Rust discontinued operations....     (0.57)     0.22
  Extraordinary loss......................................       --        --
                                                           ---------  --------
    Net loss.............................................. $   (0.69) $  (0.20)
                                                           =========  ========

 
                                       36

 
         COMMON SHARE MARKET PRICE INFORMATION; DIVIDEND INFORMATION;
                  SHARE PURCHASE INFORMATION FOR THE COMPANY
 
  Common Shares are traded on the NYSE under the symbol "WTI." The following
table shows the per share high and low sales prices reported in the
consolidated transaction reporting system for transactions in Common Shares
for the periods indicated and for June 19, 1997 (the last full trading day
prior to the day on which the initial proposal to effectuate the Merger was
publicly announced), December 8, 1997 (the trading day on which the approval
of the Merger Agreement was publicly announced after the close of the NYSE),
and February 10, 1998 (the Record Date). The following table also shows for
the periods indicated the dividends declared per Common Share. Holders of
Common Shares are encouraged to obtain current market quotations for Common
Shares.
 


                                                   MARKET PRICE OF
                                                    COMMON SHARES    DIVIDENDS
                                                  ----------------- DECLARED PER
                                                    HIGH     LOW    COMMON SHARE
                                                  -------- -------- ------------
                                                           
      1995
        First Quarter............................ $17 1/2  $12 1/2
        Second Quarter...........................  15 3/4   13 5/8      $.11
        Third Quarter............................  17       14 1/4
        Fourth Quarter...........................  16 3/4   14
      1996
        First Quarter............................ $17 1/2  $14 3/4
        Second Quarter...........................  17 1/8   14 3/4      $.12
        Third Quarter............................  15 1/2   13 7/8
        Fourth Quarter...........................  16 3/4   14 3/4
      1997
        First Quarter............................ $17 1/4  $12 1/4
        Second Quarter...........................  16       11 3/4      $.12
        Third Quarter............................  16 3/16  15 7/16
        Fourth Quarter...........................  16 1/4   13 5/8
        June 19, 1997............................ $13      $12 7/8
        December 8, 1997......................... $14 7/8  $14 5/8
        February 10, 1998........................ $16 5/16 $16 3/16

 
  If the proposed Merger is not consummated, the declaration of future
dividends, if any, will necessarily be dependent upon business conditions, the
earnings and financial position of the Company and the Company's plans with
respect to operating and capital expenditures and such other matters as the
Company's Board of Directors deems relevant.
 
  In 1995, the Company purchased a total of 7.2 million of its Common Shares
on the open market for $104.2 million. During 1996, the Company repurchased a
total of 19.1 million of its Common Shares for $306.0 million, including 10.7
million shares purchased from a large institutional stockholder, Sanford C.
Bernstein & Co., Inc., in a negotiated transaction for $170.6 million and a
total of 8.4 million shares purchased in the open market for $135.4 million.
 
  During the first four months of 1997, the Company purchased 5.1 million of
its Common Shares on the open market for $67.4 million. In February 1997, the
Company announced that it planned to initiate a "Dutch Auction" style issuer
tender offer for up to $350 million of its Common Shares. However, in order to
provide the Company's management the flexibility to assess certain investment
opportunities relating to the Company's core business, the Board of Directors
of the Company subsequently decided to defer the issuer tender indefinitely.
See "Special Factors--Purpose and Background of the Merger."
 
                                      37

 
  The following table shows for the periods indicated the amount of shares
purchased, the range of prices paid and the average purchase price for all
purchases by the Company of Common Shares.
 


                                                           RANGE OF     AVERAGE
                                                        PURCHASE PRICE  PURCHASE
                                             NUMBER OF    PER COMMON     PRICE
                                               COMMON        SHARE        PER
                                               SHARES   ---------------  COMMON
                                             PURCHASED   HIGH     LOW    SHARE
                                             ---------- ------- ------- --------
                                                            
1995
  First Quarter.............................  1,708,600 $14.250 $12.875  $13.50
  Second Quarter............................     88,600  14.375  14.250   14.28
  Third Quarter.............................          0       0       0       0
  Fourth Quarter............................  5,397,400  16.250  14.000   14.72
1996
  First Quarter.............................  2,992,100 $16.375 $15.750  $16.14
  Second Quarter............................ 15,452,600  16.250  14.875   16.00
  Third Quarter.............................    472,500  14.875  14.000   14.31
  Fourth Quarter............................    200,000  14.875  14.875   14.88
1997
  First Quarter.............................    762,900 $13.250 $12.500  $13.09
  Second Quarter............................  4,343,300  13.500  12.125   13.17
  Third Quarter.............................          0       0       0       0
  Fourth Quarter............................          0       0       0       0

 
During the periods set forth above, Waste Management purchased no Common
Shares.
 
                 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 attached
as Appendix D reflect information which was contained in projections prepared
by management of the Company and furnished to Waste Management after the
Proposal was made. 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 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 the control of the Company. While the Company believes these
estimates and assumptions to have been reasonable, there can be no assurance
that the projections will be 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, Waste Management or any other
person that the anticipated results will be achieved and investors are
cautioned not to place undue reliance on such information. See "--Opinions of
the Investment Bankers for the Special Committee--Common Shares--Discounted
Cash Flow Analysis."
 
  The financial projections of the Company are attached as Appendix D to this
Proxy Statement. The Company does not intend to update or otherwise revise the
information presented in Appendix D to reflect circumstances existing after
the date of the most recent financial statements incorporated by reference in
this Proxy Statement or to reflect the occurrence of unanticipated events. The
information presented in Appendix D should be read together with the Company's
Consolidated Financial Statements and the notes thereto incorporated by
reference in this Proxy Statement and other information contained or
incorporated by reference in this Proxy Statement.
 
                                      38

 
  Subject to the qualifications and limitations stated above, the information
presented in Appendix D generally relies upon the following material
assumptions and bases for projections:
 
    1. The rate of inflation was assumed to be 4% per annum.
 
    2. Projected tipping fees for solid waste delivered under long term
  contracts were based on rates pursuant to such contracts. Upon the
  expiration of such contracts, the tonnage was priced at current market
  rates escalated at the assumed rate of inflation. Projected tipping fees on
  tonnage not under a long term contract were based on current market rates
  escalated at the assumed rate of inflation.
 
    3. Projected solid waste volume was based upon the most recent
  information regarding historical volumes. Solid waste volumes pursuant to
  long term contracts were based upon current delivery levels and/or
  contractual requirements.
 
    4. Electricity rates for sales under long term contracts were based on
  rates specified in such contracts. For projects after the expiration of
  such contracts, electricity rates were based on current market rates
  escalated at the assumed rate of inflation. Electricity volume was based on
  historical production levels.
 
    5. Operating costs were based upon historical expenditure levels
  escalated at the assumed rate of inflation, with adjustments for expected
  project-specific requirements for extraordinary expenditures over the term
  of the projections.
 
    6. The installation of enhanced metal recovery systems at all waste-to-
  energy plants was assumed to be completed by the end of 1999. The
  annualized contribution in the year 2000 from the installation of such
  systems was assumed to be approximately $12 million after taxes.
 
    7. Debt service projections were based on existing third party debt
  service obligations with assumed refinancings on the earliest call dates at
  lower interest rates for the Company's Concord, New Hampshire, North and
  South Broward County, Florida and Bridgeport, Connecticut projects.
 
    8. The acquisition of industrial cogeneration facilities totalling
  approximately $31 million per year beginning in 1998 was assumed.
 
    9. Contracts to operate and maintain industrial cogeneration facilities
  generating annual revenue of approximately $5 million (plus escalation)
  beginning in 1998 was assumed.
 
    10. Development and construction of two international waste-to-energy
  plants were assumed to result in commencement of commercial operation in
  2001 and 2002.
 
          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 in Appendix D concerning the projected consolidated income statement
data as to the years ending December 31, 1997 through December 31, 2016. Such
information has been included in this Proxy 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 Waste Management. Such
information was prepared by the Company's management for internal use and not
with a view to publication. The information in Appendix D was based on
assumptions concerning the Company's services and business prospects in the
years 1997 through 2016. 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
in Appendix D. In addition, the consolidated income statement data as to the
years ending December 31, 1997 through December 31, 2016 were not prepared
with a view to public disclosure or compliance with the published guidelines
of the Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding projections and forecasts and are
included in this Proxy Statement only because such information was made
available to Waste Management. Neither the Company's nor Waste Management's
independent accountants have examined or applied any agreed upon procedures to
this information and, accordingly, assume no responsibility for this
information. None of the Company, Waste Management, or any other party assumes
any responsibility for the accuracy or validity of the projections.
 
                                      39

 
                    CERTAIN RELATIONSHIPS AND TRANSACTIONS
 
  The Company and Waste Management (or certain of their respective
subsidiaries) have entered into a number of interrelated agreements with
respect to their ongoing relationships and certain transactions. Because of
the complexity of the various relationships between the Company and Waste
Management (including their respective subsidiaries), there can be no
assurance that each of such agreements, or the transactions provided for
therein, considered separately, has been or will be effected on terms no less
favorable to the Company than could have been or could be obtained from
unaffiliated third parties. However, it has been the intention of the Company
and Waste Management that such agreements and transactions, taken as a whole,
should accommodate their respective interests in a manner that is fair to all
parties, while continuing certain mutually beneficial joint arrangements.
 
  Additional or modified arrangements and transactions may be entered into by
the Company, Waste Management and their respective subsidiaries. In the event
that the Merger does not occur, any such future arrangements and transactions
are expected to be determined through negotiation between them, but there can
be no assurance that conflicts of interest will not occur. In the event that
the Merger does not occur, the Company intends to seek the approval of its
independent directors for any agreement which its management or any
independent director of the Company believes to be of material importance to
the Company and to involve a significant conflict of interest with Waste
Management or its affiliated companies.
 
  The following is a summary of certain past, current and anticipated future
arrangements and transactions between or among the Company, Waste Management
and their respective affiliates.
 
LAND OPTION AGREEMENT
 
  Pursuant to a Land Option Agreement originally entered into at the time of
the 1988 transaction in which Waste Management acquired approximately 22% of
the common shares of a predecessor of the Company (the "1988 Transaction") and
subsequently amended, Resco, as the successor by merger to the predecessor of
the Company, was granted an exclusive option (the "Land Option") to purchase,
lease or sublease parcels of real estate at or adjacent to landfill facilities
located in the United States or Canada owned or leased by Waste Management or
its affiliates or subsidiaries. The potential uses for such option parcels
include trash-to-energy facilities, biosolids management and organic waste
composting facilities. The Land Option Agreement was amended in August 1995
to, among other things, accelerate the renewal date to a current date and
increase the renewal fees from $10 million to $15 million; extend the term of
the Land Option Agreement to December 31, 2020; add a schedule setting forth
the minimum portion of the Land Option to be allocated to each parcel
acquired; terminate the Land Option (except with respect to the guarantee of
value described below) upon a Change in Control (as defined in the Land Option
Agreement) of the Company; and provide for guarantee by Waste Management of
the book value (less related deferred taxes) of any portion of the Land Option
that the Company has not been able to allocate to facilities by December 31,
2020. The per-acre purchase price of any parcel purchased pursuant to the Land
Option Agreement will be equal to the book value per acre on the books of WMNA
for such parcel.
 
SECOND AMENDED AND RESTATED AIRSPACE DEDICATION AGREEMENT
 
  The original Airspace Dedication Agreement was entered into in connection
with the 1988 Transaction and was subsequently amended in June 1992. Pursuant
to such agreement, Waste Management agreed to dedicate airspace at landfill
sites owned, leased or operated by subsidiaries or affiliates of Waste
Management for the disposal of ash residue and non-hazardous biosolids and
bypass waste ("Other Waste") generated at or from facilities owned or operated
by Resco. In December 1992, the agreement was again amended and restated in
connection with the formation of Rust, described below under "Rust
Transaction," to expand the definition of Other Waste to include special
wastes removed from third-party sites being remediated by Resco or any of its
affiliates. The Second Amended and Restated Airspace Dedication Agreement (the
"Second Amended and
 
                                      40

 
Restated ADA") was executed in connection with the assignment by Resco to Rust
of $30 million of disposal credits which, as described below, have
subsequently been cancelled.
 
  Under the Second Amended and Restated ADA, Resco may reserve dedicated
airspace at any one or more Disposal Sites for a term ending August 12, 2008,
subject to extension in certain circumstances involving an event of force
majeure. Such reservations of airspace must be at Disposal Sites properly
permitted to dispose of the type of waste proposed for disposal, and may not
exceed a total of 35% of the airspace available for the type of waste proposed
for disposal at any such Disposal Site. The price-per-ton that will be charged
to Resco by Waste Management to dispose of waste covered by the Second Amended
and Restated ADA at any Disposal Site generally will not be greater than the
most favorable per ton price charged by the Disposal Site to customers other
than Resco for the acceptance and disposal of similar quantities and types of
waste on similar terms and conditions excluding, however, charges to disposal
customers who pay a premium for long-term guaranteed waste disposal. Under the
original agreement, Waste Management granted Resco disposal credits totaling
$70 million ("Disposal Credits"), to be applied against the aggregate cost of
disposing of Ash Residue at the rate of 20% of the applicable disposal price
described above. The availability of the Disposal Credits was extended to
cover all waste eligible for disposal under the Second Amended and Restated
ADA. The Second Amended and Restated ADA also provides for Disposal Credits to
be applied against disposal fees paid by Resco and its subsidiaries under
separately negotiated disposal arrangement with Waste Management, such as the
arrangement described below under "Disposal Agreement." On January 1, 1993, as
a part of the consideration paid by the Company in the Rust Transaction
described below, Resco contributed $30 million in unused Disposal Credits to
Rust. The contribution of Disposal Credits was made pursuant to a provision of
the Second Amended and Restated ADA allowing Resco to sell all or any part of
the unused portion of the Disposal Credits to any third party, subject to
Waste Management's right of first refusal with respect to each such sale. In
November 1995, Waste Management and Rust agreed that Rust's unused portion of
its Disposal Credit would be cancelled upon the payment by Waste Management to
Rust of cash in an amount equal to the portion of the Disposal Credit that
remained unused by Rust as of the date of payment (the "Unused Disposal
Credit"). Pursuant to such agreements, Waste Management paid Rust $27.5
million for Rust's Unused Disposal Credits, which were subsequently cancelled.
In 1997, Resco paid Waste Management a total of $15.4 million for disposal of
waste pursuant to the Second Amended and Restated ADA and used $5.0 million in
Disposal Credits.
 
DISPOSAL AGREEMENT
 
  In 1989, Waste Management Inc. of Florida, a subsidiary of Waste Management,
entered into a Disposal Agreement with a Resco subsidiary for the disposal of
ash residue and bypass waste from the 2,250 ton-per-day trash-to-energy
facility owned and operated by such subsidiary in Broward County, Florida (the
"North Broward Project"). For disposal of bypass waste, the North Broward
Project will be charged the same rates as other users of the landfill. The
disposal price for ash residue is based upon a contractually specified
formula. Pursuant to the Second Amended and Restated ADA, described above, the
amount paid by the North Broward Project for disposal of ash residue and
bypass waste since June 1, 1992 has been reduced by Disposal Credits available
thereunder. During 1997, the North Broward Project paid approximately $9.0
million in ash disposal fees to Waste Management, net of Disposal Credits.
 
RESTATED FUNDING AGREEMENT
 
  Pursuant to a Restated Funding Agreement entered into between Waste
Management and the Company, Waste Management agreed to use all reasonable
efforts to assist the Company, at the Company's request, in obtaining and
maintaining a credit rating of "A" or better from Standard & Poor's
Corporation or Moody's Investors Service for the Company's long-term unsecured
debt securities. Waste Management's obligations under the Restated Funding
Agreement, which terminates on August 12, 2008, may involve anything from
contingent credit support obligations to and including Waste Management's
purchase from the Company of up to $200 million principal amount of the
Company's securities (the "Securities"), which may be either debt, equity or a
combination thereof. Waste Management's obligations will be deemed satisfied
by the purchase of the Securities,
 
                                      41

 
even if the purchase of all of the Securities does not enable the Company to
obtain an "A" rating. In addition, the obligation to purchase any of the
Securities will be suspended if the Company does not reasonably demonstrate
its ability to pay interest or dividends, as the case may be, on the
Securities. Waste Management's obligations will also be suspended during any
period in which the Company obtains and maintains an "A" rating and will be
reduced to the extent that the purchase of a lesser amount of Securities will
allow the Company to obtain or maintain such a rating. Any Securities issued
to Waste Management will be subject to mandatory repayment or redemption in
equal annual installments during the twenty-five years following their date of
issuance, and they may be prepaid or redeemed by the Company, at its option,
if the directors of the Company not otherwise affiliated with Waste Management
or the Company conclude that such repayment or redemption is in the best
interests of the Company and its stockholders. Any Securities redeemed or
prepaid prior to August 12, 2008 will restore availability under the $200
million purchase obligation referred to above. To date, Waste Management has
not been required to provide credit support to the Company pursuant to the
Restated Funding Agreement.
 
INTELLECTUAL PROPERTY LICENSING AGREEMENT
 
  In connection with the 1990 merger of a wholly-owned subsidiary of Waste
Management and the Company (the "1990 Merger"), an intellectual property
licensing agreement was entered into among the Company, WMNA and Waste
Management (the "Intellectual Property License Agreement") and provides, among
other things, that the Company has a 10-year, non-exclusive, royalty-free
license, with two successive five-year renewal options, to (i) the "BRINI"
recycling and compositing technology owned by WMNA; (ii) the Recycle
America(R) and Recycle Canada(R) trademarks and logos and the related
materials separation and processing technology of Waste Management for use in
conjunction with the development or operation of recycling facilities at or
adjacent to any facility of the Company; and (iii) the proprietary technology
and know-how of Waste Management, in the area of landfill gas recovery and the
conversion of such gas to energy. Waste Management further agreed to use
reasonable and good faith efforts to give the Company substantial
responsibility for the electricity-generating portion of each landfill gas-to-
energy facility owned by Waste Management. Waste Management agreed that only
the Company shall develop the business of designing, constructing, operating
and maintaining landfill gas recovery facilities for governmental, industrial
and other third party customers, and that Waste Management will assist the
Company in such development. To the extent the Company develops landfill gas
recovery technology and know-how during the period of its license (and
renewals) from Waste Management, it will share such technology and know-how
with Waste Management on a similar royalty-free basis. The Company may waive
its rights to develop landfill gas recovery systems on a case-by-case basis in
those situations in which minimum financial objectives established by the
Board of Directors can not be achieved by the Company through development of
such projects. Projects waived by the Company may be developed by Waste
Management. The licenses and related rights and obligations to conduct
business granted under the Intellectual Property Licensing Agreement shall
terminate, as to facilities not already operational, contractually committed
or the subject of, or contemplated by, a bid or other submission previously
made by the Company or Waste Management, as the case may be, at the earlier of
the termination of the stated license periods, the expiration of any patent
licensed pursuant thereto, or the date on which the Company is no longer a
majority-owned subsidiary of Waste Management.
 
AMENDED AND RESTATED MASTER INTERCORPORATE AGREEMENT
 
  The Company, Waste Management and CWM are parties to an amended and restated
master intercorporate agreement (the "Amended Intercorporate Agreement"),
originally entered into in connection with the 1990 Merger, which provides,
among other things, that the Company shall invest its excess cash in
obligations of Waste Management (so long as such investments would not be a
material factor in affecting the ability of the Company to obtain or maintain
an "A" long-term debt rating). Under the Amended Intercorporate Agreement,
Waste Management is required to fund the Company's working capital
requirements on an unsecured basis (but with rights of set off), with the
aggregate outstanding advances not to exceed at any time the amount of the
Company's excess cash then invested with Waste Management (the "Compensating
Balance Facility"), plus (to
 
                                      42

 
the extent not prohibited by agreements with third parties) $100 million under
the facility described below (the "$100 Million Facility"). The Company may
borrow such funds from Waste Management on open account under both the $100
Million Facility and the Compensating Balance Facility at floating interest
rates that will match Waste Management's 30-day commercial paper rate plus
Waste Management's cost of providing funds. The Company may at its option also
borrow funds for fixed terms of up to ten years under the Compensating Balance
Facility (however the maturities of such borrowings may not extend beyond the
date on which the Company's deposits with Waste Management come due) and for
fixed terms of up to 270 days under the $100 Million Facility. The interest
rate for any fixed or term loan borrowing by the Company will be Waste
Management's total effective cost for borrowings of a comparable maturity. To
the extent that the Company can demonstrate the availability to it of lower
short-term borrowing rates, or higher rates of return on short-term
investments involving risks comparable to those inherent in investments in
short-term debt instruments of Waste Management, it is entitled to pay such
rates on amounts borrowed from Waste Management or receive such rates on
amounts invested with Waste Management, as the case may be. As of December 31,
1997, the amount of the Company's deposits with Waste Management totaled
approximately $450.4 million. The largest amount on deposit with Waste
Management during 1997 was approximately $471.1 million. During 1997, the
Company was paid interest on such deposits at rates adjusted every month
ranging from 5.3% to 6.0%. The Company had no borrowings from Waste Management
as of December 31, 1997. The largest amount of such borrowings outstanding
during 1997 was approximately $109.9 million. Obligations due to Waste
Management during 1997 bore interest at rates, adjusted every month, ranging
from 5.3% to 6.1%.
 
  Under the Amended Intercorporate Agreement, Waste Management also agreed to
make available to the Company various corporate and support services,
including, among other things, the services of Waste Management's
transportation, federal and state government affairs, legal, treasury, tax and
environmental audit departments. The Amended Intercorporate Agreement also
requires Waste Management to make available to the Company the services of
Waste Management's corporate risk management department for purposes of
administering the Company's insurance and risk management programs. Such
corporate support and risk management services are supplied by Waste
Management on a cost reimbursement basis. During 1997, the Company paid Waste
Management approximately $1.9 million for these and related services.
 
  Pursuant to the Amended Intercorporate Agreement, the Company is designated
as the preferred vendor to Waste Management and CWM for all engineered
products of the types then being manufactured or assembled by the Company,
including air pollution control systems and equipment. There were no sales by
the Company to Waste Management or its subsidiaries of such engineered
products in 1997.
 
  The Amended Intercorporate Agreement also provides that Waste Management has
the cumulative, continuing right to purchase from the Company for cash or cash
equivalents such number of shares of Common Shares and other capital stock as
may be necessary for Waste Management to continue to own a majority of the
Company's outstanding voting stock. Waste Management's rights under this
option will expire in the event that such option is exercisable as of the end
of any calendar year and is not exercised by April 30 of the immediately
following year. The purchase price for the shares of the capital stock of the
Company will be the then current fair market value of such shares. The Company
is required to maintain a sufficient number of shares of authorized but
unissued capital stock, together with any treasury stock, to permit Waste
Management to exercise its option, and will take such reasonable steps as
Waste Management may request to cause such shares to be listed on the New York
Stock Exchange upon issuance and to be subject to the registration rights
currently held by Waste Management with respect to shares of stock of the
Company already held by it.
 
  With the exception of the $100 Million Facility, which expires December 31,
1998, with automatic annual renewal periods thereafter, the Amended
Intercorporate Agreement will terminate at the time of the termination of
Waste Management's option to maintain the Company as a majority-owned
subsidiary of Waste Management. Either Waste Management or the Company have
the right to terminate the $100 Million Facility effective as of any renewal
date by providing 90 days prior written notice of its intent to so terminate
the facility.
 
 
                                      43

 
WM INTERNATIONAL AGREEMENTS
 
  Waste Management, WMNA, the Company, CWM, WM International, Waste Management
Europe N.V., WTI International Holdings Inc. and RIH Inc. are parties to a
Third Amended and Restated International Development Agreement (the "IDA")
dated January 1, 1993. The IDA is a successor to an agreement originally
entered into by Waste Management, CWM, the Company and certain of their
affiliates in connection with a 1990 merger.
 
  The IDA was twice amended and restated in its entirety, first in connection
with the initial public offering by WM International of ordinary shares of its
capital stock, and again in connection with the Rust Transaction (defined
below), described below, primarily to provide for the transfer, from CWM to
Rust, of CWM's rights thereunder. Pursuant to the IDA, as amended, the
Company, Waste Management and Rust have agreed to vote their WM International
shares so that one designee of the Company (or such greater number as shall
equal to the total number of directors multiplied by the percentage of
outstanding WM International shares held by the Company, reduced to the
nearest whole number) shall be elected to the Board of Directors of WM
International, so long as the Company continues to own or has the right to
acquire at least 10% of WM International's outstanding shares (Mr. Miller has
been designated by the Company as its designee). This agreement also grants
the Company an option to maintain beneficial ownership of WM International's
outstanding shares at a level having not less than 10% of the voting power of
outstanding WM International securities. Pursuant to this agreement, the
Company granted to Waste Management certain rights of first refusal with
respect to its WM International shares, Waste Management granted to the
Company certain participation rights with respect to a disposition of WM
International shares by Waste Management, and WM International granted to the
Company rights to participation and demand registrations under the Securities
Act of 1933 and rights to have WM International facilitate sales in offerings
made outside of the United States.
 
  At the time of WM International's initial public offerings, the Company,
CWM, WMNA Waste Management, and WM International entered into an International
Business Opportunities Agreement, which includes certain terms previously
contained in the IDA and the Master Intercorporate Agreement discussed above.
The International Business Opportunities Agreement was amended and restated in
connection with the Rust Transaction, described below, and Rust was added as a
party. Under the Amended and Restated International Business Opportunities
Agreement, the parties agreed that in order to minimize the potential for
conflicts of interest among various subsidiaries under the common control of
Waste Management, Waste Management has the right to direct all business
opportunities to Waste Management-controlled subsidiary which, in Waste
Management's reasonable and good faith judgment, has the most experience and
expertise in that line of business. Waste management services opportunities
outside of North America will be allocated primarily to WM International, and
the Company has agreed not to conduct waste management services operations
outside of North America other than through its interest in WM International
until the later of July 1, 2000 and the date Waste Management ceases to
beneficially own a majority of the outstanding shares of common stock of the
Company or a majority of all outstanding voting equity interests of WM
International.
 
  The Company, CWM, Rust, Waste Management and WM International are also
parties to a First Amended and Restated Master License Agreement originally
entered into in connection with the initial public offering of WM
International. Under the Master License Agreement, as amended, each of Waste
Management, CWM, Rust and the Company, on the one hand, and WM International,
on the other, was granted the right to obtain from time to time a non-
exclusive license of patents, technology, trademarks, know-how and other
intellectual property of the other. A party's license of intellectual property
would be usable only within the scope of activities allocated to the party by
the Amended and Restated International Business Opportunities Agreement and
would be subject to the party's payment of a royalty equal to the fair market
value of the license at the time of the grant of the license (subject to a
"most favored nation" pricing provision). Sublicensing is not permitted. All
of the parties have agreed to share business information and to keep such
information confidential. Any services to be provided by the licensing party
in connection with the grant of the license and the compensation for the
services would be as agreed by the parties to the license at the time of its
grant. The Amended and Restated International
 
                                      44

 
Business Opportunities Agreement permits the Company to license technology to
third parties anywhere in the world, subject to certain conditions.
 
  In July 1995, the Company and WM International entered into a joint venture
agreement to develop waste-to-energy ("WTE") projects outside of North
America, Germany and Italy (the "Joint Venture"). The Joint Venture will have
the first right to develop WTE projects anywhere in the world outside of North
America (which remains exclusively allocated to the Company), Germany and
Italy (which remain exclusively allocated to WM International). The Company
will have responsibility for early stage development of WTE projects and will
bear all of the costs of development of these WTE projects. Subject to some
exceptions, the Company has committed to expend $10 million toward such
development costs during the initial five-year term of the Joint Venture,
which expires on July 1, 2000. Thereafter, the Joint Venture will continue
indefinitely, subject to the right of either WM International or the Company
to terminate it by giving one year's written notice. WM International has the
option to hold up to a 49% equity interest in each project developed by the
Company pursuant to the Joint Venture. During 1997, the Company expended
approximately $856,000 in development costs pursuant to the Joint Venture.
 
RUST TRANSACTION
 
  In December 1992, an Organizational Agreement was entered into among the
Company, CWM and the Brand Companies, Inc. ("Brand") pursuant to which the
Company and CWM agreed to organize Rust and to acquire newly issued shares of
Rust in exchange for contributing certain business to Rust (the "Rust
Transaction"). On January 1, 1993, pursuant to the Organization Agreement, the
Company contributed to Rust, in exchange for approximately 42% of the
outstanding capital stock of Rust at that time, its two principal engineering,
environmental consulting and construction businesses, its London-based
international engineering and consulting business, certain Disposal Credits
and cash. At the same time, CWM contributed to Rust, in exchange for
approximately 58% of the outstanding capital stock of Rust at that time, all
of its ownership in Brand, its hazardous substance remediation services
businesses, its ownership interest in WM International and certain
indebtedness owed by Brand to CWM. In addition, the Company, CWM, Rust and
various of their affiliates entered into several ancillary agreements
described below or under "WM International Agreements" above.
 
  Subsequent to the Rust Transaction, on May 7, 1993 Brand was merged into a
subsidiary of Rust, and Rust became owned approximately 40% by the Company,
56% by CWM, and 4% by the former public stockholders of Brand. In July 1995,
Waste Management acquired the outstanding shares of Rust common stock not
already owned by the Company or CWM. Although the Company was offered the
opportunity to participate in the transaction, the Company determined not to
participate following a review of the proposed transaction by the Company's
independent directors. The transaction did not affect the Company's 40%
ownership interest in Rust nor did it effect any change in control of Rust.
 
  The Company, Waste Management, CWM and Rust have also entered into the Rust
Intercorporate Services Agreement pursuant to which Waste Management has
committed to loan to Rust up to $350 million, and to provide Rust (at Rust's
expense) with all appropriate insurance coverages and bid, performance and
other surety bonds to the extent reasonably available, all on terms
substantially similar to Waste Management's arrangement with the Company as
described above under "Amended and Restated Master Intercorporate Agreement."
Under the Rust Intercorporate Services Agreement, Rust also agreed to provide
the Company with certain administrative and benefit services previously
managed by one of the subsidiaries of the Company contributed to Rust. Such
services are provided on a fully allocated cost basis. The Company did not
utilize any services under this agreement in 1997. Waste Management, the
Company and CWM have also agreed that Rust will be the preferred vender of
architectural, design, engineering, construction and construction management
services (including related procurement services), environmental consulting
and engineering services, hazardous remediation services, and industrial
maintenance and other construction services of the type generally offered by
Rust and its subsidiaries to third parties. During 1997, the Company paid Rust
$1.1 million for such services, which the Company believes reflects the
approximate value for which the Company could have obtained comparable
 
                                      45

 
services from unaffiliated third parties. In January 1996, partially as a
consequence of Rust's decision to sell its process engineering and
construction businesses, the Rust Intercorporate Services Agreement was
amended to authorize Waste Management and its subsidiaries to provide
management services to Rust Industrial Services Inc., a Rust subsidiary, and
to authorize the Company to find and implement alternative arrangements for
obtaining benefits administrative services. With the exception of certain
provisions related to the committed credit facility discussed above, the Rust
Intercorporate Services Agreement is scheduled to terminate on December 31,
2002.
 
STOCK OPTION PLAN LOANS
 
  When an option is exercised by an optionee under the Stock Option Plans at a
time when the fair market value of the underlying stock exceeds the option
exercise price, the difference is treated as ordinary income to the optionee
for income tax purposes and the Company is entitled to a deduction equal to
such amount. The Internal Revenue Service has indicated that it will disallow
such a deduction unless the employer withholds the tax payable by the optionee
by reason of such exercise. To facilitate the purchase of stock upon exercise
of such options, and to assure itself of the deductions, the Company has a
policy of making available interest-free loans, in an amount up to the
equivalent of all applicable tax withholding requirements, to optionees whose
exercise of options results in ordinary income to them in excess of $10,000.
All such loans are required to be repaid not later than April 15 in the year
following the year in which such loans were made, unless otherwise extended.
There were no such loans in excess of $60,000 outstanding to the Company's
directors and executive officers during the period from January 1, 1996
through December 31, 1997. The Company also makes available to optionees
interest-free loans for a period not to exceed 15 days to facilitate the
exercise of options and the sale of the underlying stock. The largest amounts
of such loans from the Company in excess of $60,000 pursuant to such policy
which were outstanding to the Company's directors and executive officers
during the period from January 1, 1996 through December 31, 1997 were as
follows: Richard S. Haak, Jr.--$70,546; Mark Paul--$867,351; James Wood--
$261,482; Mr. Meister--$1,295,955; John D. Sanford--$559,352; James E.
Koenig--$2,832,310. Such loans have been repaid and were not outstanding as of
February 10, 1998.
 
OTHER PAYMENTS
 
  The Company provides services to, and purchases services from, Waste
Management and its affiliated companies in the ordinary course of business at
market rates. During 1997, the Company made payments in addition to those
described above of (i) approximately $6.5 million to Waste Management for
waste transportation services; (ii) approximately $250,000 to Waste Management
for office space rental; (iii) approximately $536,000 for wood waste fuel;
(iv) approximately $473,000 for biosolids pellet disposal; and (v)
approximately $158,500 to Waste Management for miscellaneous equipment rentals
and services. During 1997, Waste Management delivered waste for disposal to
certain facilities of the Company pursuant to various contractual
arrangements, for which Waste Management paid disposal fees aggregating
approximately $28.1 million. During 1997, Waste Management paid the Company
$202,000 for office space rental and approximately $178,000 for land spreading
greenwaste.
 
  Waste Management has agreed to provide a guarantee in respect of the
Company's outstanding indebtedness at one of its trash-to-energy facilities.
As consideration for Waste Management's credit support, the Company pays Waste
Management an annual fee equal to 0.25% of the principal amount of such
outstanding indebtedness. The Company believes such annual fee to be at a rate
equal to or better than that obtainable from unaffiliated third parties with a
similar credit rating. In 1997, the Company paid Waste Management
approximately $78,000 for such credit support.
 
                                      46

 
                             SECURITIES OWNERSHIP
 
OWNERSHIP OF COMMON SHARES
 
  By Waste Management, Certain Holders and the Directors and Executive
Officers of Waste Management
 
  The following table sets forth certain information as of February 1, 1998 as
to the beneficial ownership of Common Shares by Waste Management, certain
holders, the directors of Waste Management, each person who served as Chief
Executive Officer of Waste Management during 1997, the four other most highly
compensated executive officers of Waste Management, two executive officers who
would have been included in the four most highly compensated executive
officers but were not officers of Waste Management on December 31, 1997 and
all directors and persons serving as executive officers of Waste Management as
a group:
 


                          NUMBER OF COMMON  PERCENT OF
                               SHARES       OUTSTANDING
                            BENEFICIALLY   COMMON SHARES
NAME                      OWNED (1)(2)(3)     (2)(3)
- - - ----                      ---------------- -------------
                                     
Waste Management, Inc...    104,621,810        66.5%
 3003 Butterfield Road
 Oak Brook, Illinois
  60523
Waste Management, Inc.
 Retirement Savings
 Plan...................         21,948           *
Wheelabrator-Rust
 Savings and Retirement
 Plan...................        632,454           *
H. Jesse Arnelle........              0           *
Dean L. Buntrock........        116,377           *
Pastora San Juan
Cafferty................              0           *
Jerry E. Dempsey........         34,336           *
James B. Edwards........              0           *
Donald F. Flynn.........         45,245           *
Roderick M. Hills.......              0           *
Robert S. Miller........              0           *
Paul M. Montrone........        256,000           *
Peer Pedersen...........              0           *
James R. Peterson.......              0           *
John C. Pope............              0           *
Steven G. Rothmeier.....              0           *
Alexander B. Trowbridge.              0           *
Phillip B. Rooney.......        374,769           *
Ronald T. LeMay.........              0           *
Joseph M. Holsten.......              0           *
William P. Hulligan.....              0           *
James E. Koenig.........          1,500           *
Herbert A. Getz.........         73,414           *
D.P. Payne..............              0           *
Jerry W. Caudle.........              0           *
L. Michael Collier......              0           *
All directors and
 executive officers as a
 group
 including persons named
 above (27 persons).....        901,641           *

- - - --------
  *Less than one percent.
(1) The above named persons and members of such group have sole voting power
    and sole investment power over Common Shares listed, except (i) Common
    Shares covered by options exercisable within 60 days of February 1, 1998;
    (ii) Messrs. Getz and Koenig, and all executive officers and directors as
    a group (including such individuals), who have shared voting and
    investment power with their spouses over 73,414 and 1,500 Common Shares,
    respectively; (iii) 1,000 shares for Mr. Dempsey (held by spouse
    directly); and
 
                                      47

 
   (iv) 10,000 Common Shares that Messrs. Buntrock, Flynn and Rooney each are
   entitled to receive as a result of restricted units granted pursuant to the
   Company's Restricted Unit Plan for Non-Employee Directors.
(2) Excludes an aggregate of 104,621,810 Common Shares that may be deemed to
    be beneficially owned by the officers and directors of Waste Management,
    if such officers and directors of Waste Management are deemed affiliates
    of Waste Management. The officers and directors of Waste Management
    disclaim any beneficial ownership of such WTI shares.
(3) The numbers and percentages of shares shown in the table are based on the
    assumption that currently outstanding stock options covering Common Shares
    which were exercisable within 60 days of February 1, 1998 had been
    exercised as follows: Mr. Montrone---256,000. Mr. Montrone disclaims any
    beneficial ownership of the shares subject to such option.
 
 By the Directors and Executive Officers of the Company
 
  The following table sets forth certain information as of February 1, 1998 as
to the beneficial ownership of Common Shares by the directors of the Company,
each person who served as Chief Executive Officer during 1997, the three other
most highly compensated executive officers of the Company and by all directors
and persons serving as executive officers of the Company as a group:
 


                                          NUMBER OF COMMON       PERCENT OF
                                         SHARES BENEFICIALLY     OUTSTANDING
NAME                                       OWNED(1)(2)(3)    COMMON SHARES(2)(3)
- - - ----                                     ------------------- -------------------
                                                       
Robert S. Miller.......................               0                *
Donald F. Flynn........................          45,245                *
Kay Hahn Harrell.......................          10,000                *
John M. Kehoe, Jr......................         386,938                *
Paul M. Meister........................          53,000                *
Edward J. Noha.........................           3,000                *
Phillip B. Rooney......................         374,769                *
Manuel Sanchez.........................          30,000                *
Lt. Gen. Thomas P. Stafford............          30,212                *
Robert J. Gagalis......................          39,598                *
Lawrence W. Plitch.....................          29,392                *
Richard S. Haak, Jr....................          55,275                *
All directors and executive officers as
 a group including persons named above
 (12 persons)..........................       1,061,023                *

- - - --------
*Less than one percent.
(1) The above named persons and members of such group have sole voting power
    and sole investment power over Common Shares listed, except (i) Common
    Shares covered by options exercisable within 60 days of February 1, 1998;
    (ii) Common Shares held pursuant to the Company's Savings and Retirement
    Plan; and (iii) 10,000 Common Shares that Messrs. Flynn and Rooney each
    are entitled to receive as a result of restricted units granted pursuant
    to the Company's Restricted Unit Plan for Non-Employee Directors.
(2) Excludes an aggregate of 104,621,810 Common Shares owned by Waste
    Management that may be deemed to be beneficially owned by Messrs. Miller
    and Flynn because each person may be deemed to be an affiliate of Waste
    Management. Each such person disclaims any beneficial ownership of such
    Common Shares.
(3) The number and percentages of Common Shares owned by the above named
    persons and the members of such group assume, in each case, that currently
    outstanding stock options covering Common Shares which were exercisable
    within 60 days of February 1, 1998 had been exercised as follows: Mr.
    Gagalis--38,212; Mr. Haak--53,044; Ms. Harrell--9,000; Mr. Kehoe--369,190;
    Mr. Meister--53,000; Mr. Noha--3,000; Mr. Sanchez--30,000; Lt. Gen.
    Stafford--30,000; Mr. Plitch--29,392; and all executive officers and
    directors as a group (including such individuals)--614,838. Such persons
    and the members of such group disclaim any beneficial ownership of the
    Common Shares subject to such options.
 
                                      48

 
  Since November 22, 1997, 60 days prior to the initial filing of the Schedule
13E-3, through February 1, 1998, none of Waste Management, the Company, any
majority owned subsidiary of Waste Management, any director or executive
officer of Waste Management or the Company and no pension, profit-sharing or
similar plan of Waste Management or the Company has effected any purchases or
sales of Common Shares, except as set forth below.
 


                                           PRICE PER                   NUMBER OF
                                            COMMON                      COMMON
NAME                           TRANSACTION   SHARE         DATE         SHARES
- - - ----                           ----------- --------- ----------------- ---------
                                                           
Waste Management Inc.
 Retirement Savings Plan.....  Sale        $15.35    November 24, 1997      930
Herbert A. Getz..............  Purchase(1) $ 8.9031  November 28, 1997  240,000
Herbert A. Getz..............  Sale(1)     $16.00    December 10, 1997  134,000
Waste Management Inc.
 Retirement Savings Plan.....  Sale        $15.98    December 16, 1997       38
Wheelabrator-Rust Savings and
 Retirement Plan.............  Sale        $16.1875  January 27, 1998    13,730

- - - --------
(1) Mr. Getz exercised an option to acquire 240,000 Common Shares on November
    28, 1997, and in connection therewith sold 134,000 Common Shares in a
    market transaction on December 10, 1997, to cover the exercise price of
    such option, and effected the withholding by the Company of 32,586 Common
    Shares to cover withholding taxes in connection with the option exercise.
 
OWNERSHIP OF WASTE MANAGEMENT SHARES BY DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANY
 
  The following table sets forth certain information as of February 1, 1998 as
to the beneficial ownership of shares of common stock of Waste Management by
the directors of the Company, each person who served as Chief Executive
Officer of the Company during 1997, the three other most highly compensated
executive officers of the Company, and all directors and persons serving as
executive officers of the Company as a group:
 


                                                 NUMBER OF        PERCENT OF
                                               COMPANY SHARES    OUTSTANDING
                                             BENEFICIALLY OWNED COMPANY SHARES
NAME                                             (1)(2)(3)           (2)
- - - ----                                         ------------------ --------------
                                                          
Robert S. Miller............................         1,511             *
Donald F. Flynn.............................       508,234             *
Kay Hahn Harrell............................         2,513             *
John M. Kehoe, Jr. .........................        47,675             *
Paul M. Meister.............................             0             *
Edward J. Noha..............................             0             *
Phillip B. Rooney...........................     1,953,276             *
Manuel Sanchez..............................             0             *
Lt. Gen. Thomas P. Stafford.................             0             *
Robert J. Gagalis...........................             0             *
Lawrence W. Plitch..........................             0             *
Richard S. Haak, Jr. .......................           127             *
All directors and executive officers as a
 group including persons named above (12
 persons)...................................     2,513,336             *

- - - --------
*Less than one percent.
(1) The above named persons and members of such group have sole voting power
    and sole investment power over the Waste Management shares listed, except
    (i) Waste Management shares covered by options granted under Waste
    Management's stock option plans which were exercisable within 60 days of
    February 1, 1998; (ii) Waste Management shares issuable upon conversion of
    Waste Management Convertible Subordinated Notes due 2005 ("Convertible
    Notes"); (iii) Waste Management shares held pursuant to Waste Management's
    Retirement Savings Plan and the Company's Savings and Retirement Plan; and
    (iv) Messrs. Miller and Rooney, and all executive officers and directors
    as a group (including such individuals), who have shared voting and
    investment power over 1,000 and 58,392 Waste Management shares,
    respectively.
 
                                      49

 
   Such Waste Management shares shown for Mr. Rooney are held in trusts or
   foundations over which he shares voting and investment power with other co-
   trustees or directors of such trusts and foundations. Such Waste Management
   shares shown for Mr. Miller are held jointly with his spouse. Ownership of
   Waste Management shares shown for Mr. Rooney, and for all executive
   officers and directors as a group, includes Waste Management shares not
   held directly by them but held by or for the benefit of (i) their spouses
   or (ii) their minor children and other children residing with them, as to
   which they have neither investment power nor voting power. Waste Management
   shares were held by or for the benefit of such spouses or children of the
   following directors and all executive officers and directors as a group at
   February 1, 1998, in the amounts indicated; Mr. Rooney--102,648 (held by
   spouse directly and as trustee for children); and all executive officers
   and directors as a group (including such individual)--102,648. Each of the
   above named persons and the members of such group disclaim any beneficial
   ownership of such Waste Management shares.
(2) The numbers and percentages of Waste Management shares owned by the above
    named persons and the members of such group assume that currently
    outstanding stock options covering Waste Management shares which were
    exercisable within 60 days of February 1, 1998 had been exercised as
    follows: Mr. Kehoe--14,119; Mr. Rooney--1,258,537; and all executive
    officers and directors as a group (including such individuals)--1,272,656.
    Such numbers and percentages also assume that 318 Waste Management shares
    were issued to Ms. Harrell upon conversion of Convertible Notes. Such
    persons and the members of such group disclaim any beneficial ownership of
    the Waste Management shares subject to such options or issuable upon
    conversion of Convertible Notes.
(3) Pursuant to Waste Management's Non-Qualified Retirement Savings Plus Plan,
    Mr. Rooney acquired beneficial ownership of the equivalent of an
    additional 66,086 shares in connection with his voluntary deferral of
    bonus payments earned under Waste Management's Corporate Incentive Bonus
    Plan for 1995 and 1996.
 
                MANAGEMENT OF WASTE MANAGEMENT AND THE COMPANY
 
DIRECTORS OF WASTE MANAGEMENT
 
  Set forth below are the name and business address of each person who is a
director of Waste Management and, unless disclosed elsewhere in "Management of
Waste Management and the Company," (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, AGE AND ADDRESS                   PRINCIPAL OCCUPATIONS
 
H. JESSE ARNELLE, 64.. c/o Waste Mr. Arnelle has been a director of Waste
Management, Inc. 3003            Management since 1992. In October 1997, he
Butterfield Road Oak Brook, IL   became counsel to Womble, Carlyle, Sandridge
60523                            and Rice, a law firm in Winston-Salem, North
                                 Carolina. For more than 10 years prior
                                 thereto, Mr. Arnelle was senior partner of
                                 Arnelle, Hastic, McGee, Willis and Greene, a
                                 San Francisco-based law firm. From 1993 to
                                 1998, he served as Vice Chairman and the
                                 Chairman of the Board of Trustees of the
                                 Pennsylvania State University. 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.
 
                                      50

 
      NAME, AGE AND ADDRESS                   PRINCIPAL OCCUPATIONS
 
DR. PASTORA SAN JUAN CAFFERTY,     Dr. Cafferty was elected a director of
57...............................  Waste Management in July 1994. She has
The University of Chicago The      served as a Professor since 1985 at the
School of Social Service           University of Chicago, where she has been
Administration 969 East 60th       on the faculty since 1971. Dr. Cafferty
Street Chicago, IL 60637           also serves as a director of Kimberly-Clark
                                   Corporation, Harris Bankcorp, Inc. and its
                                   subsidiary Harris Trust and Savings Bank,
                                   and People's Energy Corporation, and is on
                                   the boards of the Rush-Presbyterian-St.
                                   Luke's Medical Center and the Lyric Opera
                                   Association, both in Chicago.
 
JERRY E. DEMPSEY, 65... c/o Waste  Mr. Dempsey has served as a director of
Management, Inc. 3003              Waste Management since 1984. From September
Butterfield Road Oak Brook, IL     1993 until July 1997, he was Chairman and
60523                              Chief Executive Officer of PPG Industries,
                                   Inc., a glass, coatings and chemicals
                                   company, and thereafter its Chairman until
                                   he retired on November 1, 1997. From April
                                   1984 to May 1988, Mr. Dempsey served as
                                   Vice Chairman of the Board of Waste
                                   Management. From May 1988 to June 1993, Mr.
                                   Dempsey was Senior Vice President of Waste
                                   Management. From September 1991 to May
                                   1993, Mr. Dempsey served as Chairman of the
                                   Board of CWM. Mr. Dempsey is also a
                                   director of Navistar International Corp.
                                   and Eastman Chemical Co.
 
DR. JAMES B. EDWARDS, 70.. Office  Dr. Edwards has served as a director of
of the President Medical           Waste Management since 1995 and has been
University of South Carolina 171   President of the Medical University of
Ashley Avenue Charleston, SC       South Carolina since November 1982. From
29425                              January 1981 to November 1982, he served as
                                   the United States Secretary of Energy, and
                                   previously as Governor of the State of
                                   South Carolina. Dr. Edwards is also a
                                   director of Phillips Petroleum Company,
                                   SCANA Corporation, Imo Industries Inc. and
                                   National Data Corporation.
 
DONALD F. FLYNN, 57..............  Mr. Flynn has served as a director of Waste
Flynn Enterprises, Inc. 676        Management since 1981 and as Chairman of
North Michigan Avenue Suite 4000   the Board and President of Flynn
Chicago, IL 60611                  Enterprises, Inc., a financial advisory and
                                   venture capital firm, since February 1988.
                                   He also has been since February 1997 the
                                   Vice Chairman of Blue Chip Casino, Inc., an
                                   owner and operator of a riverboat gaming
                                   vessel in Michigan City, Indiana. He also
                                   served as Chairman of the Board and Chief
                                   Executive Officer of Discovery Zone, Inc.
                                   ("Discovery Zone"), an operator of indoor
                                   fun and fitness centers for children, from
                                   July 1992 until February 1996 and May 1995,
                                   respectively. Discovery Zone, which in
                                   March 1996 announced that it filed a
                                   voluntary petition under Chapter 11 of the
                                   U.S. Bankruptcy Code, emerged from
                                   bankruptcy with a Plan of Reorganization
                                   that was approved by the bankruptcy court
                                   in July 1997. Mr. Flynn was a Senior Vice
                                   President of Waste Management from May 1975
                                   to January 1991. He also served as Waste
                                   Management's Chief Financial Officer from
                                   March 1972 to December 1989 and Waste
                                   Management's Treasurer from May 1979 to
                                   December 1986. Mr. Flynn is also a director
                                   of Extended Stay America, Inc.,
                                   Psychemedics Corporation, the Company and
                                   WM International.
 
 
                                      51

 
      NAME, AGE AND ADDRESS                   PRINCIPAL OCCUPATIONS
 
RODERICK M. HILLS, 67............  Mr. Hills has been a director of the
Hills Enterprises, Ltd. 1200       Company since November 1997 and President
19th Street, N.W.Suite             of Hills Enterprises, Ltd. (formerly The
201Washington, D.C. 20036          Manchester Group, Ltd.), a consulting firm,
                                   since 1987 and a partner in Hills & Hills,
                                   a law firm, since 1994. Mr. Hills has also
                                   served as Vice Chairman of Oak Industries,
                                   Inc., a manufacturing firm, since 1989. Mr.
                                   Hills served from September to November
                                   1996 as Chairman of Federal-Mogul
                                   Corporation, an automotive parts
                                   manufacturing firm. Mr. Hills served as
                                   Chairman of the Securities and Exchange
                                   Commission from 1975 to 1977 and as Counsel
                                   to the President of the United States in
                                   1975. Mr. Hills is also a director of
                                   Federal-Mogul Corporation and Oak
                                   Industries, Inc.
 
ROBERT S. MILLER, 56....... Waste  Mr. Miller has served as Acting Chairman of
Management, Inc. 3003              the Board and Chief Executive Officer of
Butterfield Road Oak Brook, IL     Waste Management since October 29, 1997.
60523                              Mr. Miller also is Vice Chairman of
                                   Morrison Knudsen Corporation, an
                                   engineering and construction firm. He
                                   served as Acting Chief Executive Officer of
                                   Federal-Mogul Corporation, an automotive
                                   parts manufacturing firm, from September
                                   until November 1996, and as Chairman of
                                   Morrison Knudsen Corporation from April
                                   1995 until September 1996. In addition,
                                   since 1993 he has served as Vice President
                                   and Treasurer of Moore Mill and Lumber, a
                                   privately held forest products firm, and
                                   from 1992 until 1993, he served as a Senior
                                   Partner of James D. Wolfensohn, Inc., an
                                   investment banking firm. From 1979 to 1992,
                                   Mr. Miller worked at Chrysler Corporation,
                                   an automobile and truck manufacturing firm,
                                   rising to become Vice Chairman of the Board
                                   after serving as the company's Chief
                                   Financial Officer. Mr. Miller is a director
                                   of Federal-Mogul Corporation, Fluke
                                   Corporation, Morrison Knudsen Corporation,
                                   Pope & Talbot, Inc., and Symantec
                                   Corporation.
 
PAUL M. MONTRONE, 56...... Fisher  Mr. Montrone has served as a director of
Scientific International Inc.      Waste Management since January 1997. Mr.
Liberty Lane Hampton, NH 03842     Montrone has been Chairman of the Board
                                   since February 1998, and President, Chief
                                   Executive Officer and a director since
                                   December 1991, of Fisher Scientific
                                   International Inc., a provider of
                                   scientific equipment and supplies ("Fisher
                                   Scientific"). 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 manufacturer of engineered
                                   components for aerospace, defense
                                   industrial and commercial markets, or its
                                   predecessors, from 1992 to 1995. Mr.
                                   Montrone was a director of the Company or a
                                   predecessor thereof since prior to 1989
                                   until January 1997.
 
 
                                      52

 
      NAME, AGE AND ADDRESS                   PRINCIPAL OCCUPATIONS
 
PEER PEDERSEN, 72..... Pedersen &  Mr. Pedersen has been a director of Waste
Houpt, P.C. 161 North Clark        Management since 1979 and Chairman of the
Street Suite 3100 Chicago, IL      Board and Managing Partner of the law firm
60601-3224                         of Pedersen & Houpt, P.C. for more than the
                                   past five years. Mr. Pedersen is also a
                                   director of Aon Corporation, Boston
                                   Chicken, Inc., Latin American Growth Fund,
                                   Tennis Corporation of America and Extended
                                   Stay America, Inc.
 
JAMES R. PETERSON, 70............  Mr. Peterson has been a director of Waste
c/o Waste Management, Inc. 3003    Management since 1980 and was a director
Butterfield Road Oak Brook, IL     and President and Chief Executive Officer
60523                              of The Parker Pen Company from January 1982
                                   to January 1985. The Parker Pen Company was
                                   principally involved in the manufacture and
                                   distribution of writing instruments and in
                                   providing temporary help services. Mr.
                                   Peterson is also a director of The Dun &
                                   Bradstreet Corporation and Cognizant
                                   Corporation.
 
JOHN C. POPE, 48.................  Mr. Pope was elected a director of the
MotivePower Industries, Inc. 810   Company in November 1997. Since January
South Ridge Road Lake Forest, IL   1996, he has been Chairman of the Board of
60045                              MotivePower Industries, Inc., a
                                   manufacturer and remanufacturer of
                                   locomotives and locomotive components. Mr.
                                   Pope served as President and Chief
                                   Operating Officer of United Airlines and
                                   its parent corporation, 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 director
                                   of Federal-Mogul Corporation, Wallace
                                   Computer Services, Inc., Medaphis
                                   Corporation, MotivePower Industries, Inc.,
                                   Lamalie Associates, Inc. and Dollar Thrifty
                                   Automotive Group, Inc.
 
STEVEN G. ROTHMEIER, 50..........  Mr. Rothmeier has served as a director of
Great Northern Capital 332         Waste Management since March 1997 and has
Minnesota Street Suite W2900 St.   been Chairman and Chief Executive Officer
Paul, MN 55101                     of Great Northern Capital, a private
                                   investment management, consulting 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 10 years prior thereto, he served
                                   Northwest Airlines, Inc. or its parent
                                   corporation, NWA, Inc., in various
                                   executive capacities, including Chairman
                                   and Chief Executive Officer from 1986 to
                                   1989. Mr. Rothmeier is also a director of
                                   Honeywell, Inc., Department 56, Inc., E. W.
                                   Blanch Holdings, Inc. and Precision
                                   Castparts Corp.
 
ALEXANDER B. TROWBRIDGE, 68......  Mr. Trowbridge has served as a director of
Trowbridge Partners, Inc. 1317 F   Waste Management since 1985 and President
Street, N.W. Suite 500             of Trowbridge Partners, Inc., a consulting
Washington, D.C. 20004             services firm, since January 1990. He was
                                   President of the National Association of
                                   Manufacturers, Washington, D.C., from
                                   January 1980 to January 1990. Mr.
                                   Trowbridge also served as U.S. Secretary of
                                   Commerce in 1967 and 1968 and as Vice
                                   Chairman of Allied Chemical Corp. from 1976
                                   to
 
                                      53

 
                                   1980. He also serves as a director of New
                                   England Life Insurance Co., The Rouse Co.,
                                   Harris Corp., Sun Co. Inc., The Gillette
                                   Co., Warburg-Pincus Counsellors Funds and
                                   Icos Corp.
 
EXECUTIVE OFFICERS OF WASTE MANAGEMENT
 
  Set forth below are the name and business address if different than Waste
Management's address of each executive officer of Waste Management who is not
also a director of Waste Management and unless disclosed elsewhere in
"Management of Waste Management and the Company," (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 such
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, AGE AND ADDRESS                   PRINCIPAL OCCUPATIONS
 
JERRY W. CAUDLE, 55..............  Mr. Caudle has been Senior Vice President
                                   of the Company since December 1997. He
                                   served as a Group President in WMNA
                                   beginning in 1992, having previously been
                                   Vice President-West Region since October
                                   1990. Mr. Caudle has been employed by the
                                   Company since 1974.
 
DONALD R. CHAPPEL, 46............  Mr. Chappel, who was named Acting Chief
                                   Financial Officer of the Company in October
                                   1997, has served as its Vice President-
                                   Financial Services since November 1996 and
                                   Vice President and Controller (North
                                   American operations) since 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 Controller
                                   of CWM. Prior thereto he had served as Vice
                                   President and Controller-WMI Urban
                                   Services, beginning in June 1987 when he
                                   joined the Company.
 
MICHAEL J. COLE, 50..............  Mr. Cole was elected a Senior Vice
                                   President of the Company in December 1997.
                                   From September 1996 to November 1997, Mr.
                                   Cole served as a Group President in WMNA.
                                   Mr. Cole served as a Vice President of the
                                   Company from May to September 1996, and as
                                   its Group President-Technology Services
                                   from March to September 1996. He was
                                   previously President and Chief Executive
                                   Officer of CWM from March 1995 to March
                                   1996, and President of its Chem-Nuclear
                                   Systems, Inc. subsidiary from June 1991 to
                                   March 1995. Mr. Cole has been employed by
                                   the Company since 1976.
 
L. MICHAEL COLLIER, 50...........  Mr. Collier was elected a Senior Vice
                                   President of the Company in December 1997.
                                   From June 1996 until December 1997, he was
                                   an Area President in WMNA. From November
                                   1995 to May 1996, Mr. Collier served as
                                   Executive Vice President of WMNA, and from
                                   September 1990 to October 1995 as Vice
                                   President and Chief Operating Officer of WM
                                   International. Mr. Collier has been
                                   employed by the Company since 1973.
 
 
                                      54

 
      NAME, AGE AND ADDRESS                   PRINCIPAL OCCUPATIONS
 
HERBERT A. GETZ, 42..............  Mr. Getz has been a Senior Vice President
                                   of Waste Management since May 1995, Vice
                                   President of Waste Management since May
                                   1990 and General Counsel since August 1992.
                                   He has also been Secretary of Waste
                                   Management since January 1998. He also
                                   served as Assistant General Counsel of
                                   Waste Management from December 1985 until
                                   August 1992. Mr. Getz has also held the
                                   offices of Vice President, General Counsel
                                   and Secretary at WMNA from April 1989 until
                                   December 1993, and Vice President and
                                   Secretary of Rust from January 1993 until
                                   May 1994. He also served as Secretary of
                                   the Company from July 1995 to January 1997,
                                   a position he previously held, as well as
                                   being General Counsel of the Company, from
                                   November 1990 until May 1993. Mr. Getz
                                   commenced his employment with Waste
                                   Management in 1983. He is a director of NSC
                                   Corporation and OHM Corporation.
 
JOSEPH M. HOLSTEN, 45............  Mr. Holsten has been Executive Vice
                                   President and Chief Operating Officer of
                                   Waste Management since February 1997. He
                                   was Chief Executive Officer of WM
                                   International from July 1995 to March 1997.
                                   From October 1993 to July 1995, he was
                                   Executive Vice President and Chief
                                   Financial Officer of WMNA. Mr. Holsten was
                                   Vice President of Acquisitions and Project
                                   Development for WM International from April
                                   1992 to August 1993 and Vice President,
                                   Chief Financial Officer and Treasurer of
                                   Rust from September to October 1993. Mr.
                                   Holsten has been employed by Waste
                                   Management since 1981.
 
JAMES E. O'CONNOR, 48............  Mr. O'Connor has been a Senior Vice
                                   President of the Company since December
                                   1997. Beginning in 1993 he served as an
                                   Area President in WMNA, and prior thereto
                                   as a Group President in WMNA. Mr. O'Connor
                                   began his employment with the Company in
                                   1972.
 
D.P. PAYNE, 55...................  Mr. Payne has been a Senior Vice President
                                   of Waste Management since April 1995, a
                                   position he previously held from 1990 to
                                   1993. He also served as President and Chief
                                   Executive Officer and a director of CWM
                                   from September 1991 to March 1995. Mr.
                                   Payne has been employed by Waste Management
                                   since 1990.
 
MARK T. SPEARS, 40...............  Mr. Spears was elected Controller of the
                                   Company in November 1997 and as Vice
                                   President and Assistant Controller in
                                   August 1997. From April 1995 to July 1997,
                                   Mr. Spears served as Vice President and
                                   Controller of WM International, and from
                                   October 1993 to March 1995 as Vice
                                   President and Controller of Rust. Prior to
                                   October 1993, he was Vice President and
                                   Controller for various European operations
                                   of WM International. Mr. Spears has been
                                   employed by the Company since October 1988.
 
                                      55

 
DIRECTORS OF THE COMPANY
 
  Set forth below are the name and business address of each person who is a
director of the Company and, unless disclosed elsewhere in "Management of
Waste Management and the Company," (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, AGE AND ADDRESS                        PRINCIPAL OCCUPATIONS
 
 
DONALD F. FLYNN, 57........ Flynn  Mr. Flynn has been a director of the
Enterprises, Inc. 676 N.           Company or a predecessor thereto since
Michigan Ave. Suite 4000           September 1988. See "Executive Officers and
Chicago, IL 60611                  Directors of Waste Management._________ "
 
KAY HAHN HARRELL, 57... Fairmarsh  Ms. Harrell has been a director of the
Consultants 121 Shore Rush         Company since May 1995. Since April 1993,
Circle St. Simons Island, GA       Ms. Harrell has been Chairperson and Chief
31522                              Executive Officer of Fairmarsh Consultants,
                                   which provides investment and financial
                                   consulting services. Prior thereto, Ms.
                                   Harrell had been Senior Vice President and
                                   Director of Investment Research of The
                                   Chicago Corporation, an investment banking
                                   firm, for more than five years.
 
JOHN M. KEHOE, JR., 64......... 4  Mr. Kehoe has been a director of the
Liberty Lane West Hampton, NH      Company since May 1996. He has been
03842                              President and Chief Executive Officer of
                                   the Company since January 1997. From
                                   January 1993 until January 1997, Mr. Kehoe
                                   was President and Chief Operating Officer
                                   of the Company. He was Vice President of
                                   the Company from December 1991 through
                                   December 1992. Since November 1990, Mr.
                                   Kehoe has also served as President of
                                   Wheelabrator Environmental Systems Inc., a
                                   subsidiary of the Company.
 
PAUL M. MEISTER, 45....... Fisher  Mr. Meister has been a director of the
Scientific International Inc.      Company since January 1997, and previously
Liberty Lane Hampton, NH 03842     served as a director of the Company or a
                                   predecessor thereto from September 1988
                                   until May 1992. He also served as Managing
                                   Director of the Company or a predecessor
                                   thereto from September 1987 until November
                                   1990, and he served as Executive Vice
                                   President-Finance and Administration of the
                                   Company from December 1989 until November
                                   1990. Mr. Meister has been Senior Vice
                                   President-Chief Financial Officer of Fisher
                                   Scientific since 1991. Mr. Meister is a
                                   director of General Chemical, M&F Worldwide
                                   Corp., and Minerals Technologies Inc.
 
ROBERT S. MILLER, 56....... Waste  Mr. Miller has been a director of the
Management, Inc. 3003              Company since November 1997. See "Executive
Butterfield Road Oak Brook, IL     Officers and Directors of Waste
80523                              Management."
 
                                      56

 
 NAME, AGE AND ADDRESS                        PRINCIPAL OCCUPATIONS
 
EDWARD J. NOHA, 70 .......... CNA  Mr. Noha has been a director of the Company
Financial Corporation CNA Plaza    since January 1997. Since October 1992, Mr.
43rd Floor Chicago, IL 60685       Noha has been Chairman of the Board of
                                   Directors of CNA Financial Corporation, an
                                   insurance holding company. Previously he
                                   served as Chairman of the Board of
                                   Directors and Chief Executive Officer of
                                   the
                                   CNA Insurance Companies since February
                                   1975. Mr. Noha is a director of Loews
                                   Corporation.
 
MANUEL SANCHEZ, 50..... Sanchez &  Mr. Sanchez has been a director of the
Daniels 333 W. Wacker Drive,       Company since August 1992. Mr. Sanchez is a
Suite 500 Chicago, IL 60606        co-founder and has been managing partner of
                                   the Chicago law firm of Sanchez & Daniels
                                   since April 1987. From 1981 to 1987 he was
                                   partner at the law firm of Hinshaw,
                                   Culbertson, Moelmann, Hoban & Fuller. Mr.
                                   Sanchez is also a director of Metropolitan
                                   Bank and Trust Company.
 
LT. GEN. THOMAS P. STAFFORD,       Lt. Gen. Stafford has been a director of
66...... Stafford, Burke & Hecker  the Company or a predecessor thereto since
1006 Cameron Street Alexandria,    September 1987. Lt. Gen. Stafford has been
VA 22314                           a consultant with General Technical
                                   Services, Inc. (consulting) since 1984. He
                                   is co-founder and has been Vice Chairman of
                                   Stafford, Burke and Hecker, Inc., a
                                   Washington-based consulting firm, since
                                   1982. After serving as an astronaut for a
                                   number of years, he retired in 1979 from
                                   the U.S. Air Force as Deputy Chief of Staff
                                   for Research, Development and Acquisition
                                   and became Vice Chairman of Gibraltar
                                   Exploration Limited, an oil and gas
                                   exploration and production company. Lt.
                                   Gen. Stafford is Chairman of the Board of
                                   the Omega Watch Corporation of America, and
                                   is a director of Tremont, Inc., Seagate
                                   Technologies, Inc., CMI, Inc., Allied-
                                   Signal, Inc. and Tracor Inc.
 
EXECUTIVE OFFICERS OF THE COMPANY
 
  Set forth below are the name and business address if different than the
Company's address of each executive officer of the Company who is not also a
director of the Company and unless disclosed elsewhere in "Management of Waste
Management and the Company," (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 such 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, AGE AND ADDRESS                        PRINCIPAL OCCUPATIONS
 
ROBERT J. GAGALIS, 43............  Mr. Gagalis has been a Vice President,
                                   Chief Financial Officer and Treasurer of
                                   the Company since January 1997. Mr. Gagalis
                                   was Vice President in the Energy Line of
                                   Business from March 1996 to January 1997
                                   and Staff Vice President, Corporate
                                   Development from August 1994 to March 1996.
                                   He was Director of Corporate Development
                                   from August 1993 to August 1994. He was
                                   Vice President and Chief Financial Officer
                                   of Signal Capital Corporation from 1986 to
                                   1993.
 
                                      57

 
 NAME, AGE AND ADDRESS                        PRINCIPAL OCCUPATIONS
 
RICHARD S. HAAK, JR., 43.........  Mr. Haak has been Controller of the Company
                                   since November 1993 and a Vice President
                                   since March 1997. He was Vice President and
                                   Controller-Operations of WESI from
                                   September 1987 until November 1993.
 
LAWRENCE W. PLITCH, 47...........  Mr. Plitch has been Vice President and
                                   General Counsel of the Company since
                                   January 1997. He was Vice President and
                                   General Counsel of Wheelabrator
                                   Environmental Systems Inc. ("WESI") from
                                   1994 to 1997 and Deputy General Counsel of
                                   WESI from 1992 to 1994 and Assistant
                                   General Counsel of WESI from 1986 to 1992.
 
  In January 1998, the Board of Directors of the Company approved employment
security agreements with Robert J. Gagalis, Vice President and Chief Financial
Officer, Richard S. Haak, Jr., Vice President and Controller, and Lawrence W.
Plitch, Vice President and General Counsel (each an "Executive"), designed to
encourage them to remain employed by the Company. The term of each agreement
continues until April 30, 2000. If the Company terminates the Executive's
employment, or reduces the nature and scope of the Executive's duties or
relocates his primary employment location, it will continue to pay him his
then current base salary on the basis of one month for every year of service
(subject to a minimum of one year and a maximum of two years) and his prorated
annual bonus for the year of such termination, reduction or relocation, unless
the termination was for cause, in which case its obligations under the
agreement will cease. In addition, the Company will request the Compensation
and Stock Option Committee of the Board of Directors to accelerate all of the
Executive's unvested stock options. During the term of the agreement and for a
period of one year thereafter, the Executive has agreed not to compete with
the Company or its subsidiaries. Also in January 1998, negotiations commenced
regarding an employment and supplemental retirement benefit agreement between
the Company and John M. Kehoe, Jr., President and Chief Executive Officer. The
terms of such an agreement with Mr. Kehoe have not been finalized and will be
subject to approval by the Compensation and Stock Option Committee.
 
                   PROPOSALS BY STOCKHOLDERS OF THE COMPANY
 
  If the Merger is consummated, there will be no public stockholders of the
Company and no public participation in any future meetings of stockholders of
the Company. However, if the Merger is not consummated, the Company's public
stockholders will continue to be entitled to attend and participate in the
Company's stockholder meetings. If the Merger is not consummated, any
proposals by stockholders intended to be presented at the 1999 annual meeting
must be received by the Company no later than November 30, 1998 in order to be
considered by the Board of Directors for inclusion in the Company's 1999 proxy
statement. In order for a stockholder to nominate a candidate for director,
under the Company's By-Laws, timely notice of the nomination must be received
by the Company in advance of the meeting. Ordinarily, such notice must be
received not less than 30 nor more than 60 days before the meeting (but if the
Company gives less than 40 days' notice of the meeting, then such notice must
be received prior to the meeting and within 10 days after notice of the
meeting is mailed or other public disclosure of the meeting is made). The
stockholder filing the notice of nomination must describe various matters
regarding the nominee, including such information as name, address, occupation
and shares held.
 
  In order for a stockholder to bring other business before a stockholder
meeting, timely notice must be received by the Company within the time limits
described above. Such notice must include a description of the proposed
business, the reasons therefor, and other specific matters. These requirements
are separate from and in addition to the requirements a stockholder must meet
to have a proposal considered for inclusion in the Company's 1999 proxy
statement. In each case, the notice must be given to the Secretary of the
Company, whose address is 3003 Butterfield Road, Oak Brook, Illinois 60523.
Any stockholder desiring a copy of the Company's By-Laws will be furnished one
without charge upon written request of the Secretary.
 
                                      58

 
                        INDEPENDENT PUBLIC ACCOUNTANTS
 
  The consolidated financial statements and schedules of the Company for the
year ended December 31, 1996, incorporated herein by reference to the
Company's Annual Report on Form 10-K (as amended in the first quarter of
1998), have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their reports with respect thereto. Such financial
statements and schedules have been incorporated herein by reference in
reliance on the reports of Arthur Andersen LLP given on the authority of such
firm as experts in auditing and accounting. It is expected that
representatives of Arthur Andersen LLP will be present at the Special Meeting,
both to respond to appropriate questions of shareholders of the Company and to
make a statement if they so desire.
 
                      WHERE YOU CAN FIND MORE INFORMATION
 
  As required by law, Wheelabrator files reports, proxy statements and other
information with the Securities and Exchange Commission. Because the merger is
a "going private" transaction, Waste Management has filed a Rule 13e-3
Transaction Statement on Schedule 13E-3 with respect to the merger. The
Schedule 13E-3 and the reports, proxy statements and other information contain
additional information about the Company. You can inspect and copy these
materials at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite
1300, New York, New York 10048. For further information concerning the
Commission's public reference rooms, you may call the Commission at 1-800-SEC-
0330. Some of this information may also be accessed on the World Wide Web
through the Commission's Internet address at "http://www.sec.gov." The
Company's shares are listed on the New York Stock Exchange, and materials may
also be inspected at its offices, 20 Broad Street, New York, New York 10005.
 
  The Commission allows the Company to "incorporate by reference" information
into this proxy statement, which means that the Company can disclose important
information by referring you to another document filed separately with the
Commission. Information incorporated by reference is considered part of this
proxy statement, except to the extent that the information is superseded by
information in this proxy statement. This proxy statement incorporates by
reference the information contained in the following documents previously
filed by the Company with the Commission (Commission file number 0-14246):
 
    (a) The Company's Annual Report on Form 10-K for the fiscal year ended
  December 31, 1996, as amended.
 
    (b) The Company's Quarterly Reports on Form 10-Q for the periods ended
  March 31, 1997, June 30, 1997 and September 30, 1997, in each case as
  amended; and
 
    (c) The Company's Current Report on Form 8-K dated December 8, 1997.
 
  The Company also incorporates by reference the information contained in all
other documents the Company files with the Commission after the date of this
proxy statement and before the Special Meeting. The information contained in
any such document will be considered part of this proxy statement from the
date the document is filed and will supplement or amend the information
contained in this proxy statement.
 
  If you are a stockholder of the Company and would like to receive a copy of
any document incorporated by reference into this proxy statement (which will
not include any of the exhibits to the document other than those exhibits that
are themselves specifically incorporated by reference into this proxy
statement), you should call or write to Wheelabrator Shareholder Services,
P.O. Box 1400, Pittsburgh, Pennsylvania 15230 (telephone: (800) 443-6474). In
order to ensure timely delivery of the documents you request, you should make
your request by March 20, 1998.
 
  You should rely on the information contained in (or incorporated by
reference into) this proxy statement. The Company has not authorized anyone to
give any information different from the information contained in (or
incorporated by reference into) this proxy statement. This proxy statement is
dated February 27, 1998. You should not assume that the information contained
in this proxy statement is accurate as of any later date, and the mailing of
this proxy statement to stockholders shall not create any implication to the
contrary.
 
 
                                      59

 
                                 OTHER MATTERS
 
  The management of the Company knows of no other matters which may be
presented at the Special Meeting. If any other matters should properly come
before the meeting, the persons named in the enclosed form of proxy will vote
in accordance with their best judgment on such matters.
 
                                          By Order of the Board of Directors
 
                                          LOGO
 
                                          Thomas A. Witt,
                                          Secretary
 
February 27, 1998
 
                                      60

 
                                                                      APPENDIX A
 
 
 
                          AGREEMENT AND PLAN OF MERGER
 
                                  BY AND AMONG
 
                            WASTE MANAGEMENT, INC.,
 
                              WMI MERGER SUB, INC.
 
                                      AND
 
                         WHEELABRATOR TECHNOLOGIES INC.
 
                                DECEMBER 8, 1997
 
 
 

 
                               TABLE OF CONTENTS
 


                                                                           PAGE
                                                                           ----
                                                                     
 RECITALS.................................................................   1
 
                                   ARTICLE I
                      THE MERGER; EFFECTIVE TIME; CLOSING
  1.1  The Merger........................................................    1
  1.2  Effective Time....................................................    1
  1.3  Closing...........................................................    1
 
                                   ARTICLE II
                    CERTIFICATE OF INCORPORATION AND BYLAWS
                          OF THE SURVIVING CORPORATION
  2.1  Certificate of Incorporation......................................    1
  2.2  Bylaws............................................................    2
 
                                  ARTICLE III
              DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
  3.1  Directors.........................................................    2
  3.2  Officers..........................................................    2
 
                                   ARTICLE IV
              MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF
                              SHARES IN THE MERGER
       Merger Consideration; Conversion or Cancellation of Shares in the
  4.1  Merger............................................................    2
  4.2  Payment for Shares in the Merger..................................    2
  4.3  Transfer of Shares After the Effective Time.......................    3
  4.4  Stock Options.....................................................    3
  4.5  Dissenting Shares.................................................    4
 
                                   ARTICLE V
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
  5.1  Corporate Organization and Qualification..........................    4
  5.2  Capitalization....................................................    4
  5.3  Authority Relative to This Agreement..............................    4
  5.4  Consents and Approvals; No Violation..............................    5
  5.5  SEC Reports; Financial Statements.................................    5
  5.6  Absence of Certain Changes or Events..............................    6
  5.7  Undisclosed Liabilities...........................................    6
  5.8  Litigation........................................................    6
  5.9  Schedule 13E-3; Proxy Statement...................................    6
  5.10 Compliance with Applicable Laws...................................    6
  5.11 Opinion of Investment Bankers.....................................    6
 
                                   ARTICLE VI
                    REPRESENTATIONS AND WARRANTIES OF PARENT
                                 AND MERGER SUB
  6.1  Corporate Organization and Qualification..........................    7
  6.2  Authority Relative to This Agreement..............................    7
  6.3  Consents and Approvals; No Violation..............................    7
  6.4  Schedule 13E-3; Proxy Statement...................................    7

 
                                       i

 


                                  PAGE
                                  ----
                            
       Payment of Merger
  6.5  Consideration...........     8
       Interim Operations of
  6.6  Merger Sub..............     8
  6.7  Ownership of Shares.....     8
       Brokers, Finders or
  6.8  Financial Advisors......     8
 
                                  ARTICLE VII
                      ADDITIONAL COVENANTS AND AGREEMENTS
  7.1  Stockholders' Approval..     8
  7.2  Schedule 13E-3; Proxy...     8
  7.3  All Reasonable Efforts..     8
  7.4  Access to Information...     9
  7.5  Publicity...............     9
       Indemnification of
  7.6  Directors and Officers..     9
       Conduct of Business of
  7.7  Merger Sub..............    10
  7.8  Company Capital Stock...    10
 
                                  ARTICLE VIII
                                   CONDITIONS
       Condition to Each
  8.1  Party's Obligations.....    10
       Additional Conditions to
       the Obligations of
  8.2  Parent and Merger Sub...    10
       Additional Conditions to
       the Obligations of the
  8.3  Company.................    11
 
                                   ARTICLE IX
                                  TERMINATION
       Termination by Mutual
  9.1  Consent.................    11
       Termination by Parent,
       Merger Sub or the
  9.2  Company.................    11
       Termination by Parent or
  9.3  Merger Sub..............    11
       Termination by the
  9.4  Company.................    12
  9.5  Effect of Termination...    12
 
                                   ARTICLE X
                           MISCELLANEOUS AND GENERAL
 10.1  Payment of Expenses.....    12
       Survival of
       Representations and
 10.2  Warranties..............    12
       Modification or
 10.3  Amendment...............    12
 10.4  Waiver of Conditions....    12
 10.5  Counterparts............    12
 10.6  Governing Law...........    12
 10.7  Notices.................    12
       Entire Agreement;
 10.8  Assignment..............    13
 10.9  Parties in Interest.....    13
 10.10 Certain Definitions.....    13
 10.11 Obligation of Parent....    14
 10.12 Validity................    14
 10.13 Captions................    14

 
                                       ii

 
                         AGREEMENT AND PLAN OF MERGER
 
  AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December 8,
1997, by and among Waste Management, Inc., a Delaware corporation ("Parent"),
WMI Merger Sub, Inc. a Delaware corporation and a [wholly owned] subsidiary of
Parent ("Merger Sub"), and Wheelabrator Technologies Inc., a Delaware
corporation (the "Company").
 
                                   RECITALS
 
  WHEREAS, the Boards of Directors of Parent and Merger Sub each have
determined that it is in the best interests of their respective stockholders
for Merger Sub to merge with and into the Company upon the terms and subject
to the conditions of this Agreement; and
 
  WHEREAS, the Board of Directors of the Company, based upon the unanimous
recommendation of a special committee of independent directors of the Company
(the "Special Committee"), has determined that it is in the best interests of
the Company's stockholders (other than Parent, Merger Sub and their
affiliates) for Merger Sub to merge with and into the Company upon the terms
and subject to the conditions of this Agreement.
 
  NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
Parent, Merger Sub and the Company hereby agree as follows:
 
                                   ARTICLE I
 
                      THE MERGER; EFFECTIVE TIME; CLOSING
 
  1.1. The Merger. Subject to the terms and conditions of this Agreement and
the Delaware General Corporation Law (the "DGCL"), at the Effective Time (as
defined in Section 1.2), the Company and Merger Sub shall consummate a merger
(the "Merger") in which (a) Merger Sub shall be merged with and into the
Company and the separate corporate existence of Merger Sub shall thereupon
cease, (b) the Company shall be the successor or surviving corporation in the
Merger and shall continue to be governed by the laws of the State of Delaware,
and (c) the separate corporate existence of the Company with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The corporation surviving the Merger is sometimes hereinafter referred
to as the "Surviving Corporation." The Merger shall have the effects set forth
in the DGCL.
 
  1.2. Effective Time. Subject to the terms and conditions of this Agreement,
Parent, Merger Sub and the Company will cause an appropriate Certificate of
Merger (the "Certificate of Merger") to be executed and filed on the date of
the Closing (as defined in Section 1.3) (or on such other date as the parties
may agree) with the Secretary of State of the State of Delaware as provided in
the DGCL. The Merger shall become effective at the time and on the date on
which the Certificate of Merger has been duly filed with the Secretary of
State of the State of Delaware or such other time as is agreed upon by the
parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time."
 
  1.3. Closing. The closing of the Merger (the "Closing") shall take place (a)
at the offices of Waste Management, Inc. in Oak Brook, Illinois, at 10:00 a.m.
local time on the first business day on which the last of the conditions set
forth in Article VIII hereof shall be fulfilled or waived in accordance with
this Agreement or (b) at such other place, time and date as the parties may
agree (the "Closing Date").
 
                                  ARTICLE II
 
                    CERTIFICATE OF INCORPORATION AND BYLAWS
                         OF THE SURVIVING CORPORATION
 
  2.1. Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, except that Article
I thereof shall be amended to read in its entirety as follows: "The name of
the Corporation is Wheelabrator Technologies, Inc."
 
                                      A-1

 
  2.2. Bylaws. The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation.
 
                                  ARTICLE III
 
              DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
 
  3.1. Directors. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving
Corporation until their successors are duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws.
 
  3.2. Officers. The officers of the Company at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Corporation
until their successors are duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
 
                                  ARTICLE IV
 
              MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF
                             SHARES IN THE MERGER
 
  4.1. Merger Consideration; Conversion or Cancellation of Shares in the
Merger. At the Effective Time, by virtue of the Merger and without any action
on the part of the holders of any shares (the "Shares") of common stock, par
value $.01 per share, of the Company (the "Company Common Stock") or capital
stock of Merger Sub:
 
    (a) Each Share issued and outstanding immediately prior to the Effective
  Time (other than Shares to be cancelled pursuant to Section 4.1(c) and any
  Dissenting Shares (as hereinafter defined in Section 4.5)) shall be
  converted into the right to receive $16.50 in cash, payable to the holder
  thereof, without interest thereon (the "Merger Consideration"), upon
  surrender of the certificate representing such Share.
 
    (b) All Shares to be converted into the right to receive the Merger
  Consideration pursuant to Section 4.1(a) shall cease to be outstanding, be
  cancelled and retired and cease to exist, and each holder of a certificate
  representing any such Shares shall thereafter cease to have any rights with
  respect thereto, except the right to receive therefor, upon the surrender
  of such certificate in accordance with Section 4.2, the Merger
  Consideration.
 
    (c) At the Effective Time, each Share issued and outstanding and owned by
  Parent, Merger Sub or any direct or indirect subsidiary of Parent
  (collectively, the "Parent Companies") or any of the Company's direct or
  indirect wholly owned subsidiaries and all treasury shares held by the
  Company immediately prior to the Effective Time shall cease to be
  outstanding, be cancelled and retired without payment of any consideration
  therefor and cease to exist.
 
    (d) At the Effective Time, each share of common stock of Merger Sub
  issued and outstanding immediately prior to the Effective Time shall be
  converted into one validly issued, fully paid and nonassessable share of
  common stock of the Surviving Corporation.
 
  4.2. Payment for Shares in the Merger. The manner of making payment for
Shares in the Merger shall be as follows:
 
    (a) Pursuant to an agreement in form and substance reasonably acceptable
  to the Company (the "Paying Agent Agreement") to be entered into on or
  before the Effective Time between Merger Sub and a paying agent (the
  "Paying Agent"), at or prior to the Effective Time, Merger Sub shall
  deposit or cause to be deposited with the Paying Agent, in trust for the
  benefit of the holders of Shares, cash in immediately available funds in
  amounts requested by the Paying Agent from time to time sufficient to pay
  the Merger Consideration to holders of Certificates in accordance with
  Section 4.2(b) (the "Merger Payment Fund").
 
    (b) As soon as reasonably practicable after the Effective Time, the
  Paying Agent shall mail to each holder of record (other than holders of
  certificates of Shares referred to in Section 4.1(c) or Dissenting Shares)
  of a certificate or certificates which immediately prior to the Effective
  Time represented outstanding
 
                                      A-2

 
  Shares (the "Certificates") (i) a form of letter of transmittal (in form
  and substance reasonably acceptable to the Company which shall specify that
  delivery shall be effected, and risk of loss and title to the Certificates
  shall pass, only upon proper delivery of the Certificates to the Paying
  Agent) and (ii) instructions for use in effecting the surrender of the
  Certificates for payment therefor. Upon surrender of Certificates for
  cancellation to the Paying Agent, together with such letter of transmittal
  duly executed and any other required documents, the holder of such
  Certificates shall be entitled to receive for each of the Shares
  represented by such Certificates the Merger Consideration, and the
  Certificates so surrendered shall forthwith be cancelled. Until so
  surrendered, such Certificates shall represent solely the right to receive
  the Merger Consideration with respect to each of the Shares represented
  thereby. No interest on the Merger Consideration will be paid.
  Notwithstanding the foregoing, neither the Paying Agent nor any party
  hereto shall be liable to a holder of Shares for any Merger Consideration
  delivered to a public official pursuant to applicable escheat law.
 
    (c) Any portion of the Merger Consideration made available to the Paying
  Agent which remains unclaimed by the former stockholders of the Company for
  six months after the Effective Time shall be delivered to Parent, upon
  demand of Parent, and any former stockholders of the Company shall
  thereafter look only to Parent for payment of their claim for the Merger
  Consideration for the Shares.
 
  4.3. Transfer of Shares After the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Company after the close of
business on the day prior to the date of the Effective Time.
 
  4.4. Stock Options.
 
    (a) Subject to the terms and conditions of the Option Plans (as defined
  below) and of any option agreements (the "Option Agreements") entered into
  thereunder, and subject to the receipt of any consents, approvals or
  waivers necessary under any such plans or agreements, after the Effective
  Time, each option (an "Option") which has been granted under the 1986 Stock
  Plan for Executive Employees of WTI, the 1988 Stock Plan for Executive
  Employees of WTI, the WTI 1991 Stock Option Plan for Non-Employee Directors
  or the WTI 1992 Stock Option Plan (collectively, the "Option Plans") and is
  outstanding at the Effective Time, whether or not then exercisable, shall
  be assumed by Parent and shall be deemed to constitute an option to
  acquire, on the terms and conditions as were applicable under the
  respective Option, that number of Parent Common Shares (as defined below)
  equal to the product of (i) that number of Shares as the holder of the
  Option would have been entitled to receive had such holder exercised the
  Option in full immediately prior to the Effective Time (not taking into
  account whether the Option was in fact exercisable at such time) and (ii)
  the quotient derived by dividing the Merger Consideration by the average of
  the per-share closing prices on the NYSE of Parent Common Shares (as
  reported in the NYSE Composite Transactions) during the 10 consecutive
  trading days ending on the trading day immediately prior to the Effective
  Time, but rounded up to the next whole number of Parent Common Shares, at a
  price per Share equal to (x) the exercise price per Share subject to the
  Option divided by (y) the quotient described in Section 4.4(a)(ii) above.
  As soon as practicable after the Effective Time, Parent shall deliver to
  each holder of an Option an appropriate notice setting forth the holder's
  right to acquire Parent Common Shares, and the Option agreements of each
  holder shall be deemed to be appropriately amended so that the Options
  shall represent rights to acquire Parent Common Shares on the same terms
  and conditions as contained in the outstanding Options. "Parent Common
  Shares" shall mean shares of common stock, par value $1.00 per share, of
  Parent.
 
    (b) Parent shall take all corporate action necessary to reserve for
  issuance a sufficient number of Parent Common Shares for delivery upon
  exercise of the Options assumed in accordance with Section 4.4(a).
 
    (c) If the consents, approvals and waivers necessary under the Option
  Plans and Option Agreements to effect the transactions contemplated by
  Section 4.4(a) are not obtained prior to the Effective Time, the Merger
  shall have the effect with respect to the Options as provided under the
  Option Plans and Option Agreements. Nothing in this Section 4.4 shall
  constitute or require any amendment to any benefit plan of the Company
  other than the Option Plans and Option Agreements and all such other plans
  shall be treated in accordance with their respective terms.
 
                                      A-3

 
  4.5. Dissenting Shares.
 
    (a) Notwithstanding any other provision of this Agreement to the
  contrary, Shares that are outstanding immediately prior to the Effective
  Time and which are held by stockholders who shall have demanded properly in
  writing appraisal for such Shares in accordance with DGCL Section 262 and
  who shall not have withdrawn such demand or otherwise have forfeited
  appraisal rights (collectively, the "Dissenting Shares") shall not be
  converted into or represent the right to receive the Merger Consideration.
  Such stockholders shall be entitled to receive payment of the appraised
  value of the Shares held by them in accordance with the provisions of such
  Section 262, except that all Dissenting Shares held by stockholders who
  shall have failed to perfect or who effectively shall have withdrawn or
  lost their rights to appraisal of such Shares under such Section 262 shall
  thereupon be deemed to have been converted into and to have become
  exchangeable, as of the Effective Time, for the right to receive, without
  any interest thereon, the Merger Consideration, upon surrender, in the
  manner provided in Section 4.2, of the Certificates that formerly evidenced
  such Shares.
 
    (b) The Company shall give Parent (i) prompt notice of any demands for
  appraisal received by the Company, withdrawals of such demands and any
  other instruments served pursuant to the DGCL and received by the Company
  and (ii) the opportunity to direct all negotiations and proceedings with
  respect to demands for appraisal under the DGCL. The Company shall not,
  except with the prior written consent of Parent, make any payment with
  respect to any demands for appraisal, or offer to settle, or settle, any
  such demands.
 
                                   ARTICLE V
 
                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
  The Company hereby represents and warrants to Parent and Merger Sub that:
 
  5.1. Corporate Organization and Qualification. Each of the Company and its
Significant Subsidiaries (as hereinafter defined in Section 10.10) (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) is qualified and in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification and (iii) has all requisite power and authority to own its
properties and to carry on its business as it is now being conducted, except
where failure to so qualify, be in good standing or have such power and
authority would not, individually or in the aggregate, have a Material Adverse
Effect (as hereinafter defined in Section 10.10).
 
  5.2. Capitalization. The authorized capital stock of the Company consists of
(i) 250,000,000 shares of Company Common Stock, of which, as of November 30,
1997, 157,198,771 shares were issued and outstanding, and (ii) 25,000,000
shares of Company Non-Voting Common Stock, of which, as of November 30, 1997,
no shares were issued and outstanding, and (iii) 150,000,000 shares of
preferred stock, par value $.01 per share, of which, as of November 30, 1997,
no shares were issued and outstanding. All of the outstanding Shares have been
duly authorized and validly issued and are fully paid and nonassessable. As of
November 30, 1997, options to acquire 4,268,618 Shares were reserved for
issuance upon exercise of outstanding Options pursuant to the Option Plans.
Except as set forth above, as otherwise known to Parent or Merger Sub, for
vested options to acquire Shares pursuant to the Option Plans and for Parent's
option to acquire Shares pursuant to Section 6.08 of the Intercorporate
Agreement, dated as of September 3, 1986, by and between Parent and the
Company, there are not as of the date hereof any outstanding or authorized
options, warrants, calls, rights (including preemptive rights), commitments or
any other agreements of any character to which the Company is a party, or by
which it may be bound, requiring it to issue, transfer, sell, purchase, redeem
or acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares
of capital stock of the Company.
 
  5.3. Authority Relative to This Agreement. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly
 
                                      A-4

 
authorized by the Board of Directors of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than
the approval of this Agreement and the Merger by the Stockholders of the
Company in accordance with Section 251 of the DGCL, the Company's Certificate
of Incorporation and Section 8.1(a) hereof). This Agreement has been duly and
validly executed and delivered by the Company and, assuming this Agreement
constitutes the valid and binding agreement of Parent and Merger Sub,
constitutes the valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that the enforcement
hereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
 
  5.4. Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby will (a) conflict with or result in
any breach of any provision of the Certificate of Incorporation or Bylaws of
the Company; (b) require of the Company or its subsidiaries any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) pursuant to the applicable
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder, (ii) the filing
of the Certificate of Merger pursuant to the DGCL, (iii) pursuant to state
blue sky takeover statutes, (iv) pursuant to New York Stock Exchange delisting
requirements or (v) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
in Section 10.10(c)); (c) except as otherwise known to Parent or Merger Sub
result in a violation or breach of, or constitute a default under any of the
terms, conditions or provisions of any note, license, agreement or other
instrument or obligation by which the Company or any of its Significant
Subsidiaries may be bound, except for such violations, breaches and defaults
as to which requisite waivers or consents have been obtained or which would
not, individually or in the aggregate, have a Material Adverse Effect; or (d)
except as otherwise known to Parent or Merger Sub violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or
any of its subsidiaries, except for violations which would not, individually
or in the aggregate, have a Material Adverse Effect.
 
  5.5. SEC Reports; Financial Statements.
 
    (a) Except as otherwise known to Parent or Merger Sub, the Company has
  filed all periodic reports required to be filed by it since January 1,
  1997, with the Securities and Exchange Commission (the "SEC") pursuant to
  the federal securities laws and the SEC rules and regulations thereunder,
  all of which as of their respective dates complied in all material respects
  with all applicable requirements of the Exchange Act (collectively, the
  "Company SEC Reports"). None of the Company SEC Reports, including, without
  limitation, any financial statements or schedules included therein, as of
  their respective dates, contained any untrue statement of a material fact
  or omitted to state a material fact required to be stated therein or
  necessary in order to make the statements therein, in light of the
  circumstances under which they were made, not misleading provided, however,
  that no representation or warranty is made with respect to those portions
  of the Company SEC Reports that address Rust International Inc. ("Rust") or
  Waste Management International plc ("WMI").
 
    (b) Except as otherwise known to Parent or Merger Sub, the consolidated
  financial statements (including the related notes thereto) of the Company
  included in the Company SEC Reports complied in all material respects with
  applicable accounting requirements and the published rules and regulations
  of the SEC with respect thereto, have been prepared in accordance with
  generally accepted accounting principles applied on a basis consistent with
  prior periods (except as otherwise noted therein) and presented fairly the
  consolidated financial position of the Company and its consolidated
  subsidiaries as of their respective dates, and the consolidated results of
  their operations and cash flows for the periods presented therein (subject,
  in the case of the unaudited interim financial statements, to normal year-
  end adjustments and the absence of notes thereto); provided, however, no
  representation or warranty is made with respect to those portions of the
  Company's consolidated financial statements provided to the Company for
  inclusion in such financial statements by Rust or WMI.
 
                                      A-5

 
  5.6. Absence of Certain Changes or Events. Since the date of this Agreement,
the business of the Company has been carried on only in the ordinary and usual
course, and the Company has not suffered any Material Adverse Effect.
 
  5.7. Undisclosed Liabilities. Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement, as contemplated by this Agreement
or as otherwise known to Parent or Merger Sub at or prior to the date of this
Agreement, there are no liabilities or obligations of the Company or its
subsidiaries of any kind whatsoever, whether accrued, contingent, absolute or
otherwise, that would be required by generally accepted accounting principles
to be reflected on a consolidated balance sheet of the Company, other than
liabilities or obligations (i) incurred in the ordinary course of business
consistent with past practice since the date of this Agreement, or (ii) which
would not, individually or in the aggregate, have a Material Adverse Effect.
 
  5.8. Litigation. Except as disclosed in the Company SEC Reports filed prior
to the date of this Agreement, as otherwise known by Parent or Merger Sub or
for any litigation relating to the transactions contemplated by this
Agreement, (i) there are no actions, claims, suits, proceedings or
governmental investigations pending or, to the knowledge of the Company,
threatened against or involving the Company or any of its subsidiaries which,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect, and (ii) there are no judgments, decrees, injunctions, rules
or orders of any court or governmental or regulatory authority applicable to
the Company or any of its subsidiaries, which, individually or in the
aggregate, would have a Material Adverse Effect.
 
  5.9. Schedule 13E-3; Proxy Statement. None of the information to be supplied
by and relating to the Company for inclusion or incorporation by reference in
the Schedule 13E-3 or the Proxy Statement (as such terms are hereinafter
defined in Section 7.2) will, at the time of the mailing of the Proxy
Statement and at the time of the stockholder meeting of the Company in
connection with the vote of such stockholders with respect to the Merger and
this Agreement (the "Stockholder Meeting"), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event with respect to the Company should occur and
is required to be described in an amendment of, or a supplement to, the Proxy
Statement or the Schedule 13E-3, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as required
by law, disseminated to the stockholders of the Company. With respect to the
information relating to the Company, the Schedule 13E-3 and the Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act. For purposes of this Section 5.9, any
statement which is made or incorporated by reference in the Proxy Statement or
the Schedule 13E-3 shall be deemed modified or superseded to the extent any
later filed document incorporated by reference in the Proxy Statement or the
Schedule 13E-3 or any statement included in the Proxy Statement or the
Schedule 13E-3 modifies or supersedes such earlier statement.
 
  5.10. Compliance with Applicable Laws. Except as otherwise known to Parent
or Merger Sub, the Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders, franchises and approvals of all governmental or
regulatory authorities necessary for the lawful conduct of its business,
except where the failure to so hold would not, individually or in the
aggregate, have a Material Adverse Effect (the "Company Permits"). Except as
otherwise known to Parent or Merger Sub, the Company and its subsidiaries are
in compliance with the terms of the Company Permits, except where the failure
so to comply would not, individually or in the aggregate, have a Material
Adverse Effect. Except as disclosed in the Company SEC Reports filed prior to
the date of this Agreement, the business of the Company is not being conducted
in violation of any law, ordinance or regulation of any governmental or
regulatory authorities, except for possible violations which, individually or
in the aggregate, would not have a Material Adverse Effect.
 
  5.11. Opinion of Investment Bankers. The Special Committee has received the
opinion (the "Fairness Opinion") of each of Goldman, Sachs & Co. and Lazard
Freres & Co. L.L.C. (each an "Investment Banker"), the Special Committee's
investment bankers to the effect that (i) in the case of Goldman, Sachs & Co.,
the
 
                                      A-6

 
consideration to be received in the Merger is fair to the holders of Shares
(other than Merger Sub and its affiliates), and (ii) in the case of Lazard
Freres & Co. L.L.C., the consideration to be received in the Merger is fair to
the holders of Shares (other than Merger Sub and its affiliates) from a
financial point of view.
 
                                  ARTICLE VI
 
            REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
 
  Parent and Merger Sub represent and warrant, jointly and severally, to the
Company that:
 
  6.1. Corporate Organization and Qualification. Each of Parent and its
Significant Subsidiaries and Merger Sub (i) is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation, (ii) is qualified and in good standing as a
foreign corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification and
(iii) has all requisite power and authority to own its properties and to carry
on its business as it is now being conducted, except where the failure to so
qualify, be in such good standing or have such power and authority would not,
individually or in the aggregate, have a Material Adverse Effect.
 
  6.2. Authority Relative to This Agreement. Each of Parent and Merger Sub has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This
Agreement and the consummation by Parent and Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of Parent and Merger Sub, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of Parent
and Merger Sub and, assuming this Agreement constitutes the valid and binding
agreement of the Company, constitutes the valid and binding agreement of each
of Parent and Merger Sub, enforceable against each of them in accordance with
its terms, except that the enforcement hereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
 
  6.3. Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by Parent or Merger Sub nor the consummation by
Parent or Merger Sub of the transactions contemplated hereby will (a) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or the Bylaws, respectively, of Parent or Merger Sub; (b)
require of Parent or its subsidiaries (except the Company) any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) pursuant to the applicable
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, (ii) the filing of the Certificate of Merger pursuant to the DGCL
or (iii) where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not, individually or in
the aggregate, have a Material Adverse Effect; (c) result in a violation or
breach of, or constitute a default under any of the terms, conditions or
provisions of any note, license, agreement or other instrument or obligation
by which Parent or any of its Significant Subsidiaries (other than the
Company) may be bound, except for such violations, breaches and defaults as to
which requisite waivers or consents have been obtained or which would not,
individually or in the aggregate, have a Material Adverse Effect; or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent or any of its subsidiaries (other than the Company),
except for violations which would not, individually or in the aggregate, have
a Material Adverse Effect.
 
  6.4. Schedule 13E-3; Proxy Statement. None of the information to be supplied
by Parent or Merger Sub for inclusion or incorporation by reference in the
Schedule 13E-3 or the Proxy Statement (except for information about the
Company furnished by the Company to Parent) will, at the time of the mailing
of the Proxy Statement and at the time of the Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect
to Parent, its officers and directors or any of its subsidiaries shall occur
and is required to be
 
                                      A-7

 
described in an amendment of, or a supplement to, the Proxy Statement and the
Schedule 13E-3, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The Schedule 13E-3 and the
Proxy Statement (except with respect to information relating to the Company)
will comply as to form in all material respects with the provisions of the
Exchange Act. For purposes of this Section 6.4, any statement which is made or
incorporated by reference in the Proxy Statement or the Schedule 13E-3 shall
be deemed modified or superseded to the extent any later filed document
incorporated by reference in the Proxy Statement or the Schedule 13E-3 or any
statement included in the Proxy Statement or the Schedule 13E-3 modifies or
supersedes such earlier statement.
 
  6.5. Payment of Merger Consideration. Parent has available the funds
necessary to pay the Merger Consideration, and, at the Effective Time, Merger
Sub will have the funds necessary to pay the Merger Consideration.
 
  6.6. Interim Operations of Merger Sub. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.
 
  6.7. Ownership of Shares. As of the date hereof, the Parent owns directly or
indirectly 104,621,810 Shares.
 
  6.8. Brokers, Finders or Financial Advisors. No agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to
any brokers' or finders' fee or any other commission or similar fee from the
Company as a result of Parent or Merger Sub being a party hereto or
consummating any of the transactions contemplated by this Agreement.
 
                                  ARTICLE VII
 
                      ADDITIONAL COVENANTS AND AGREEMENTS
 
  7.1. Stockholders' Approval.
 
    (a) The Company shall submit this Agreement and the transactions
  contemplated hereby for the approval of its stockholders at the Stockholder
  Meeting as promptly as practicable and shall use all reasonable efforts to
  obtain stockholder approval and adoption of this Agreement and the
  transactions contemplated hereby, such Stockholder Meeting to be held as
  soon as practicable following the date hereof, and the Company shall,
  through its Board of Directors, recommend to its stockholders approval of
  the transactions contemplated by this Agreement, subject to the provisions
  of Section 7.1(b) hereof.
 
    (b) Notwithstanding the foregoing, the Special Committee or the Board of
  Directors of the Company may at any time prior to the Effective Time
  withdraw, modify or change any recommendation and declaration regarding
  this Agreement or the Merger, or recommend and declare advisable any other
  offer or proposal, if in the opinion of the Special Committee or the Board
  of Directors after consultation with its counsel the failure to so
  withdraw, modify or change its recommendation and declaration would be
  inconsistent with its fiduciary duties to its stockholders under applicable
  law.
 
    (c) From the date hereof to the Effective Time, the Parent and Merger Sub
  shall not sell or otherwise dispose of any of the Shares owned by them. At
  the Stockholder Meeting, or any adjournment thereof, Parent and Merger Sub
  shall vote the Shares owned by them in favor of the Merger.
 
  7.2. Schedule 13E-3; Proxy. Parent and the Company will, as promptly as
practicable, prepare and file with the SEC a proxy statement, a Rule 13e-3
Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3") and forms of
proxy in connection with the vote of the Company's stockholders with respect
to the Merger and this Agreement (such proxy statements, together with any
amendments thereof or supplements thereto, in each case in the form or forms
mailed to the Company's stockholders, are herein called the "Proxy
Statement"). The Company and Parent will each use all reasonable efforts to
cause the Schedule 13E-3 and the Proxy Statement to be mailed to stockholders
of the Company at the earliest practicable date.
 
  7.3. All Reasonable Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the
 
                                      A-8

 
transactions contemplated by this Agreement, including using all reasonable
efforts to obtain all necessary or appropriate waivers, consents and
approvals, to effect all necessary registrations, filings and submissions and
to lift any injunction or other legal bar to the Merger (and, in such case, to
proceed with the Merger as expeditiously as possible) subject to the requisite
vote of the stockholders of the Company.
 
  7.4. Access to Information. Upon reasonable notice, the Company shall (and
shall cause each of its wholly owned subsidiaries to and use its best efforts
to cause its other subsidiaries to) afford to officers, employees, counsel,
accountants and other authorized representatives of Parent
("Representatives"), reasonable access during normal business hours throughout
the period prior to the Effective Time to its properties, books and records
and, during such period, shall (and shall cause each of its subsidiaries to)
furnish promptly to such Representatives all information concerning its
business, properties and personnel as may reasonably be requested. Parent
agrees that it will, and will cause its Representatives to, keep all such
information confidential (except as required by law and except for information
(i) which is or becomes generally available to the public (other than pursuant
to a wrongful disclosure by Parent or Merger Sub in violation of this
Agreement), (ii) which was available to Parent on a nonconfidential basis
prior to disclosure to Parent or (iii) which becomes available to Parent on a
nonconfidential basis from a source other than the Company) and will not, and
will cause its Representatives not to, use any information obtained pursuant
to this Section 7.4 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement.
 
  7.5. Publicity. The parties will consult with each other and will mutually
agree upon any press releases or public announcements pertaining to the Merger
and shall not issue any such press releases or make any such public
announcements prior to such consultation and agreement, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case the party proposing to
issue such press release or make such public announcement shall use all
reasonable efforts to consult in good faith with the other party before
issuing any such press releases or making any such public announcements.
 
  7.6. Indemnification of Directors and Officers.
 
    (a) From and after the Effective Time, the Surviving Corporation shall
  maintain, and Parent agrees to cause the Surviving Corporation to maintain,
  for not less than six years, director and officer liability insurance with
  respect to actions and omissions occurring prior to the Effective Time to
  the extent available; provided that policies with third party insurers of a
  similar or better A.M. Best rating and of at least the same coverage
  containing terms and conditions that are no less advantageous to the
  insureds may be substituted therefor; and provided further that in no event
  shall the Surviving Corporation be required to expend to maintain or
  procure insurance coverage pursuant to this Section 7.6 an amount per annum
  in excess of 175% of the current annual premiums for the twelve-month
  period ended June 30, 1997 (the "Maximum Premium") with respect to such
  insurance, or, if the cost of such coverage exceeds the Maximum Premium,
  the maximum amount of coverage that can be purchased or maintained for the
  Maximum Premium. Parent shall use its best efforts to cause the Surviving
  Corporation to purchase, immediately following the Effective Time, a pre-
  paid policy of insurance, for the 6-year period, and covering the
  liabilities described in the preceding sentence, provided that Parent shall
  not be required to cause the Surviving Corporation to purchase such a
  policy if such policy is unavailable at a price that is less than or equal
  to the sum of the maximum premiums that the Surviving Company would be
  required to pay pursuant to the preceding sentence. In the event any claim
  is made against present directors or officers of the Company that is
  covered, in whole or in part, or potentially so covered by insurance, the
  Surviving Corporation and Parent shall do nothing that would forfeit,
  jeopardize, restrict or limit the insurance coverage available for that
  claim until the final disposition of that claim. All rights to
  indemnification now existing in favor of the present directors or officers
  of the Company and its respective subsidiaries as provided in their
  respective certificates or articles of incorporation or by-laws or
  otherwise in effect on the date hereof shall survive the Merger for a
  period of six years, and, during such period, the Certificate of
  Incorporation and Bylaws of the Surviving Corporation shall not be amended
  to reduce or limit the rights of indemnity of the present directors or
  officers of the Company, or the ability of the Surviving Corporation
 
                                      A-9

 
  to indemnify them, nor to hinder, delay or make more difficult the exercise
  of such rights of indemnity or the ability to indemnify. In addition, the
  Company (and, after the Effective Time, the Surviving Corporation) shall
  pay expenses in advance of the final disposition of any action or
  proceeding to the full extent permitted by law to each director or officer
  of the Company and its respective subsidiaries seeking indemnification
  pursuant to the existing rights of indemnification required to be
  maintained in the preceding sentence upon receipt of an undertaking by such
  director or officer to repay all amounts so advanced if it is judicially
  determined that such person is not entitled to indemnification.
 
    (b) This Section 7.6 shall survive the consummation of the Merger. The
  provisions of this Section 7.6 are intended to be for the benefit of, and
  shall be enforceable by, the present directors or officers of the Company,
  as the case may be. If the Surviving Corporation or any of its successors
  or assigns (i) consolidates with or merges into any other corporation or
  entity and is not the continuing or surviving corporation or entity of such
  consolidation or merger or (ii) transfers all or substantially all of its
  properties or assets to any individual, corporation or any other entity, in
  each such case, proper provision shall be made so that the successors and
  assigns of the Surviving Corporation shall assume the obligations set forth
  in this Section 7.6.
 
  7.7. Conduct of Business of Merger Sub. During the period of time from the
date of this Agreement to the Effective Time, Merger Sub shall not engage in
any activities of any nature except as provided in or contemplated by this
Agreement.
 
  7.8. Company Capital Stock. The Company will not, nor shall Parent or Merger
Sub cause the Company to, split, combine, subdivide or reclassify any shares
of the Company's capital stock prior to the Effective Time or declare a stock
dividend or other stock distribution in Company Common Stock or Company Non-
Voting Common Stock with a record date prior to the Effective Time.
 
                                 ARTICLE VIII
 
                                  CONDITIONS
 
  8.1. Condition to Each Party's Obligations. The respective obligations of
each party to effect the Merger are subject to the satisfaction at or prior to
the Effective Time of the following conditions:
 
    (a) Stockholder Approval. This Agreement and the Merger shall have been
  duly approved and adopted at the Stockholder Meeting by (i) the holders of
  a majority of the Shares outstanding as of the record date and (ii) the
  holders of a majority of the Nonaffiliated Shares.
 
    (b) Injunction. There shall not be in effect any statute, rule,
  regulation, executive order, decree, ruling or injunction or other order of
  a court or governmental or regulatory agency of competent jurisdiction
  directing that the transactions contemplated herein not be consummated;
  provided, however, that prior to invoking this condition each party shall
  use all reasonable efforts to have any such decree, ruling, injunction or
  order vacated.
 
    (c) Governmental Filings and Consents. All governmental consents, orders
  and approvals legally required for the consummation of the Merger and the
  transactions contemplated hereby shall have been obtained and be in effect
  at the Effective Time, except where the failure to obtain any such consent
  would not, individually or in the aggregate, reasonably be expected to have
  a Material Adverse Effect on Parent (assuming the Merger had taken place).
 
    (d) Rule 13e-3. The parties shall have complied with the provisions of
  Rule 13e-3, including the provisions relating to the furnishing of the
  Proxy Statement to the Company's stockholders.
 
  8.2. Additional Conditions to the Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived in whole or in part by Parent or
Merger Sub, as the case may be, to the extent permitted by applicable law.
 
    (a) Representations and Warranties. The representations and warranties of
  the Company set forth in this Agreement shall be true and correct when made
  and as of the Effective Time with the same force and
 
                                     A-10

 
  effect as though the same had been made on and as of the Effective Time
  (except for changes permitted by this Agreement and except to the extent
  they relate to a particular date), except for such failures to be true and
  correct which, individually or in the aggregate, are not reasonably likely
  to have a Material Adverse Effect.
 
    (b) Performance. The Company shall have performed in all material
  respects all of its material obligations under this Agreement theretofore
  to be performed.
 
    (c) Officer's Certificate. Parent and Merger Sub shall have received at
  the Effective Time a certificate dated the Effective Time and executed by
  the President or a Vice President of the Company certifying to the
  fulfillment of the conditions specified in Sections 8.2(a) and (b) hereof.
 
  8.3. Additional Conditions to the Obligations of the Company. The obligation
of the Company to effect the Merger is subject to the satisfaction at or prior
to the Effective Time of the following conditions, any and all of which may be
waived in whole or in part by the Company (with the concurrence of the Special
Committee) to the extent permitted by applicable law:
 
    (a) Representations and Warranties. The representations and warranties of
  Parent and Merger Sub set forth in this Agreement shall be true and correct
  when made and as of the Effective Time with the same force and effect as
  though the same had been made on and as of the Effective Time (except for
  changes permitted by this Agreement and except to the extent they relate to
  a particular date), except for such failures to be true and correct which,
  individually or in the aggregate, are not reasonably likely to have a
  Material Adverse Effect.
 
    (b) Performance. Parent and Merger Sub shall have performed in all
  material respects all of their respective material obligations under this
  Agreement theretofore to be performed.
 
    (c) Officer's Certificate. The Company shall have received at the
  Effective Time a certificate dated the Effective Time and executed by the
  President or a Vice President of each of Parent and Merger Sub certifying
  to the fulfillment of the conditions specified in Sections 8.3(a) and (b)
  hereof.
 
                                  ARTICLE IX
 
                                  TERMINATION
 
  9.1. Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of stockholders of the Company, by the mutual written
consent of all of the parties (with the concurrence of the Special Committee).
 
  9.2. Termination by Parent, Merger Sub or the Company. This Agreement may be
terminated and the Merger may be abandoned by any of the Parent, Merger Sub or
the Company (with the concurrence of the Special Committee in the case of
termination by the Company), before or after the approval by stockholders of
the Company, if (a) any court of competent jurisdiction in the United States
or some other governmental body or regulatory authority shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and nonappealable, (b) the Merger
shall not have been consummated by June 30, 1998, provided that the right to
terminate this Agreement pursuant to this Section 9.2(b) shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement results in the failure of the Merger to occur on or before such
date, or (c) this Agreement and the Merger shall have been voted on by
stockholders of the Company at the Stockholder Meeting and the vote shall not
have been sufficient to satisfy the condition set forth in Section 8.1(a).
 
  9.3. Termination by Parent or Merger Sub. This Agreement may be terminated
by Parent or Merger Sub and the Merger may be abandoned prior to the Effective
Time, before or after the approval by stockholders of the Company, if the
Company shall have failed to perform in any material respect any of its
material obligations under this Agreement theretofore to be performed by the
Company, which failure to perform has not been cured within 30 days following
receipt by the Company of notice of such failure to perform from Parent or
Merger Sub.
 
                                     A-11

 
  9.4. Termination by the Company. This Agreement may be terminated by the
Company with the concurrence of the Special Committee and the Merger may be
abandoned prior to the Effective Time, before or after the approval by
stockholders of the Company, if Merger Sub or Parent shall have failed to
perform in any material respect any of their material obligations under this
Agreement theretofore to be performed by Parent or Merger Sub, which failure
to perform has not been cured within 30 days following receipt by Parent of
notice of such failure to perform from the Company.
 
  9.5. Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Article IX, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
hereto or its affiliates, directors, officers or stockholders, other than the
provisions of this Section 9.5 and the provisions of Sections 7.5, 7.6, 10.1
and 10.2 and the last sentence of Section 7.4. Nothing contained in this
Section 9.5 shall relieve any party from liability for any breach of this
Agreement.
 
                                   ARTICLE X
 
                           MISCELLANEOUS AND GENERAL
 
  10.1. Payment of Expenses. Whether or not the Merger shall be consummated,
each party hereto shall pay its own expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby and shall pay one half of the printing and
mailing expenses related to any proxy statement prepared in connection with
the transactions contemplated by this Agreement.
 
  10.2. Survival of Representations and Warranties. The representations and
warranties made herein shall not survive beyond the earlier of termination of
this Agreement or the Effective Time. This Section 10.2 shall not limit any
covenant or agreement of the parties hereto which by its terms contemplates
performance after the Effective Time.
 
  10.3. Modification or Amendment. Subject to the applicable provisions of the
DGCL, at any time prior to the Effective Time, the parties hereto may modify
or amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of this Agreement by the stockholders of the Company no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. Notwithstanding the foregoing, any amendment or
modification of this Agreement shall require the consent of the Special
Committee.
 
  10.4. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party
and may be waived by such party in whole or in part to the extent permitted by
applicable law; provided, however, that the waiver of any conditions by the
Company shall require the consent of the Special Committee.
 
  10.5. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
 
  10.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
 
  10.7. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile transmission (with a confirming copy sent by overnight
courier), as follows:
 
    (a) If to the Company, to:
 
      John M. Kehoe, Jr.
      President and Chief Executive Officer
      Wheelabrator Technologies Inc.
      4 Liberty Lane West
      Hampton, New Hampshire 03842
      (603) 929-3000 (telephone)
      (603) 929-3139 (telecopier)
 
                                     A-12

 
      with copies to:
 
      Paul Meister
      Chairperson of the Special
      Committee of the Board of Directors
       of Wheelabrator Technologies Inc.
 
      and
 
      Ralph Arditi, Esq.
      Debevoise & Plimpton
      875 Third Avenue
      New York, New York 10022
      (212) 909-6000 (telephone)
      (212) 909-6836 (telecopier)
 
    (b) If to Parent or Merger Sub, to:
 
      Herbert A. Getz
      Secretary
      Waste Management, Inc.
      3003 Butterfield Road
      Oak Brook, Illinois 60523
      (708) 572-8840 (telephone)
      (708) 218-1553 (telecopier)
 
      with a copy to:
 
      Charles W. Mulaney, Jr., Esq.
      Skadden, Arps, Slate,
      Meagher & Flom (Illinois)
      333 West Wacker Drive
      Chicago, Illinois 60606
      (312) 407-0700 (telephone)
      (312) 407-0411 (telecopier)
 
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
 
  10.8. Entire Agreement; Assignment. This Agreement (a) constitutes the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof and (b) shall not be assigned by operation of law or otherwise.
 
  10.9. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective successors
and assigns. Nothing in this Agreement, express or implied, other than the
right of stockholders of the Company to receive the consideration payable in
the Merger pursuant to Article IV hereof is intended to or shall confer upon
any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement; provided, however, that the provisions
of Section 7.6 shall inure to the benefit of and be enforceable by the present
directors and officers of the Company.
 
  10.10. Certain Definitions. As used herein:
 
    (a) "Significant Subsidiary" shall have the meaning ascribed to it under
  Rule 1-02 of Regulation S-X of the SEC.
 
    (b) "subsidiary" shall mean, except as otherwise noted, when used with
  reference to any entity, any corporation a majority of the outstanding
  voting securities of which are owned directly or indirectly by such former
  entity.
 
                                     A-13

 
    (c) "Material Adverse Effect" with respect to the Company shall mean any
  adverse change (other than any change resulting from or arising out of the
  transactions contemplated by this Agreement or the announcement thereof) in
  the financial condition, business or properties of the Company and its
  subsidiaries (to the extent owned by the Company) which is material to the
  Company and its subsidiaries (to the extent owned by the Company) taken as
  a whole. "Material Adverse Effect" with respect to Parent shall mean any
  adverse change in the financial condition, business or properties of Parent
  and its subsidiaries (to the extent owned by Parent) which is material to
  the ability of Parent and Merger Sub to fulfill their obligations under
  this Agreement.
 
    (d) "Nonaffiliated Shares" shall mean outstanding Shares which are
  present in person or represented by proxy at the Stockholder Meeting and
  entitled to vote thereat, excluding Shares owned by Parent and its
  affiliates.
 
    (e) "Knowledge" and the phrase "to the knowledge of" or any similar
  phrase shall mean such facts and other information which as of the date
  hereof actually are known to any executive officer of the referenced party,
  including, without limitation, any president, chief executive officer,
  chief financial officer, general counsel, secretary, chief compliance
  officer, vice president-finance, treasurer, deputy general counsel or
  controller of the referenced party.
 
  10.11. Obligation of Parent. Whenever this Agreement requires Merger Sub to
take any action, such requirement shall be deemed to include an undertaking on
the part of Parent to use its best efforts to cause Merger Sub to take such
action.
 
  10.12. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
 
  10.13. Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
 
                                     A-14

 
  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
 
                                          Wheelabrator Technologies Inc.
 
                                          By: _________________________________
                                          Name:
                                          Title:
 
                                          Waste Management, Inc.
 
                                          By: _________________________________
                                          Name:
                                          Title:
 
                                          WMI Merger Sub, Inc.
 
                                          By: _________________________________
                                          Name:
                                          Title:
 
                                      A-15

 
                                                                   APPENDIX B-1
                        OPINION OF GOLDMAN, SACHS & CO.
 
                           PERSONAL AND CONFIDENTIAL
 
                                                               December 8, 1997
 
Special Committee of the Board of Directors
Wheelabrator Technologies Inc.
4 Liberty Lane West
Hampton, NH 03842
 
Dear Ladies and Gentleman:
 
  You have requested our opinion as to the fairness from a financial point of
view to the holders (other than Waste Management Inc. ("WMX") and its
subsidiaries) (the "Public Shareholders") of the outstanding shares of Common
Stock, par value $0.01 per share (the "Common Shares"), of Wheelabrator
Technologies Inc. (the "Company") of the $16.50 per Common Share in cash
proposed to be paid to the Public Shareholders by WMX pursuant to the
Agreement and Plan of Merger (the "Agreement") dated as December 8, 1997 by
and among WMX, WTI Merger Sub., Inc., a wholly-owned subsidiary of WMX
("Merger Sub"), and the Company. The Agreement provides that Merger Sub will
be merged with and into the Company (the "Merger") and each issued and
outstanding Common Share (other than Common Shares owned directly or
indirectly by WMX) will be converted into the right to receive $16.50 in cash.
As of the date hereof, WMX is the holder of approximately 67.0% of the
outstanding Common Shares.
 
  Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company, having acted as financial advisor
to the Special Committee of the Board of Directors of the Company in
connection with, and having participated in certain of the negotiations
leading to, the Agreement.
 
  In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1996; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company;
certain other communications from the Company to its stockholders; and certain
internal financial analyses and forecasts for the Company prepared by its
management. We also have held discussions with members of the senior
management of the Company regarding its past and current business operations,
financial condition and future prospects. In addition, we have reviewed the
reported price and trading activity for the Common Shares, compared certain
financial and stock market information for the Company with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain business combinations in the
waste to energy industry specifically and in other industries generally and
performed such other studies and analyses as we considered appropriate.
 
  We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. 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 Special Committee of the Board of
Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute
a recommendation as to how any holder of Common Shares should vote with
respect to such transaction.
 
  Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is~ our opinion that as of the date hereof the $16.50
per Common Share in cash to be received by the Public Shareholders in the
Merger is fair from a financial point of view to such holders.
 
                                          Very truly yours,
 
                                          /s/ Goldman, Sachs & Co.

 
                                                                   APPENDIX B-2
                      OPINION OF LAZARD FRERES & CO. LLC
 
                                                               December 8, 1997
 
Special Committee of
Board of Directors
Wheelabrator Technologies Inc.
 
Dear Members of the Special Committee of the Board:
 
  We understand that Wheelabrator Technologies Inc. (the "Company"), Waste
Management Inc. ("Waste Management"), which currently, with its affiliates,
owns approximately 67% of the shares of Common Stock (the "Common Shares") of
the Company, and WTI Merger Sub, a wholly-owned subsidiary of Waste Management
("Merger Sub"), have entered into an Agreement and Plan of Merger dated as of
December 8, 1997 (the "Agreement"). Pursuant to the Agreement, Merger Sub will
be merged with and into the Company (the "Merger") and each issued and
outstanding Common Share (other than Common Shares owned directly or
indirectly by Waste Management) will be converted into the right to receive
$16.50 per share in cash (the "Consideration"). The terms and conditions of
the Merger are set forth in the Agreement, which, among other things, requires
approval of the Agreement and the Merger by the holders of a majority of the
outstanding Common Shares, other than Common Shares owned by Waste Management
and its affiliates, which are present or represented by proxy at the
stockholders meeting to be called in connection with the Agreement.
 
  You have requested our opinion as to the fairness, from a financial point of
view, to the holders of Common Shares, other than Waste Management and its
affiliates, of the Consideration. In connection with this opinion, we have:
 
    (i) Reviewed the financial terms and conditions of the Agreement;
 
    (ii) Analyzed certain historical business and financial information
  relating to the Company;
 
    (iii) Reviewed various financial forecasts and other data provided to us
  by the Company relating to its businesses and financial performance;
 
    (iv) Held discussions with members of the senior management of the
  Company and Waste Management with respect to the businesses and prospects
  of the Company including financial forecasts relating to both the Company
  and the estimated synergies and other financial benefits which Waste
  Management might realize as a result of the Merger;
 
    (v) Reviewed the financial terms of the only transaction as to which
  there is publicly available information relating to a company engaged in a
  business line similar to that of the Company, and of certain business
  combinations involving the acquisition of companies by significant or
  controlling stockholders;
 
    (vi) Reviewed certain financial and stock market information for certain
  other companies, although we did not identify any publicly traded companies
  which we deemed to be comparable;
 
    (vii) Reviewed the potential impact on Waste Management's earnings per
  share of the Merger;
 
    (viii) Reviewed the historical stock prices and trading volumes of the
  Common Shares; and
 
    (ix) Considered such other information, financial studies, analyses and
  investigations and financial, economic and market criteria that we deemed
  appropriate.
 
  In light of Waste Management's majority stock ownership position in the
Company and the absence of any indication that Waste Management would provide
the support of a sale of the Company or other alternatives to the Merger
involving a third party would require, an active solicitation of third party
interest in a transaction involving the Company is not practicable and we have
engaged in only very limited exploratory activities in this regard.
 
  We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company. With respect to financial
forecasts, we have assumed that they

 
Special Committee of the Board of Directors
December 8, 1997
Page 2
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of managements of the Company and Waste Management as
to the future financial performance of the Company. We assume no
responsibility for and express no view as to such forecasts or estimates or
the assumptions on which they are based. In addition, our opinion does not
address the Company's underlying business decision to enter into the
Agreement. Further, our opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
 
  In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company and that obtaining any necessary
regulatory or third party approvals for the Merger will not have an adverse
effect on the Company.
 
  Lazard Freres & Co. LLC is acting as investment banker to the Company in
connection with the Merger and will receive a fee for our services, a
substantial portion of which is contingent upon consummation of the Merger.
Our firm has in the past provided investment banking services to the Company
and to an affiliate of Waste Management and has received fees for rendering
such services; however, we have not provided such services to the affiliate of
Waste Management within the past three years.
 
  Our opinion is addressed to, and is for the use and benefit of, the Board of
Directors of the Company and does not constitute a recommendation to any
stockholder as to how such stockholder should vote with respect to the Merger.
 
  Based on and subject to the foregoing, we are of the opinion that the
Consideration is fair to the holders of Common Shares (other than Waste
Management and its affiliates) from a financial point of view.
 
                                          Very truly yours,
 
                                          /s/ Lazard Freres & Co. LLC
 
                                     B-2-2

 
                                                                     APPENDIX C
 
  262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S) 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
 
  (b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251 (other than a merger effected pursuant to
subsection (S) 251(g) of this title), (S) 252, (S) 254, (S) 257, (S) 258,
(S) 263, or (S) 264 of this title:
 
    (1) Provided, however, that no appraisal rights under this section shall
  be available for the shares of any class or series of stock, which stock,
  or depository receipts in respect thereof, at the record date fixed to
  determine the stockholders entitled to receive notice of and to vote at the
  meeting of stockholders to act upon the agreement of merger or
  consolidation, were either (i) listed on a national securities exchange or
  designated as a national market system security on an interdealer quotation
  system by the National Association of Securities Dealers, Inc. or (ii) held
  of record by more than 2,000 holders; and further provided that no
  appraisal rights shall be available for any shares of stock of the
  constituent corporation surviving a merger if the merger did not require
  for its approval the vote of the stockholders of the surviving corporation
  as provided in subsection (f) of (S) 251 of this title.
 
    (2) Notwithstanding paragraph (1) of this subsection, appraisal rights
  under this section shall be available for the shares of any class or series
  of stock of a constituent corporation if the holders thereof are required
  by the terms of an agreement of merger or consolidation pursuant to
  (S)(S) 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
  such stock anything except:
 
      a. Shares of stock of the corporation surviving or resulting from
    such merger or consolidation, or depository receipts in respect
    thereof;
 
      b. Shares of stock of any other corporation, or depository receipts
    in respect thereof, which shares of stock (or depository receipts in
    respect thereof) or depository receipts at the effective date of the
    merger or consolidation will be either listed on a national securities
    exchange or designated as a national market system security on an
    interdealer quotation system by the National Association of Securities
    Dealers, Inc. or held of record by more than 2,000 holders;
 
      c. Cash in lieu of fractional shares or fractional depository
    receipts described in the foregoing subparagraphs a. and b. of this
    paragraph; or
 
      d. Any combination of the shares of stock, depository receipts and
    cash in lieu of fractional shares or fractional depository receipts
    described in the foregoing subparagraphs a., b. and c. of this
    paragraph.
 
    (3) In the event all of the stock of a subsidiary Delaware corporation
  party to a merger effected under (S) 253 of this title is not owned by the
  parent corporation immediately prior to the merger, appraisal rights shall
  be available for the shares of the subsidiary Delaware corporation.
 
  (c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all
 
                                      C-1

 
or substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
 
  (d) Appraisal rights shall be perfected as follows:
 
    (1) If a proposed merger or consolidation for which appraisal rights are
  provided under this section is to be submitted for approval at a meeting of
  stockholders, the corporation, not less than 20 days prior to the meeting,
  shall notify each of its stockholders who was such on the record date for
  such meeting with respect to shares for which appraisal rights are
  available pursuant to subsections (b) or (c) hereof that appraisal rights
  are available for any or all of the shares of the constituent corporations,
  and shall include in such notice a copy of this section. Each stockholder
  electing to demand the appraisal of his shares shall deliver to the
  corporation, before the taking of the vote on the merger or consolidation,
  a written demand for appraisal of his shares. Such demand will be
  sufficient if it reasonably informs the corporation of the identity of the
  stockholder and that the stockholder intends thereby to demand the
  appraisal of his shares. A proxy or vote against the merger or
  consolidation shall not constitute such a demand. A stockholder electing to
  take such action must do so by a separate written demand as herein
  provided. Within 10 days after the effective date of such merger or
  consolidation, the surviving or resulting corporation shall notify each
  stockholder of each constituent corporation who has complied with this
  subsection and has not voted in favor of or consented to the merger or
  consolidation of the date that the merger or consolidation has become
  effective; or
 
    (2) If the merger or consolidation was approved pursuant to (S) 228 or
  (S) 253 of this title, each constituent corporation, either before the
  effective date of the merger or consolidation or within ten days
  thereafter, shall notify each of the holders of any class or series of
  stock of such constituent corporation who are entitled to appraisal rights
  of the approval of the merger or consolidation and that appraisal rights
  are available for any or all shares of such class or series of stock of
  such constituent corporation, and shall include in such notice a copy of
  this section; provided that, if the notice is given on or after the
  effective date of the merger or consolidation, such notice shall be given
  by the surviving or resulting corporation to all such holders of any class
  or series of stock of a constituent corporation that are entitled to
  appraisal rights. Such notice may, and, if given on or after the effective
  date of the merger or consolidation, shall, also notify such stockholders
  of the effective date of the merger or consolidation. Any stockholder
  entitled to appraisal rights may, within 20 days after the date of mailing
  of such notice, demand in writing from the surviving or resulting
  corporation the appraisal of such holder's shares. Such demand will be
  sufficient if it reasonably informs the corporation of the identity of the
  stockholder and that the stockholder intends thereby to demand the
  appraisal of such holder's shares. If such notice did not notify
  stockholders of the effective date of the merger or consolidation, either
  (i) each such constituent corporation shall send a second notice before the
  effective date of the merger or consolidation notifying each of the holders
  of any class or series of stock of such constituent corporation that are
  entitled to appraisal rights of the effective date of the merger or
  consolidation or (ii) the surviving or resulting corporation shall send
  such a second notice to all such holders on or within 10 days after such
  effective date; provided, however, that if such second notice is sent more
  than 20 days following the sending of the first notice, such second notice
  need only to be sent to each stockholder who is entitled to appraisal
  rights and who has demanded appraisal of such holder's shares in accordance
  with this subsection. An affidavit of the secretary or assistant secretary
  or of the transfer agent of the corporation that is required to give either
  notice that such notice has been given shall, in the absence of fraud, be
  prima facie evidence of the facts stated therein. For purposes of
  determining the stockholders entitled to receive either notice, each
  constituent corporation may fix, in advance, a record date that shall be
  not more than 10 days prior to the date the notice is given, provided, that
  if the notice is given on or after the effective date of the merger or
  consolidation, the record date shall be such effective date. If no record
  date is fixed and the notice is given prior to the effective date, the
  record date shall be the close of business on the day next preceding the
  day on which the notice is given.
 
  (e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the
 
                                      C-2

 
  value of the stock of all such stockholders. Notwithstanding the foregoing,
  at any time within 60 days after the effective date of the merger or
  consolidation, any stockholder shall have the right to withdraw his demand
  for appraisal and to accept the terms offered upon the merger or
  consolidation. Within 120 days after the effective date of the merger or
  consolidation, any stockholder who has complied with the requirements of
  subsections (a) and (d) hereof, upon written request, shall be entitled to
  receive from the corporation surviving the merger or resulting from the
  consolidation a statement setting forth the aggregate number of shares not
  voted in favor of the merger or consolidation and with respect to which
  demands for appraisal have been received and the aggregate number of
  holders of such shares. Such written statement shall be mailed to the
  stockholder within 10 days after his written request for such a statement
  is received by the surviving or resulting corporation or within 10 days
  after expiration of the period for delivery of demands for appraisal under
  subsection (d) hereof, whichever is later.
 
    (f) Upon the filing of any such petition by a stockholder, service of a
  copy thereof shall be made upon the surviving or resulting corporation,
  which shall within 20 days after such service file in the office of the
  Register in Chancery in which the petition was filed a duly verified list
  containing the names and addresses of all stockholders who have demanded
  payment for their shares and with whom agreements as to the value of their
  shares have not been reached by the surviving or resulting corporation. If
  the petition shall be filed by the surviving or resulting corporation, the
  petition shall be accompanied by such a duly verified list. The Register in
  Chancery, if so ordered by the Court, shall give notice of the time and
  place fixed for the hearing of such petition by registered or certified
  mail to the surviving or resulting corporation and to the stockholders
  shown on the list at the addresses therein stated. Such notice shall also
  be given by 1 or more publications at least 1 week before the day of the
  hearing, in a newspaper of general circulation published in the City of
  Wilmington, Delaware or such publication as the Court deems advisable. The
  forms of the notices by mail and by publication shall be approved by the
  Court, and the costs thereof shall be borne by the surviving or resulting
  corporation.
 
    (g) At the hearing on such petition, the Court shall determine the
  stockholders who have complied with this section and who have become
  entitled to appraisal rights. The Court may require the stockholders who
  have demanded an appraisal for their shares and who hold stock represented
  by certificates to submit their certificates of stock to the Register in
  Chancery for notation thereon of the pendency of the appraisal proceedings;
  and if any stockholder fails to comply with such direction, the Court may
  dismiss the proceedings as to such stockholder.
 
    (h) After determining the stockholders entitled to an appraisal, the
  Court shall appraise the shares, determining their fair value exclusive of
  any element of value arising from the accomplishment or expectation of the
  merger or consolidation, together with a fair rate of interest, if any, to
  be paid upon the amount determined to be the fair value. In determining
  such fair value, the Court shall take into account all relevant factors. In
  determining the fair rate of interest, the Court may consider all relevant
  factors, including the rate of interest which the surviving or resulting
  corporation would have had to pay to borrow money during the pendency of
  the proceeding. Upon application by the surviving or resulting corporation
  or by any stockholder entitled to participate in the appraisal proceeding,
  the Court may, in its discretion, permit discovery or other pretrial
  proceedings and may proceed to trial upon the appraisal prior to the final
  determination of the stockholder entitled to an appraisal. Any stockholder
  whose name appears on the list filed by the surviving or resulting
  corporation pursuant to subsection (f) of this section and who has
  submitted his certificates of stock to the Register in Chancery, if such is
  required, may participate fully in all proceedings until it is finally
  determined that he is not entitled to appraisal rights under this section.
 
    (i) The Court shall direct the payment of the fair value of the shares,
  together with interest, if any, by the surviving or resulting corporation
  to the stockholders entitled thereto. Interest may be simple or compound,
  as the Court may direct. Payment shall be so made to each such stockholder,
  in the case of holders of uncertificated stock forthwith, and the case of
  holders of shares represented by certificates upon the surrender to the
  corporation of the certificates representing such stock. The Court's decree
  may be enforced as other decrees in the Court of Chancery may be enforced,
  whether such surviving or resulting corporation be a corporation of this
  State or of any state.
 
                                      C-3

 
    (j) The costs of the proceeding may be determined by the Court and taxed
  upon the parties as the Court deems equitable in the circumstances. Upon
  application of a stockholder, the Court may order all or a portion of the
  expenses incurred by any stockholder in connection with the appraisal
  proceeding, including, without limitation, reasonable attorney's fees and
  the fees and expenses of experts, to be charged pro rata against the value
  of all the shares entitled to an appraisal.
 
    (k) From and after the effective date of the merger or consolidation, no
  stockholder who has demanded his appraisal rights as provided in subsection
  (d) of this section shall be entitled to vote such stock for any purpose or
  to receive payment of dividends or other distributions on the stock (except
  dividends or other distributions payable to stockholders of record at a
  date which is prior to the effective date of the merger or consolidation);
  provided, however, that if no petition for an appraisal shall be filed
  within the time provided in subsection (e) of this section, or if such
  stockholder shall deliver to the surviving or resulting corporation a
  written withdrawal of his demand for an appraisal and an acceptance of the
  merger or consolidation, either within 60 days after the effective date of
  the merger or consolidation as provided in subsection (e) of this section
  or thereafter with the written approval of the corporation, then the right
  of such stockholder to an appraisal shall cease. Notwithstanding the
  foregoing, no appraisal proceeding in the Court of Chancery shall be
  dismissed as to any stockholder without the approval of the Court, and such
  approval may be conditioned upon such terms as the Court deems just.
 
    (l) The shares of the surviving or resulting corporation to which the
  shares of such objecting stockholders would have been converted had they
  assented to the merger or consolidation shall have the status of authorized
  and unissued shares of the surviving or resulting corporation.
 
                                      C-4

 
                                                                     APPENDIX D
 
  THE FOLLOWING CONSOLIDATED INCOME STATEMENT DATA OF THE COMPANY REFLECT
INFORMATION THAT WAS CONTAINED IN THE PROJECTIONS REFERRED TO UNDER THE
CAPTION "CERTAIN FINANCIAL PROJECTIONS OF THE COMPANY" (IN MILLIONS):
 


                                                                  PROJECTION FOR THE YEAR ENDING DECEMBER 31,
                 -----------------------------------------------------------------------------------------------------------
                  1997   1998  1999(/2/)  2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011
                 ------ ------ --------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
                                                                         
Revenue......... $1,027 $1,030  $1,013   $1,049 $1,138 $1,312 $1,378 $1,430 $1,491 $1,564 $1,593 $1,698 $1,714 $1,799 $1,838
EBIT (/4/)......    300    289     272      285    319    402    416    424    444    482    468    517    497    512    519
EBITDA (/4/)....    394    371     342      357    399    504    519    524    545    581    575    619    600    623    631
Net Income
(/1/)........... $  179 $  165  $  150   $  164 $  179 $  208 $  219 $  226 $  240 $  255 $  251 $  276 $  270 $  281 $  286

                  2012   2013   2014   2015   2016
                 ------ ------ ------ ------ ------
                              
Revenue......... $1,918 $2,029 $2,158 $2,286 $2,406
EBIT (/4/)......    547    587    652    708    737
EBITDA (/4/)....    661    709    782    847    883
Net Income
(/1/)........... $  305 $  333 $  366 $  393 $  408

- - - ----
(1) Net Income includes equity income from Rust and WM International of $20.8
    million in 1997 and $20 million in 1998 growing at 4% per year thereafter.
(2) 1999 excludes $21 million ($12 million after-tax) in one-time debt
    refinancing charges for the North and South Broward Projects assumed to be
    treated as extraordinary expenses.
(3) Net Income for 1997 excludes a charge recorded by OHM Corporation which
    reduced the Company's equity earnings by approximately $4.8 million.
(4) "EBIT" means earnings of the Company before deductions for interest and
    taxes. "EBITDA" means earnings of the Company before deductions for
    interest, taxes, depreciation and amortization. EBIT and EBITDA are
    commonly used measures of business performance, but are not measures
    included in generally accepted accounting procedures. The EBIT and EBITDA
    numbers set forth above were included in the performance information
    provided by the Company to Waste Management, the Special Committee, the
    Investment Bankers and Merrill Lynch and were used during negotiation with
    respect to the Merger.


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LOGO
PROXY                                                                      PROXY
 
                        WHEELABRATOR TECHNOLOGIES INC.
 
                        SPECIAL MEETING, MARCH 30, 1998
          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
 
  John M. Kehoe, Jr., Robert J. Gagalis and Thomas A. Witt, each with power of
substitution, are hereby authorized to vote all shares of common stock of
Wheelabrator Technologies Inc. which the undersigned would be entitled to vote
if personally present at the Special Meeting of Stockholders of Wheelabrator
Technologies Inc., to be held on March 30, 1998, and at any adjournments, as
designated on the reverse hereof.
 
  A MAJORITY (OR IF ANY ONE, THEN THAT ONE) OF THE ABOVE PERSONS OR THEIR
SUBSTITUTES WHO SHALL BE PRESENT AND ACTING AT THE MEETING SHALL HAVE THE
POWERS CONFERRED HEREBY.
 
           PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
                         USING THE ENCLOSED ENVELOPE.
 
           DO NOT SUBMIT ANY STOCK CERTIFICATES WITH THIS PROXY CARD.
 
                 (Continued and to be signed on reverse side.)

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   PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [_]

 A Vote FOR approval and adoption of the below-described Agreement and Plan of
               Merger is recommended by the Board of Directors.

1. To consider and act upon a proposal to adopt an Agreement and Plan of Merger
   among Wheelabrator Technologies Inc., Waste Management, Inc. and WMI Merger
   Sub, Inc., as more fully described in the accompanying Proxy Statement.
   
                        FOR       AGAINST       ABSTAIN
                        [_]         [_]           [_]

2. To transact such other business as may properly come before the meeting or 
   any adjournment or postponement thereof.

                                     This Proxy when properly executed will be
                                     voted in the manner directed herein by the
                                     undersigned stockholder(s). If no direction
                                     is made, this Proxy will be voted for
                                     proposal no. 1 above and will be voted as
                                     recommended by the Proxy holders listed on
                                     the reverse hereof as to any other matters
                                     which may properly come before the meeting.


                                                    Dated: ________________,199_

                                     Signature(s) ______________________________

                                     ___________________________________________
                                     Signature of Stockholder(s)--please sign
                                     name exactly as imprinted (do not print).
                                     Please indicate any change of address.
                                     NOTE: Executors, administrators, trustees
                                     and others signing in a representative
                                     capacity should indicate the capacity in
                                     which they sign. If shares are held
                                     jointly, EACH holder should sign.

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