Progressive/Waste Management -- summary under Inversions

Overview

It is proposed that Waste Connections, a NYSE-listed Delaware corporation, will effect a reverse takeover of Progressive, a TSX and NYSE-listed OBCA corporation, through a merger of Waste Connections with a Delaware shell sub of Progressive, with Waste Connections as the survivor and with Waste Connections’ shareholders receiving common shares of Progressive so as to end up holding 70% of Progressive. The shares of Progressive will then be consolidated (so that the Waste Connections shareholders have the same number of shares as before) – and Progressive will be renamed Waste Connections by means of amalgamation with a shell Ontario subsidiary with that name. The obligation to effect the merger is conditional upon receipt of opinions that Code s. 7874 should not cause Progressive to be treated as a U.S. corporation. The disclosure estimates that the April 4, 2016 U.S. Treasury Department and IRS proposals, that could cause intercompany debt if it were to exceed the currently outstanding debt of Waste Connections to be treated as equity, would reduce the adjusted free cash flow expected in the first year following the Merger by less than 3%.

Progressive

A TSX and NYSE-listed OBCA corporation which is one of North America's largest full-service waste management companies, providing waste collection, recycling and disposal services to commercial, industrial, municipal and residential customers in 14 U.S. states, the District of Columbia and in six Canadian provinces.

Waste Connections

A Delaware NYSE-listed integrated municipal solid waste services company that provides solid waste collection, transfer, disposal and recycling services primarily in exclusive and secondary markets in the U.S. and a leading provider of non-hazardous exploration and production waste treatment, recovery and disposal services in several of the most active natural resource producing areas of the U.S.

Merger Sub

A Delaware limited liability company and currently a wholly-owned subsidiary of Progressive. Merger Sub was incorporated on January 14, 2016 for the purposes of effecting the Merger….

Merger

Merger Sub will merge with and into Waste Connections (the ''Merger''), with Waste Connections continuing as the surviving corporation and a subsidiary of Progressive. On the Merger, Waste Connections stockholders will receive newly issued Progressive common shares as consideration under the Merger at an exchange ratio of 2.076843 Progressive common shares for every one common share of Waste Connections common stock, so that Progressive and Waste Connections stockholders will hold approximately 30% and 70%, respectively, of post-Merger Progressive common shares. The Merger is expected to close in the second quarter of 2016.

Consolidation

Every 2.076843 pre-Consolidation Progressive common shares will be consolidated into one post-Consolidation Progressive common share. All fractional Progressive common shares will be aggregated and sold in the open market and each common shareholder who would otherwise have been entitled to receive a fraction of a Progressive common share will receive, in lieu thereof, cash, without interest.

Amalgamation name change

Progressive intends to change its name to ''Waste Connections, Inc.'' (i.e., the Name Change) by amalgamating with its newly-formed direct wholly-owned subsidiary, Waste Connections, Inc., which was incorporated under the OBCA solely for the purpose of effecting the Name Change.

U.S. Securities laws

Progressive is currently a "foreign private issuer" within the meaning of Rule 3b-4.

U.S. tax considerations

Code s. 7874 opinions

The obligation to effect the Merger is conditional upon Progressive's and Waste Connections' receipt of Code s. 7874 opinions from Weil, Gotshal & Manges LLP and Locke Lord LLP, respectively, dated as of the closing date and subject to certain qualifications and limitations, to the effect that s. 7874 and the Treasury Regulations promulgated thereunder should not apply in such a manner so as to cause Progressive to be treated as a U.S. corporation for U.S. federal income tax purposes from and after the closing date of the Merger.

Consolidation

Progressive intends for the Consolidation to qualify as a ''recapitalization'' within the meaning of Code s. 368(a). On this basis, Progressive shareholders whose pre-Consolidation Progressive common shares are exchanged in the Consolidation will not recognize gain or loss for U.S. federal income tax purposes, except to the extent of cash, if any, received in lieu of a fractional Progressive common share (which fractional share will be treated as received and then exchanged for such cash).

Debt recharacterization proposals

On April 4, 2016, the U.S. Treasury Department and the IRS issued proposed Treasury Regulations under Code s. 385 that would treat certain intercompany debt as equity for Code purposes, which when finalized would be retroactive to April 4, 2016. At the time the Merger Agreement was signed, Waste Connections and Progressive indicated that adjusted free cash flow for the combined company in the first year following the Merger was expected to exceed $625 million. Waste Connections and Progressive have considered the effect of the proposed Treasury Regulations on the combined company and believe that, if adopted in the form proposed, the proposed Treasury Regulations could cause intercompany debt if it were to exceed the currently outstanding debt of Waste Connections to be treated as equity, reducing the amount of deductible interest expense available to the combined company, which could reduce the adjusted free cash flow expected in the first year following the Merger by less than 3%.

Canadian tax considerations

Consolidation

Subject to the treatment of fractional shares, the Consolidation will result in all of the Progressive common shares being replaced by a lesser number of Progressive common shares in the same proportion for all Progressive shareholders, in circumstances where there is no change in the total capital represented by the issue, there is no change in the interest, rights or privileges of the shareholders and there are no concurrent changes in the capital structure of Progressive. On that basis, subject to the paragraph below, the Consolidation will not result in any disposition or acquisition of Progressive common shares.

Cash in lieu

A Resident Holder who receives cash in lieu of a fractional Progressive common share on the Consolidation will realize a capital gain (or capital loss) equal to the amount, if any, by which the cash proceeds received, net of reasonable costs of disposition, exceed (or are less than) the adjusted cost base to the Resident Holder of the fractional Progressive common share so disposed of.