UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-27508
SUPERIOR SERVICES, INC.
(exact name of Registrant as specified in its charter)
Wisconsin 39-1733405
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 South 84th Street, Suite 200, Milwaukee, Wisconsin 53214
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (414) 479-7800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes_____ No_____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
The number of shares of Common Stock of the registrant, par value
$.01 per share, outstanding on November 9, 1998 was 32,499,687.
<PAGE>
SUPERIOR SERVICES, INC.
FORM 10-Q INDEX
(1) For the Quarter Ended September 30, 1998
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets........................3
Condensed Consolidated Income Statements.....................4
Condensed Consolidated Statements of Shareholders'
Investment...................................................5
Condensed Consolidated Statements of Cash Flows..............6
Notes to Condensed Consolidated Financial Statements......7-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................14-23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................24
Item 5. Other Matters....................................................24
Item 6. Exhibits and Reports on Form 8-K.................................27
SIGNATURES....................................................................28
EXHIBIT INDEX.................................................................29
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<PAGE>
<TABLE>
Superior Services, Inc.
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
December 31, September 30,
1997 1998
------------ -------------
(Restated)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $44,033 $13,490
Trade accounts receivable 39,184 56,057
Prepaid expenses and other current assets 6,575 5,798
------- --------
Total current assets 89,792 75,345
Property and equipment, net 231,994 268,500
Restricted funds held in trust 7,714 8,342
Other assets 4,796 4,412
Intangible assets, net 73,995 92,902
------ ------
Total assets $408,291 $449,501
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt $8,170 $4,401
Trade accounts payable 13,074 15,186
Accrued payroll and related expenses 4,941 5,112
Other accrued expenses 22,139 25,482
------- ------
Total current liabilities 48,324 50,181
Long-term debt, net of current maturities 16,998 27,312
Disposal site closure and long-term care obligations 41,281 45,596
Deferred income taxes 18,067 21,015
Other liabilities 13,810 13,111
Commitments and contingencies
Common stock 292 301
Additional paid-in capital 220,099 229,439
Retained earnings 49,420 62,546
------- -------
Total shareholders' investment 269,811 292,286
------- -------
Total liabilities and shareholders' investment $408,291 $449,501
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
Superior Services, Inc.
Condensed Consolidated Income Statements
(In Thousands, Except Share and Per Share amounts)
(Unaudited)
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1997 1998 1997 1998
---- ---- ---- ----
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues $64,891 $78,150 $163,467 $215,885
Expenses:
Cost of operations 37,062 44,242 91,968 124,349
Selling, general and administrative costs 8,565 9,088 24,812 26,732
-
Merger costs 5,327 1,035 6,820
Depreciation and amortization expenses 8,098 8,736 20,359 26,039
------- ------- -------- --------
53,725 67,393 138,174 183,940
------- ------- -------- --------
Operating income 11,166 10,757 25,293 31,945
Other income (expense):
Interest expense (869) (434) (2,024) (1,796)
Other income (expense) 533 (59) 731 943
-------- -------- -------- ---------
Income before income taxes 10,830 10,264 24,000 31,092
Provision for income taxes 3,849 7,270 8,536 16,374
------- ------- -------- --------
Net income $6,981 $2,994 $15,464 $14,718
======= ======= ======== =========
Earnings per share - basic $0.28 $0.10 $0.63 $0.49
======= ======= ======== ========
Earnings per share - diluted $0.27 $0.10 $0.62 $0.49
======= ======= ======== ========
Pro forma adjustments (Notes 1 and 3):
Net income, as reported $6,981 $2,994 $15,464 $14,718
======= ======= ======== ========
Adjustment for income taxes (607) (20) (1,479) (620)
Net income, as adjusted $6,374 $2,974 $13,985 $14,098
======= ======= ======== ========
Earnings per share as adjusted - basic $0.25 $0.10 $0.57 $0.47
======= ======= ======== ========
Earnings per share as adjusted - diluted $0.25 $0.10 $0.56 $0.47
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
<CAPTION>
Superior Services, Inc.
Condensed Consolidated Statements of Shareholders' Investment
(In Thousands, Except Share Amounts)
(Unaudited)
Common Additional
Stock Paid-In Retained
Shares Amount Capital Earnings Total
Balance at December 31, 1997, as
<S> <C> <C> <C> <C> <C>
previously reported 24,071,932 $241 $216,309 $42,859 $259,409
Shares issued for pooling of interests 5,094,146 51 3,790 6,561 10,402
--------- -- ----- ----- ------
Balance at December 31, 1997, as restated
29,166,078 292 220,099 49,420 269,811
Net income - - - 14,718 14,718
Issuance of common stock:
Exercise of stock options 207,058 2 1,604 - 1,606
Acquisitions 706,139 7 8,143 (446) 7,704
Subchapter S distributions
to former shareholders - (407) (1,146) (1,553)
---------- ----- ----- ------- -------
-
Balance at September 30, 1998 30,079,275 $ 301 $229,439 $62,546 $ 292,286
========== ===== ======== ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
Superior Services, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<CAPTION>
For the nine months ended September 30,
1997 1998
(Restated)
OPERATING ACTIVITIES
<S> <C> <C>
Net income $15,464 $14,718
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 20,359 26,039
Deferred income taxes (280) 2,948
Gain on sale of assets (4) (208)
Changes in operating assets and liabilities,
net of effects of acquired businesses:
Accounts receivable (13,699) (15,618)
Prepaid expenses and other current assets (1,496) 224
Accounts payable and accrued expenses 5,387 990
Disposal site closure and long-term care
obligation 1,618 1,932
Other 3,918 1,177
----- -----
Net cash provided by operating activities 31,267 32,202
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (83,118) (34,634)
Purchases of property and equipment (23,424) (32,685)
Proceeds from sale of property and equipment 761 718
Decrease (increase) in restricted funds held in trust 1,281 (628)
----- -----
Net cash used in investing activities (104,500) (67,229)
FINANCING ACTIVITIES
Net decrease in short-term borrowings (1,268) (3,769)
Proceeds from long-term debt 13,900 28,864
Payments of long-term debt (8,730) (20,664)
Issuance of common stock 111,246 1,606
Subchapter S distributions to former shareholders (2,600) (1,553)
---------- ---------
Net cash provided by financing activities 112,548 4,484
---------- ---------
Net increase (decrease) in cash and cash equivalents 39,315 (30,543)
Cash and cash equivalents at beginning of period 20,569 44,033
---------- ---------
Cash and cash equivalents at end of period $59,884 $13,490
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Superior Services, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Basis of Presentation
Superior Services, Inc. ("Superior" or the "Company") is an integrated
solid waste services company providing a range of collection, transfer,
transportation, disposal and recycling services to generators of solid waste and
special waste. The condensed consolidated financial statements included herein
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). As applicable
under such regulations, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that
the presentations and disclosures in the financial statements included herein
are adequate to make the information not misleading. The financial statements
reflect all elimination entries and normal adjustments that are necessary for a
fair statement of the results for the interim periods presented. The Company has
also restated its previously issued financial statements for the three and nine
months ended September 30, 1997 and its consolidated balance sheet as of
December 31, 1997 to reflect the acquisition of Alabama Waste Systems, Inc. and
Acmar Regional Landfill, Inc. (collectively "AWS") completed on March 31, 1998;
Gopher Disposal, Inc., Eagle Environmental, Inc., Materials Recovery, Ltd. and
Watson's Rochester Disposal, Inc. (collectively "Gopher") completed on August
26, 1998; PenPac, Inc., Heritage Recycling, Inc., Iorio Carting, Inc., ACS
Services, Inc., Recycling Techniques, Inc., Iocal Associates, Advanced Water
Technologies, Inc., Baray, Inc., and Nicholas Enterprises, Inc. (collectively
"PenPac") completed on September 30, 1998 and all accounted for using the
pooling of interests method. Prior to their merger, AWS, a substantial number of
companies comprising Gopher, and PenPac had each selected S Corporation status
for income tax purposes. As a result of their merger, AWS, Gopher and PenPac
terminated their S Corporation elections. Pro forma provisions for income taxes
are presented for the three months ended September 30, 1997 and 1998 and have
been computed as if AWS, Gopher and PenPac had been "C" Corporations during the
periods presented.
Operating results for interim periods are not necessarily indicative of the
results for full years or other interim periods. It is suggested that the
condensed consolidated financial statements included herein be read in
conjunction with the consolidated financial statements of Superior for the year
ended December 31, 1997 and the related notes thereto (the "Financial
Statements") included in the Company's Form 10-K for the year ended December 31,
1997.
The accompanying condensed consolidated financial statements include the
accounts of Superior and its subsidiaries. All significant intercompany
transactions and balances have been eliminated. Certain reclassifications have
been made to the 1997 financial statements to conform to the 1998 presentation.
2. Significant Accounting Policies and Use of Estimates
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<PAGE>
There have been no significant additions to or changes in accounting
policies of the Company since December 31, 1997. For a description of these
policies, see Note 2 of Notes to Consolidated Financial Statements in the
Company's Form 10-K for the year ended December 31, 1997.
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of this Statement had no impact
on the Company's net income or shareholders' investment. SFAS No. 130 requires
unrealized gains or losses on the Company's available-for-sale securities and
foreign currency translation adjustments to be included in other comprehensive
income. The Company has no such transactions that would be accounted for as part
of comprehensive income.
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," effective January 1, 1998. SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operation segments in
interim financial reports. Adoption of SFAS No. 131 has had no effect on the
Company.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Acquisitions
In the first nine months of 1998, the Company acquired 15 solid waste
businesses that were accounted for as purchases. Aggregate consideration for
these acquisitions was approximately $32.9 million in cash and 274,695 shares of
Common Stock issued under the Company's Form S-4 Acquisition Shelf Registration
Statement. These acquisitions have been accounted for as purchases and,
accordingly, the results of their operations have been included in the Company's
financial statements from their respective dates of acquisition.
During the first nine months of 1998, 67,772 shares were issued and $1.7
million of cash was paid in settlement of final valuation computations on
certain acquisitions that occurred in 1997
The Company completed its mergers with TWR, Inc. ("TWR"), AWS, South Lake
Refuse Service, Inc. and Commercial Refuse, Inc. (collectively "South Lake"),
Gopher, Wilson Waste Systems, Inc. ("Wilson") and PenPac on March 1, March 31,
August 17, August 26, August 31, and September 30, 1998, respectively. The
mergers were accounted for as pooling of interests pursuant to which the Company
issued approximately 5.5 million shares of Common Stock under the Company's Form
S-4 Acquisition Shelf Registration Statement of which 5,094,146 were for AWS,
Gopher and PenPac and 363,672 were for TWR, South Lake, and Wilson. The Company
incurred nonrecurring merger costs of approximately $1.5 million during the
first quarter and $5.3 million during the third quarter of 1998 as a result of
their mergers. The merger costs incurred in connection with their mergers during
the first quarter and third quarter were $1,236,000 net of tax and $4,272,000
net of tax, respectively. Their merger costs included severance and bonuses,
professional fees, and other merger-related costs. As of September 30, 1998,
$4.9 million had been accrued for merger costs expected to be paid by December
31, 1998. Included in the provision for income taxes for the nine months ended
September 30, 1998 is $2.7 million related to the cumulative deferred tax
provision associated with the conversions from S
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<PAGE>
Corporation to C Corporation in connection with the mergers with the Company.
Periods prior to 1998 have not been restated to include the accounts and
operations of TWR, South Lake, or Wilson, as combined results are not materially
different from the results as previously presented. Combined and separate
results of operation of the Company prior to completion of the mergers for the
restated periods are as follows (in thousands, except per share amounts):
<TABLE>
Superior AWS Gopher PenPac Combined
Three months ended September
30, 1997 (unaudited):
<S> <C> <C> <C> <C> <C>
Revenue $51,578 $3,603 $5,024 $4,686 $64,891
Income before income taxes 9,314 799 540 177 10,830
Net income 5,472 799 540 170 6,981
Earnings per share - basic $0.27 $0.28
Earnings per share - diluted $0.27 $0.27
Nine months ended September
30, 1997 (unaudited):
Revenue $127,552 $10,336 $12,290 $13,289 $163,467
Income before income taxes 20,335 2,056 1,550 59 24,000
Net income 11,806 2,056 1,550 52 15,464
Earnings per share - basic $0.61 $0.63
Earnings per share - diluted $0.60 $0.62
</TABLE>
The unaudited pro forma results of operations below assume that 1997 and
1998 acquisitions accounted for as purchases occurred at the beginning of 1997.
In addition to combining the historical results of all such acquired entities,
the pro forma calculations include adjustments for amortization of various
intangibles acquired in conjunction with the acquisitions. However, no
adjustments have been reflected for nonrecurring expenses as a result of the
acquisition of the entities.
Nine Months Ended September 30,
1997 1998
(Unaudited and in thousands, except per share amounts)
Total net revenue $201,936 $220,454
Net income $16,614 $14,755
Earnings per share - basic $0.67 $0.49
Earnings per share - diluted $0.66 $0.49
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<PAGE>
The pro forma financial information does not purport to be indicative of
the result, which would actually have been recognized had the purchase
transactions been completed on January 1, 1997 or which may be realized in the
future.
4. Shareholders' Investment
On February 24, 1998, the Company granted employee incentive stock options
exercisable for 358,774 shares of Common Stock at an exercise price of either
$25.875 or $28.457 per share (fair market value on grant date was $25.875.) The
options become exercisable 25% after one year and an additional 6.25% for each
quarter thereafter. On September 14, 1998, the Company granted additional
employee incentive stock options exercisable for 33,000 shares at an exercise
price of $26.00 per share. Of these options, options with respect to 30,000
shares become exercisable 50% after one year and an additional 6.25% for each
quarter thereafter and options with respect to 3,000 shares become exercisable
25% after one year and an additional 6.25% for each quarter thereafter.
On May 12, 1998, the Company granted non-qualified common stock options for
10,000 shares at an exercise price of $31.625 to independent directors serving
on the Company's Board of Directors. These options vest six months after the
date of grant.
5. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands):
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1998 1997 1998
---- ---- ---- ----
Numerator
Income from continuing operations used in
computing basic and diluted earnings per
<S> <C> <C> <C> <C>
share $6,981 $2,994 $15,464 $14,718
====== ====== ======= =======
Denominator
Denominator for basic earnings per share -
weighted average common shares 25,158 29,991 24,499 29,823
Effect of dilutive securities - employee stock
options 407 405 377 442
--- --- --- ---
Denominator for diluted warnings per share -
adjusted weighted average common shares 25,565 30,396 24,876 30,265
====== ====== ====== ======
</TABLE>
6. Commitments and Contingencies
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<PAGE>
In connection with an acquisition in March 1993, the Company was required
to accept the transfer of an adjacent closed landfill that is listed on the
National Priorities List ("NPL"). A remedial investigation performed by the PRPs
(including the Company) has determined the scope and nature of the contamination
at the site and the PRPs have submitted a feasibility study to the EPA and WDNR,
which describes the alternatives for remediating the associated groundwater
contamination. The WDNR has formally approved the remedial alternative
recommended by the PRPs which calls for the installation of two to four
additional gas extraction wells (which would be connected to the existing gas
extraction system at the site) and continued groundwater monitoring. The
estimate of total costs of the remedial alternative approved by the WDNR is
approximately $2.8 million, consisting of one-time capital costs for the
additional extractions wells of $107,000, and annual operating, maintenance and
monitoring costs for the new extraction wells, the landfill cap, the existing
gas extraction system and groundwater monitoring system estimated at $90,000 per
year. The operating duration of the proposed remediation is uncertain, but could
be 30 years or longer. As the duration is uncertain, the accrual was not
measured on a discounted basis. Approximately $231,000 has been expended through
September 1998 pursuant to remediation performed at this site. Thus, total costs
remaining are estimated to be approximately $2.6 million. The Company has
entered into settlement agreements with certain generator PRPs that allocates
the costs of the remediation. Under the settlement agreements certain of the
generator PRPs agreed to contribute to a total of approximately 42% of future
costs for remedial action and the annual operating, maintenance, and monitoring
costs related to the site.
The seller and former owner of the closed landfill agreed to indemnify the
Company up to $2.8 million for any site liabilities, including the annual costs
of operating, maintaining and monitoring the closed landfill and any costs the
Company may incur as a PRP. The Company has been paid $482,755 by the seller of
which $230,836 has been expended as of September 30, 1998. The seller's
remaining potential indemnification obligation was collateralized as of
September 30, 1998, by $2,317,245 in cash held in escrow. The Company has
recorded as an other asset approximately $2.3 million that is deemed probable of
recovery from the generator PRPs and the seller of the closed landfill. On
August 15, 1997, an engineer selected by the seller determined that the
reasonable present value of the cost of a likely remediation plan for the closed
landfill approximates $688,000. The Company and seller are in dispute regarding
the cost of a likely remedial action plan. The seller has demanded arbitration
and has filed a declaratory judgment action in state circuit court. The state
court entered judgment on March 23, 1998 finding that the engineer's estimate is
final and binding on the parties. On April 30, 1998 the Company filed its notice
of appeal of the lower court judgment in state appellate court. If the seller's
position is accepted or upheld in the pending proceedings, the Company may be
required to return to the seller substantially all or a substantial portion of
the current amount held in escrow. This would result in a reduction of its
"other asset" and the related liability account on its balance sheet, but is not
expected to have a material income statement effect. Although the engineer's
estimate of such potential costs was substantially less than the Company's
current estimate, the Company believes its existing financial reserves, together
with the amounts paid and remaining payable by the seller and the contribution
obligations of the generator PRPs, are adequate to cover the currently
anticipated remediation costs of such landfill. As is the case with all sites on
the NPL, the performance of the selected remedy at the closed landfill will be
subject to periodic review by the WDNR and the EPA. In the event the selected
remedy does not perform adequately to meet applicable state and federal
standards, additional remedial measures beyond those currently anticipated could
be required by the WDNR or EPA. Implementation of any such additional remedial
measures may involve substantial additional costs beyond those currently
anticipated.
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<PAGE>
In connection with the formation of the Company in 1993 through the
consolidation of three groups of independent waste services companies, certain
potential environmental liabilities associated with the previously filled
portion of the Superior Valley Meadows landfill were identified. At the time of
the consolidation of these companies into the Company, a contingent liability
escrow was established to cover the then estimated costs of remediation and
monitoring with respect to the contingent liabilities. To indemnify the Company
against up to $1,308,000 of these contingent liabilities, 130,800 shares of the
Company's common stock otherwise issuable as part of the consolidation to the
individual who was the principal shareholder of the prior owner of the site and
who is now a director, executive officer and significant shareholder of the
Company, were withheld from issuance. In order to preserve the Company's rights
under this indemnification arrangement prior to the February 24, 1997 expiration
date for advancing such types of indemnification claims, the Company formally
notified the individual of the Company's claim against the withheld shares for
the entire amount of the originally established liability escrow. The Company
believes that the entire amount of such environment liabilities will not exceed
$1.3 million and will either be covered by the foregoing indemnification
arrangement or otherwise is not expected to have a material adverse effect on
the Company's results of operations or financial condition.
In connection with the AWS merger on March 31, 1998, a landfill was
acquired which was subject to legal proceedings brought by the local
municipality. In October 1996, the municipality filed an administrative appeal
challenging the State of Alabama Department of Environmental Management's (ADEM)
decision to issue a landfill permit modification. An administrative commission
appointed a judge to act as a hearing officer to oversee the permit appeal.
Based upon the hearing officer's recommendation, the administrative commission
in June 1997 unanimously adopted the recommendation of the hearing officer that
the landfill permit modification was properly issued. Subsequently, the
municipality filed an appeal of this administrative decision in state circuit
court. While the Company believes it will be successful in defending the appeal
of this decision, there can be no assurance that this appeal will not be
determined adversely to the Company. Any such adverse decision, if ultimately
upheld, could impact the ability of such landfill to accept any or certain
volumes of waste and, in turn, could adversely effect the Company's results of
operations. Separately, the municipality in August 1996 filed in Federal
district court a citizen's suit against the landfill brought under provisions of
the Clean Water Act and the Resource Conservation and Recovery Act. The Company
does not believe there is a basis for a claim supporting the citizen's suit. In
addition to the Federal claims, the municipality has alleged certain state law
claims that, among other things, the prior owners of the landfill misrepresented
the geology and hydrogeology of an expansion portion of the landfill, allegedly
inducing the municipality to grant local approval for the expansion of the
landfill. This local approval is a prerequisite for issuance of the ADEM solid
waste permit. Prior to the acquisition of this landfill, the prior owners were
engaged in settlement negotiations with the municipality regarding these
proceedings. Since the acquisition, the Company has met with municipal officials
and presented settlement offers that the municipality currently has under
consideration. The Company believes that the ultimate resolution of the
citizen's suit and the municipality's state law claims will not have a material
adverse effect on the Company's financial condition or results of operations.
The Company acquired PenPac, Inc. as part of its PenPac acquisition on
September 30, 1998. Prior to the Company's acquisition of PenPac, Inc., in
February 1998, the Borough of Totowa filed a verified petition with the New
Jersey Department of Environmental Protection seeking to require PenPac, Inc. to
pay statutory host fees under New Jersey law at the rate of $3 per ton for all
solid waste accepted at PenPac's Totowa transfer station since November 1997.
(As of September 30, 1998, the PenPac Totowa transfer station had accepted
approximately 70,560 tons of solid waste since November
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<PAGE>
1997.) Prior to its acquisition by the Company, PenPac, Inc. filed an answer
disputing the Borough's entitlement to host benefits at the rate of $3 per ton
and asserted that the statutory minimum of $.50 per ton was appropriate. The
proceeding is currently in the discovery stage. Under the terms of the
acquisition agreement for PenPac, Inc., its former shareholders have agreed to
indemnify the Company against any host community fees which are in excess of
$.50 per ton, both on a historical basis (i.e., prior to September 30, 1998) and
on a pro forma basis (i.e., after September 30, 1998), provided that the maximum
indemnification amount for periods subsequent to September 30, 1998 is $1
million and is limited to the incremental additional loss incurred by PenPac,
Inc. for the term of any new host community fee agreement. A $500,000 escrow,
consisting of 19,230 shares of the Company's common stock otherwise issuable to
the former PenPac, Inc. shareholders in the PenPac acquisition has been
established specifically to cover potential indemnification claims against the
former PenPac, Inc. shareholders relating to this litigation.
Also as part of the Company's PenPac acquisition, the Company acquired ACS
Services, Inc. ACS Services, Inc. is the subject of litigation filed by the
Passaic County Utilities Authority ("PCUA") in December 1996 in the Superior
Court of New Jersey. The PCUA alleges that, during the years 1994 and 1995, ACS
Services, Inc. failed to dispose of all solid waste that it collected at certain
designated transfer stations in Passaic County and was therefore in violation of
the Passaic County solid waste franchise, as well as state statutes and
regulations, including the New Jersey Solid Waste Management Act. The PCUA is
seeking an unspecified amount of damages. In February 1997, ACS Services, Inc.
filed an answer and counterclaim claiming that such statutes are
unconstitutional. Thereafter, the PCUA filed a motion seeking a determination
that any ruling declaring that the rates sought by the PCUA are unconstitutional
not be applied retroactively in the litigation against ACS Services, Inc. On
September 8, 1998, the Superior Court of New Jersey entered an order
transferring this case to an inactive list pending the disposition by the New
Jersey Supreme Court of a similar case. Under the terms of the acquisition
agreement for ACS Services, Inc., its former shareholders have agreed to
indemnify the Company for contingencies and claims resulting from this
litigation. A $300,000 escrow, consisting of 11,538 shares of the Company's
common stock otherwise issuable to the former shareholders of ACS Services, Inc.
in the PenPac acquisition, has been established specifically to cover potential
indemnification claims against the former ACS Services, Inc. shareholders
relating to this litigation.
Further, as part of the Company's PenPac acquisition, the Company acquired
Nicholas Enterprises, Inc. Nicholas Enterprises, Inc. has been named as a
potentially responsible party ("PRP") and defendant in litigation commenced
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA" or "Superfund") at two Superfund sites: (i) Sharkey's Landfill in
Parsippany-Troy Hills Township, New Jersey and (ii) Cortese Landfill in Town of
Tusten - Narrowsburg, New York. Under the terms of the acquisition agreement for
Nicholas Enterprises, Inc., its former shareholders have agreed to indemnify the
Company, to the extent not covered by insurance, for all claims arising from any
Superfund liability at or related to disposal of waste at these sites.
The Company carries a range of insurance, including a commercial general
liability policy and a property damage policy. The Company maintains a limited
environmental impairment liability policy on its landfills and transfer stations
that provides coverage, on a "claims made" basis, against certain third party
off-site environmental damage. There can be no assurance that the limited
environmental impairment policy will remain in place or provide sufficient
coverage for existing, but not yet known, third party, off-site environmental
liabilities. The Company is also a party to various legal proceedings arising in
the normal course of business. The Company believes that the ultimate resolution
of these
-13-
<PAGE>
other matters will not have a material adverse effect on the Company's financial
condition or result of operations.
7. Subsequent Event
On October 30, 1998, the Company completed its merger with GeoWaste,
Incorporated ("GeoWaste"). The Company issued approximately 2.3 million shares
of common stock and assumed approximately $8.6 million in indebtedness. GeoWaste
generates approximately $24 million in annual revenue. These Florida-based
operations provide solid waste collection, recycling, and transportation
services primarily in the northern Florida and southern Georgia areas. The
transaction will be accounted for using the pooling of interest method of
business combinations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Management's Discussion and Analysis are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Company "believes,"
anticipates, "expects" or words of similar import. Similarly, statements that
describe the Company's future plans, objectives, strategies or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are either described in close proximity to
such statements or include the following (i) the Company's ability to manage its
growth; (ii) the availability to the Company of additional acquisition
opportunities at favorable pricing levels and the ability of the Company to
effectively integrate its existing and potential future acquisitions; (iii) the
continuing seasonality of its business; and (iv) competition for both collection
and disposal services and acquisitions. All of these factors, or others, could
cause actual results to differ materially from those currently anticipated.
Shareholders, potential investors and other readers are urged to consider these
factors carefully in evaluating the forward-looking statements and are cautioned
not to place undue reliance on such forward-looking statements. The
forward-looking statements made herein are only made as of the date of this
report and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
General
The Company provides solid waste collection, transfer, transportation,
recycling and disposal services to over 750,000 residential, commercial and
industrial customers in Alabama, Florida, Georgia, Illinois, Michigan,
Minnesota, Missouri, New Jersey, Ohio, Pennsylvania, West Virginia, and
Wisconsin. The Company also provides other integrated waste services, most of
which are project-based and many of that provide additional waste volumes to the
Company's landfills and recycling facilities. As of September 30, 1998, solid
waste operations consisted of 17 Company-owned solid waste landfills, four
managed third party landfills, 49 solid waste collection operations, 16
recycling facilities and 15 solid waste transfer stations.
-14-
<PAGE>
As described more fully below, revenues for the periods presented were
comprised of fees received for the following services:
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1998 1997 1998
---- ---- ---- ----
Collection 55% 58% 55% 60%
Third party disposal 23% 22% 24% 20%
Recycling 9% 7% 9% 8%
Other integrated waste services 13% 13% 12% 12%
--- --- --- ---
100% 100% 100% 100%
==== ==== ==== ====
The Company's strategy for future growth anticipates the recognition of
additional revenue from acquiring additional solid waste collection and disposal
operations as well as continued internal growth. The Company acquired or merged
with businesses with estimated annualized revenues of just over $130 million in
the first nine months of 1998. The Company expects that it will acquire
operations in the fourth quarter of 1998 with estimated revenues of between $40
million and $65 million, although the Company cannot guarantee it will be able
to complete all of the acquisitions. The percentage of revenue obtained from
collection services increased to 60% in the first nine months of 1998 compared
to 55% in the first nine months of 1997 due to a greater portion of revenue
being generated from collection operations that have been acquired. As it
continues to acquire additional solid waste collection and disposal operations,
the Company believes that its revenue mix will shift away from recycling and
other integrated waste services and more towards solid waste collection and
disposal.
All financial data for the three- and nine-month periods ended September
30, 1997 have been restated and give retroactive effect to reflect the Company's
March 31, 1998 acquisition of AWS, the August 26, 1998 acquisition of Gopher,
and the September 30, 1998 acquisition of PenPac, in transactions accounted for
as poolings of interests.
Prior to the AWS, Gopher and Pen Pac mergers, many of the companies
comprising such entities had elected "S" Corporation status for federal income
tax purposes. As a result of the mergers, the "S" Corporation status was
terminated for the companies comprising AWS, Gopher and PenPac. Accordingly,
certain pro forma information is presented in the Company's Consolidated
Statements of Income as if they had been taxable entities during the periods
presented.
Results of Operations
The information presented below reflects the pro forma net income exclusive
of merger costs incurred in connection with the acquisitions of TWR, AWS, South
Lake, Gopher, Wilson and PenPac which were accounted for as poolings of
interest. Pro forma net income includes federal and state income tax provisions
for 1997 and 1998 as if AWS, Gopher and PenPac had been taxable entities, and
excludes the cumulative deferred tax provision for AWS, Gopher and PenPac which
were Subchapter S Corporations prior to their acquisition.
-15-
<PAGE>
<TABLE>
Summary Financial Data
(in thousands, except per share data)
Three Months Ended September 30,
------------------------------------------------------------------
1997 Per 1998 Per
(restated) Share ---- Share
---------- ----- -----
<S> <C> <C>
Revenue $64,891 - $78,150 -
Net Income, as reported $6,981 $0.27 $2,994 $0.10
Pro forma adjustments:
Adjustment for income taxes (607) (0.02) 1,895 0.06
----- ------ ------- -----
Pro forma net income 6,374 0.25 4,889 0.16
Merger costs, net of tax - - 4,272 0.14
------- ------ ------- -----
Pro forma net income, exclusive of merger
costs and cumulative deferred tax
provisions $6,374 $0.25 $9,161 $0.30
====== ===== ====== =====
Summary Financial Data
(in thousands, except per share data)
Nine Months Ended September 30,
------------------------------------------------------------------
1997 Per 1998 Per
----
(restated) c. Share Share
Revenue $163,467 - $215,885 -
Net Income, as reported $15,464 $0.62 $14,718 $0.49
Pro forma adjustments:
Adjustment for income taxes (1,479) (0.06) 2,066 0.07
------- ------ ----- ----
Pro forma net income 13,985 0.56 16,784 0.56
Merger costs, net of tax 762 0.03 5,508 0.18
--- ---- ----- ----
Pro forma net income, exclusive of merger
costs and cumulative deferred tax
provisions $14,747 $0.59 $22,292 $0.74
======= ===== ======= =====
Overview
</TABLE>
Revenues in the 1998 third quarter of $78.1 million increased 20.4% over
the comparable period in the prior year, as restated, primarily due to
businesses acquired which were accounted for under the purchase method of
accounting. Pro forma earnings per share, excluding one-time merger costs
resulting from the acquisitions of South Lake, Gopher, Wilson, and PenPac and
excluding cumulative deferred tax provisions for the companies comprising Gopher
and PenPac which were "S" Corporations prior to their acquisition, increased
20.0% to $0.30 per share from $0.25 per share for the third quarter of 1997, as
restated. The one-time merger costs and the cumulative deferred tax provisions
totaled approximately $0.20 per share. Net income, exclusive of these merger
costs and the cumulative deferred tax provisions, increased 43.7% to $9.2
million in the 1998 third quarter, from $6.4 million in the same period of 1997,
as restated. The weighted average of common and common equivalent shares
-16-
<PAGE>
outstanding was 30.4 million for the third quarter of 1998 and 25.6 million for
the third quarter of 1997, as restated. This increase was due to the issuance of
additional shares to effect acquisitions, as well as a full period to reflect
the Company's September, 1997 follow-on public stock offering of 4,000,000
shares.
For the first nine months of 1998, revenues increased 32.1% to $215.9
million compared to $163.5 million for the same period in the prior year, as
restated, primarily due to businesses acquired which were accounted for under
the purchase method of accounting. Pro forma earnings per share, excluding
one-time merger costs resulting from the acquisitions of TWR, AWS, South Lake,
Gopher, Wilson, and PenPac and excluding cumulative deferred tax provisions for
the companies comprising AWS, Gopher and Pen Pac which were "S" Corporations
prior to their acquisition, increased 25.4% to $0.74 per share from $0.59 per
share for the first nine months of 1997, as restated. Net income, excluding
one-time merger costs and cumulative deferred tax provisions incurred in
connection with the acquisitions of AWS, TWR, South Lake, Gopher, Wilson, and
PenPac, increased 51.2% to $22.3 million in nine months of 1998 from $14.7
million in the nine-month period ended 1997, as restated. The weighted average
of common and common equivalent shares outstanding was 30.3 million for nine
months of 1998 and 24.9 million for nine months of 1997, as restated.
Although the Company remains confident in its ability to grow through
acquisitions, it also believes it may require some additional time in selected
markets to fully integrate the acquisitions during 1998. As a result, together
with anticipated seasonal reductions in revenues and earnings during the fourth
quarter, the Company anticipates that its fourth quarter earnings per share,
exclusive of one-time merger costs associated with its announced acquisition of
GeoWaste Incorporated, will be lower than originally expected. The Company also
expects its internal growth in existing operations to remain in the 4% to 5%
range consistent with the Company's internal growth rate during the first nine
months of 1998 of approximately 4%. The Company also believes that its current
expectations for earnings per share next year may well be lower than earlier
anticipated as it focuses on predominantly tuck-in opportunities in current or
adjacent service markets and on implementing operational improvements. This
belief continues to be impacted by increasingly competitive pricing levels for
acquisitions in the solid waste industry.
The following table sets forth for the periods indicated the percentage of
revenues represented by the individual line items reflected in the Company's
condensed consolidated statements of operations:
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1997 1998 1997 1998
(restated) (restated)
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Operations 57.1 56.6 56.3 57.6
Selling, general and administrative expenses 13.2 11.6 15.2 12.4
Merger costs - 6.8 0.6 3.1
Depreciation and amortization 12.5 11.2 12.4 12.1
---- ---- ---- ----
Operating income 17.2 13.8 15.5 14.8
Interest expense 1.3 0.6 1.2 0.8
Other (income) expense (0.8) 0.1 (0.4) (0.4)
----- --- ----- ----
Income before income taxes 16.7 13.1 14.7 14.4
</TABLE>
-17-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Income taxes 5.9 9.3 5.2 7.6
--- --- --- ---
Net income 10.8% 3.8% 9.5% 6.8%
===== ==== ==== ====
Revenues
</TABLE>
Revenues increased $13.3 million, or 20.4%, and $52.4 million, or 32.1%,
for the three- and nine-month periods, respectively, ended September 30, 1998
compared with the same periods in 1997, as restated. These increases for each
1998 period were primarily due to the impact of operations acquired which were
accounted for under the purchase method of accounting. Revenues for each 1998
period compared to the same periods in 1997, as restated, increased $11.6
million and $46.2 million, respectively, from the impact of operations acquired
and accounted for under the purchase method. The increase in revenue was also
due, to a much lesser extent, to increases in volumes of wastes collected and
disposed at the Company's landfills. Daily disposal volume at the Company's
landfills rose to an average of more than 16,200 tons per day in the 1998 third
quarter compared to an average of 11,300 tons per day in the corresponding
period last year. The higher landfill volume was predominantly the result of
waste received at six new disposal sites acquired since September 30, 1997.
The resale prices of, and demand for, recyclable waste products,
particularly wastepaper, can be volatile and subject to changing market
conditions. However, the impact of prices for recyclable wastepaper had
essentially no effect on revenues in the 1998 third quarter compared to the 1997
third quarter as the average price received by the Company for its recyclable
waste products remains basically unchanged. The Company expects the recycling
operations to continue to be profitable due to the Company's floor-pricing
arrangement with a national paper company coupled with the cost effectiveness of
the Company's processing facilities and fees received for providing recyclable
waste collection services to its customers.
Cost of Operations
Cost of operations increased $7.2 million, or 19.4%, and $32.4 million, or
35.2%, for the three- and nine-month periods ended September 30, 1998,
respectively, compared to the same periods in 1997, as restated. As a percentage
of revenues, cost of operations decreased from 57.1% in the third quarter of
1997, as restated, to 56.6% in the third quarter of 1998, and increased from
56.3% in the first nine months of 1997, as restated, to 57.6% in the first nine
months of 1998. The decrease in the percentage in the third quarter of 1998
compared to the corresponding quarter in 1997 was primarily due to cost savings
at landfills owned and operated in both periods. The increase in the first nine
months of 1998 compared to 1997 was due to the higher relative percentage of
non-integrated collection business resulting in a lower overall percentage of
waste collected by the Company which is disposed of at its own facilities and
due to the higher relative percentage of business from collection operations and
other integrated waste services (which have higher costs of operations than
disposal operations). The Company currently internalizes 58% of the waste it
collects to its own disposal sites compared to 54% during the first nine months
of 1997, as restated. During the third quarter of 1998 prior to the inclusion of
the volumes from South Lake, Gopher, Wilson, and PenPac, close to 70% of the
waste collected by the Company was disposed of at its own facilities. The
Company's goal is to maintain or increase its internalization rate through
focusing on full vertical integration of its solid waste business in all of its
service areas. Changes in this trend are dependent on the timing and mix of
potential future business acquisitions, as well as the seasonality of the
Company's operations. See "Seasonality." The increase in the dollar amount of
cost of operations was primarily attributable to the costs of collecting and
-18-
disposing of the increased volumes of wastes received from services provided to
new customers, including the operation of new businesses acquired.
Selling, General and Administrative Expense ("SG&A")
SG&A increased $523,000, or 6.1%, and $1.9 million, or 7.7%, for the three-
and nine-month periods ended September 30, 1998, respectively, compared to the
same periods in 1997, as restated. As a percentage of revenues, SG&A decreased
to 11.6% in the third quarter of 1998 compared to 13.2% in the third quarter of
1997, as restated, and to 12.4% in the first nine months of 1998 compared to
15.2% in the first nine months of 1997, as restated. The trend of reducing SG&A
as a percentage of revenue is expected to continue in the near term due
primarily to the impact of spreading corporate SG&A costs over a larger revenue
base as the Company integrates acquisitions and continues to pursue its
acquisition growth strategy. While SG&A decreased as a percentage of revenues,
the actual dollar amount of SG&A increased primarily due to increased costs for
personnel necessary to service new customers, including those associated with
the operations acquired, and to support the Company's acquisition program.
Merger Costs
The Company incurred nonrecurring merger costs of approximately $6.8
million during the first nine months of 1998 compared to $1.0 million in the
first nine months of 1997, as a result of the mergers completed with TWR, AWS,
South Lake, Gopher, Wilson and PenPac during 1998. The one-time merger costs
included severance and bonuses, professional fees, and other related merger
costs. As of September 30, 1998, $4.9 million had been accrued for merger
related costs which are expected to be substantially paid by December 31, 1998.
Depreciation and Amortization
Depreciation and amortization increased $638,000, or 7.9%, and $5.7
million, or 27.9%, for the threeand nine-month periods ended September 30, 1998,
respectively, compared to the same periods in 1997, as restated, due to
increased depreciation costs for the additional assets and operations acquired.
As a percentage of revenues, depreciation and amortization decreased to 11.2% in
the third quarter of 1998 compared to 12.5% in the third quarter of 1997, as
restated, and to 12.1% in the first nine months of 1998 compared to 12.4% in the
first nine months of 1997, as restated, due to several landfill airspace
expansions in the third quarter and better densities achieved at the landfills
resulting in lower depletion costs for airspace.
Interest Expense
Interest expense decreased $435,000, or 50.0%, and $228,000, or 11.3%, for
the three- and nine-month periods ended September 30, 1998, respectively,
compared to the same periods in 1997, as restated, primarily due to lower debt
levels during 1998 compared to 1997. Debt was reduced late in the third quarter
of 1997 when $106.1 million was received from a follow-on offering of the
Company's stock in September, 1997. Interest of $457,000 and $100,000 was
capitalized during the first nine months of 1997 and 1998, respectively, related
to land being developed.
Other Income (Expense)
Other income (expense) decreased $592,000 from other income of $533,000 in
the three-month period ended September 30, 1997, as restated, to other expense
of $59,000 in the three-month period ended September 30, 1998. Other income
increased $212,000 from other income of $731,000 in the
-19-
<PAGE>
nine-month period ended September 30, 1997, as restated, to $943,000 in the
nine-month period ended September 30, 1998. Interest income increased $293,000
from $456,000 in the nine-month period ended September 30, 1997, as restated, to
$749,000 in the nine-month period ended September 30, 1998. Approximately
$500,000 of direct costs associated with acquisition activity primarily related
to one unsuccessful acquisition bid for a significant company being liquidated
in a bankruptcy auction process were charged against earnings in the second
quarter of 1997. During the third quarter of 1998, approximately $362,000 of
direct costs associated with unsuccessful acquisition activity were charged
against earnings.
Income Tax Expense
The Company's effective tax rate increased from 35.5% for the three months
ended September 30, 1997, as restated, to 70.8% for the three-month period ended
September 30, 1998, and from 35.6% for the nine months ended September 30, 1997,
as restated, to 52.7% for the nine months ended September 30, 1998. The increase
is primarily due to the $2.7 million cumulative deferred tax provisions
recognized in 1998 associated with the conversions of AWS, Gopher and PenPac
from subchapter S Corporations to taxable entities. As Subchapter S Corporations
prior to their merger with the Company, payments of income taxes were the
responsibility of their former stockholders. The Company estimates its effective
tax rate to be approximately 41.2% at September 30, 1998 excluding the impact of
certain nondeductible merger costs and cumulative deferred tax provisions.
Liquidity and Capital Resources
The Company's balance sheet at September 30, 1998 reflected approximately
$13.5 million in cash and cash equivalents compared to $44.0 million at December
31, 1997, as restated. The decrease in cash and cash equivalents was primarily
due to the use of cash to acquire solid waste companies during the first nine
months of 1998. Pending specific application, the Company has invested its
excess cash in short-term interest bearing securities.
On October 30, 1998, the Company completed its merger with GeoWaste. The
transaction will be accounted for using the pooling of interest method of
business combinations. The Company issued approximately 2.3 million shares of
common stock and assumed approximately $8.6 million in indebtedness.
Effective September 1998, the Company's borrowing capacity under its
revolving credit facility was expanded to $275 million and the maturity was
extended to September 2003. At September 30, 1998, the Company had $24.5 million
of outstanding borrowings, and approximately $3.9 million in letters of credit
outstanding under its revolving credit facility, with $250.5 million available
under its credit facility for future borrowings. Total long-term debt at
September 30, 1998 was $27.3 million. At September 30, 1998, the ratio of the
Company's long-term debt to total capitalization ratio was 8.5% compared to 5.9%
at December 31, 1997, as restated. This increase was attributable primarily to
acquisition activity.
The Company's principal strategy for future growth is through the
acquisition of additional solid waste disposal, transfer and collection
operations. Although there can be no assurance that the Company will be able to
complete successfully any such acquisitions, the Company intends to fund any
such future acquisitions in 1998 through the use of cash, capital stock,
assumption of indebtedness, future royalties, and/or contingent payments. The
cash required to fund any future acquisitions will likely be provided
-20-
<PAGE>
from one or more of the following sources: existing cash balances, cash flow
from operations and/or borrowings under the Company's revolving credit facility.
Capital expenditures for the nine months ended September 30, 1998 were
$32.7 million compared to $23.4 million for the nine months ended September 30,
1997, as restated, primarily due increased spending for landfill expansions.
Capital expenditures for 1998 are currently expected to be approximately $44
million (including $32.7 million expended through September 30, 1998) compared
to $33.1 million in 1997, as restated. These amounts have been and will continue
to be primarily allocated to continued spending for landfill expansions. The
Company intends to fund future capital expenditures principally through
internally generated funds and, to a lesser extent, equipment lease financing.
In addition, as described above, the Company also anticipates that it may
require substantial additional capital expenditures to facilitate its growth
strategy of acquiring additional solid waste collection and disposal businesses.
If the Company is successful in acquiring additional solid waste collection and
disposal facilities, the Company may also be required to make significant
expenditures to bring any such newly acquired disposal facilities into
compliance with applicable regulatory requirements, obtain permits for any such
newly acquired disposal facilities or expand the available disposal capacity at
any such newly acquired disposal facilities. The amount of these expenditures
cannot be currently determined, since they will depend on the nature and extent
of any acquired landfill disposal facilities, the condition of any facilities
acquired and the permitting status of any acquired sites. In the past, the
Company has been able to obtain other types of financing arrangements, such as
equipment lease financing, to fund its various capital requirements. The Company
believes it can readily access such additional sources of financing as necessary
to facilitate the Company's growth.
Net cash provided by operations for the nine months ended September 30,
1998 increased to $32.2 million from $31.3 million in the nine months ended
September 30, 1997, as restated. The increase was primarily due to an increase
in depreciation and amortization, a noncash expense, of $5.7 million, and the
increase in deferred income taxes of $3.2 million between the first nine months
of 1997, as restated, and the first nine months of 1998. These increased cash
amounts were offset by the decrease in accounts payable and accrued expenses of
$4.4 million and the increase in accounts receivable of $1.9 million between the
first nine months of 1997, as restated, and the first nine months of 1998.
Net cash used in investing activities for the nine months ended September
30, 1998 decreased to $67.2 million from $104.5 million in the nine months ended
September 30, 1997, as restated. The decrease was primarily due to the Company's
$34.6 million of net cash payments for operations acquired in the nine months
ended September 30, 1998 compared to the $83.1 million of net cash payments in
the nine months ended September 30, 1997, as restated.
Net cash provided by financing activities in the nine months ended
September 30, 1998 totaled $4.5 million, compared to $112.5 million of cash
provided in the nine months ended September 30, 1997, as restated, reflecting
the receipt of $106.1 million in net proceeds from a follow-on offering of the
Company's stock in September, 1997.
Seasonality
The Company's historical results of operations have tended to vary
seasonally, with the first quarter of the year typically generating the least
amount of revenues, and with revenues higher in the second and third quarters,
followed by a decline in the fourth quarter. This seasonality reflects the lower
volume of waste, as well as decreased revenues from project-based and other
integrated waste services
-21-
<PAGE>
during the fall and winter months, as well as the operating difficulties
experienced during the protracted periods of cold and inclement weather
typically experienced during the winter in the Upper Midwest. Also, certain
operating and other fixed costs remain relatively constant throughout the
calendar year, resulting in a similar seasonality of operating income.
Year 2000 Initiative
A team of internal staff is managing the Company's comprehensive Year 2000
initiative. The team's activities are designed to ensure that there is no
adverse effect on the Company's core business operations and that transactions
with customers, suppliers and financial institutions are fully supported. The
Company has determined that it will need to modify or replace portions of its
software so that its computer systems will function properly with respect to
dates in the year 2000 and beyond. The Company also has initiated discussions
with its significant suppliers and financial institutions to ensure that those
parties have appropriate plans to remediate Year 2000 issues where their systems
interface with the Company's systems or otherwise impact its operations.
The Company, it is conducting a comprehensive review to ensure that all
internal computer systems and equipment are, or prior to the end of 1999 will
be, Year 2000 compliant. The Company's Year 2000 readiness plan includes the
following phases: (i) conducting an inventory of the Company's internal systems,
including information technology systems and non-information technology systems
(which include office and facilities' environment related systems) and the
systems acquired or to be acquired by the Company from third parties; (ii)
assessing and prioritizing any required remediation; (iii) remediating any
problems by repairing or, if appropriate, replacing the non-compliant systems;
(vi) testing of all remediated systems for Year 2000 compliance; and (v)
developing contingency plans that may be employed in the event that any system
used by the Company is unexpectedly affected by an unanticipated Year 2000
problem. The Company has completed its inventory phase of this plan and is
actively engaged in completing the remaining phases. The Company currently
expects to complete all phases of this plan and that all computer systems will
be Year 2000 complaint before August 31, 1999.
In addition to assessing its own systems, the Company has initiated
communication with all of its vendors, service providers and third party
business partners to assess their Year 2000 readiness. The Company plans to
continue assessment of its vendors, service suppliers and third party business
partners to ensure Year 2000 readiness. Despite the Company's diligence, there
can be no guarantee that the non-compliant systems of other entities which the
Company relies upon in its day to day operations will not have a material
adverse impact on the Company. The actual impact on the Company resulting from
non- compliance of these entities cannot be determined at this time.
The Company has limited the scope of its risk assessment to those factors
which it can reasonably be expected to have an influence upon. The Company has
made the assumption that government agencies, utility companies and national
telecommunication providers will continue to operate. Obviously, the lack of
such services could have a material impact on the Company's ability to operate,
but the Company has little, if any, ability to influence such an outcome, or to
make alternative arrangements in advance for such services if they are
unavailable. Additionally, the Company believes that disruptions in the economy
generally resulting from Year 2000 issues could have a material adverse impact
on the Company. The Company could be subject to litigation for computer system
failures such as equipment shutdown or failure to properly date business
records. The amount of potential liability or loss of revenue to the Company
cannot be reasonably estimated at this time.
-22-
<PAGE>
The Company intends to develop contingency plans within the second quarter
of 1999 to address Year 2000 problems. The Company believes that this is an
appropriate time frame for developing these contingency plans and that efforts
prior to that time should be focused on the remediation and testing phases of
the Company's Year 2000 readiness plan.
While the Company believes its planning efforts are adequate to address its
Year 2000 concerns, there can be no guarantee that the systems of other
companies on which the Company's systems and operations rely will be converted
on a timely basis and will not have a material effect on the Company. The
Company currently estimates that it will cost approximately $250,000 to fully
execute its Year 2000 initiative.
-23-
<PAGE>
PART II
Item 1. Legal Proceedings
See Note 6 to Condensed Consolidated Financial Statements included in
this Form 10-Q for information regarding certain legal proceedings.
Item 5. Other Matters
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents selected consolidated statement of
operations, balance sheet and other operating data of the Company for the
periods presented. The following selected financial and operating data were
derived from the Company's consolidated financial statements. The selected
consolidated financial data below should be read in conjunction with the
Company's consolidated financial statements. All financial data have been
restated and give retroactive effect to reflect the Company's acquisition of
AWS, Gopher and PenPac in transactions accounted for as a poolings of interests.
<TABLE>
Superior Services, Inc.
Selected Consolidated Financial and Operating Data - Restated
<CAPTION>
Years Ended December 31
(in thousands except per share data)
1993 1994 1995 1996 1997
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenues $106,872 $109,361 $133,233 $160,399 $226,625
Cost of operations 67,002 69,062 72,698 87,129 127,654
Selling, general and administrative expenses 18,977 22,522 24,464 27,507 34,255
Merger costs (2) -- -- -- -- 1,035
Litigation settlement costs (3) -- -- -- -- 1,790
Depreciation and amortization 9,131 12,179 17,130 21,408 28,254
----- ------ ------ ------ ------
Operating income from continuing operations 11,762 5,598 18,941 24,355 33,637
Interest expense (2,141) (3,039) (3,971) (2,019) (2,692)
Other income 812 2,121 1,472 1,350 1,954
--- ----- ----- ----- -----
Income from continuing operations before
income taxes 10,433 4,680 16,442 23,686 32,899
Income taxes 3,461 1,394 5,820 8,599 12,716
----- ----- ----- ----- ------
Income from continuing operations 6,972 3,286 10,622 15,087 20,183
Income (loss) from discontinued operations,
net of income tax (1) 56 (5,735) (329) -- --
-- ------- ----- -- --
Net income (loss) $7,028 $(2,449) $10,293 $15,087 $20,183
====== ======== ======= ======= =======
Earnings-(loss) per share:
Basic $0.41 $(0.13) $0.51 $0.66 $0.79
===== ======= ===== ===== =====
Diluted $0.41 $(0.13) $0.51 $0.65 $0.78
===== ======= ===== ===== =====
</TABLE>
-24-
<PAGE>
<TABLE>
Years ended December 31
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $5,305 $3,081 $4,817 $20,569 $44,033
Working capital 10,253 12,025 3,600 15,801 41,468
Property and equipment, net 86,097 94,580 104,862 133,421 231,994
Total assets 132,510 148,984 163,280 223,634 408,291
Long-term debt, net of current maturities 33,448 44,798 29,758 14,796 16,998
Total common shareholders' investment 38,143 35,373 49,490 117,878 269,811
</TABLE>
(1) Includes losses on disposition of discontinued operations, net of income
taxes of $5,042,000 and $329,000 for 1994 and 1995, respectively.
(2) On June 27, 1997, the Company completed its merger with Resource Recovery
Transfer and Transportation, Inc. ("R2T2") accounted for as a pooling of
interest. The Company incurred nonrecurring merger costs of $1,035,000
during 1997 as a result of the merger with R2T2.
(3) Prior to its acquisition of the Company, Acmar Regional Landfill, Inc.
negotiated a settlement agreement with the United States Government with
respect to a "Clean Water Act" violation in 1993 resulting in fines and
restitutions totaling $1,790,000 and was placed on probation for three
years. This amount was accrued for in the December 31, 1997 financial
statements. As provided in the settlement agreement, its probation was
terminated as a result of the payment of the fine and its merger with the
Company on March 31, 1998. Additionally, AWS incurred legal fees included
in selling, general and administrative costs of $342,000 during 1997 in
connection with this matter. These costs, together with the fine, net of
applicable income taxes, amounted to approximately $0.07 per share in 1997.
Quarterly Results
The following table represents the Company's unaudited consolidated
quarterly results and the percentages of revenues represented by the individual
line items reflected in the Company's consolidated statements of operations for
each of the four quarters ended December 31, 1997, all as restated to give
retroactive effect to the acquisitions of AWS, Gopher and PenPac in transactions
accounted for as poolings of interests and for the two quarters ended June 30,
1998, as restated to give retroactive effect to the acquisitions of AWS, South
Lake, Gopher, Wilson, and PenPac accounted for as poolings of interests. This
information has been presented on the same basis as the Company's audited
consolidated financial statements incorporated herein by reference and, in the
Company's opinion, contains all necessary adjustments (consisting only of normal
recurring adjustments) to present fairly the Company's unaudited quarterly
results when read in conjunction with the Company's audited financial statements
and notes thereto. Interim operating results, however, are not necessarily
indicative of the Company's results for any future period.
-25-
<PAGE>
<TABLE>
For the three months ended
March 31, 1997 June 30, 1997 September 30, 1997 December 31, 1997
-------------- ------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $41,389 100% $57,187 100% $64,891 100% $63,158 100%
Cost of operations 23,121 56% 31,785 56% 37,062 57% 35,686 57%
Selling, general &
administrative expenses 5,507 13% 6,754 12% 8,098 12% 7,895 13%
Litigation settlement cost -- -- -- -- -- -- 1,790 3%
Merger costs -- --% 1,035 2% -- --% -- --%
Depreciation & amortization 7,700 19% 8,547 15% 8,565 13% 9,443 15%
------- ----- ------- ----- ------- ----- ------- ---
Operating income 5,061 12% 9,066 16% 11,166 17% 8,344 13%
Interest expense (493) (1%) (662) (1%) (869) (1%) (668) (1%)
Other income (expense) 361 1% (163) (0%) 533 1% 1,223 2%
----- ---- ----- ---- ----- ---- ------- --
Income before taxes 4,929 12% 8,241 14% 10,830 17% 8,899 14%
Income taxes 1,692 4% 2,995 5% 3,849 6% 4,180 7%
------- ---- ------- ---- ------- ---- ------- --
Net income $3,237 8% $5,246 9% $6,981 11% $4,719 7%
======== ==== ======== ==== ======== ===== ======== ==
Earnings per share:
Basic $0.13 $0.22 $0.28 $0.16
======= ======= ======= =====
Diluted $0.13 $0.21 $0.27 $0.16
======= ======= ======= =====
Pro forma (1):
Net income, as adjusted $2,902 $5,471 $6,374 $4,854
======== ======== ======== ========
Earnings per share, as
Adjusted- diluted $0.12 $0.22 $0.25 $0.17
======= ======= ======= =====
For the three Months ended
March 31, 1998 June 30, 1998 September 30, 1998
-------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $62,042 100% $75,693 100% $78,150 100%
Cost of operations 36,625 59% 43,482 56% 44,242 56%
Selling, general &
administrative expenses 9,038 15% 8,606 11% 9,088 12%
Litigation settlement cost -- -- -- -- -- --
Merger costs 1,493 2% -- -- 5,327 7%
Depreciation & amortization 8,226 13% 9,077 12% 8,736 11%
----- --- ----- --- ----- ---
Operating income 6,660 11% 14,528 19% 10,757 14%
Interest expense (734) (1%) (628) (1%) (434) (1%)
Other income (expense) 548 1% 454 1% (59) --
--- -- --- -- ---- --
Income before taxes 6,474 11% 14,354 19% 10,264 13%
Income taxes 3,447 6% 5,657 7% 7,270 9%
----- -- ----- -- ----- --
Net income $3,027 5% $8,697 11% $2,994 4%
====== == ====== === ====== ==
Earnings per share:
Basic $0.10 $0.29 $0.10
===== ===== =====
Diluted $0.10 $0.29 $0.10
===== ===== =====
Pro forma (1):
Net income, as adjusted $4,700 $8,432 $9,161
====== ====== ======
Earnings per share, as
Adjusted- diluted $0.16 $0.28 $0.30
===== ===== =====
- - --------------
</TABLE>
(1) Pro forma financial information is presented to reflect net income and
earnings per share exclusive of merger costs incurred in connection with
acquisitions accounted for as poolings of interest and cumulative deferred
tax provisions for those companies that were S Corporations prior to
acquisition by the Company. Pro forma net income includes federal and state
income tax provisions as if the companies reported as C Corporations.
-26-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibits filed with this Form 10-Q report are
incorporated herein by reference to the Exhibit Index
accompanying this report.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1998.
-27-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Superior Services, Inc.
(Registrant)
Date November 16, 1998 /s/ George K. Farr
------------------- ---------------------------
George K. Farr
Chief Financial Officer
-28-
<PAGE>
SUPERIOR SERVICES, INC.
EXHIBIT INDEX
Exhibit Number Exhibit Description
4.8 Second Amended and Restated Revolving Credit
Agreement, dated September 17, 1998, among Superior
Services, Inc. and Subsidiaries (the "Borrowers"),
BankBoston, N.A., Bank One, Wisconsin, Harris Trust
and Savings Bank, LaSalle National Bank, Bank of
America National Trust and Savings Association,
Firstar Bank Milwaukee, N.A., Fleet bank, N.A.,
Paribas, PNC Bank, National Association, Comerica
Bank, Fifth Third Bank, Hibernia National Bank (the
"Banks") and BankBoston, N.A., as Agent, Bank One,
Wisconsin, as Co-Agent, Harris Trust and Savings
Bank, as Co-Agent, LaSalle National Bank, as Co-Agent
and Bank of America National Trust and Savings
Association, as Co-Agent
27 Financial Data Schedule
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
Dated as of September 17, 1998
by and among
Superior Services, Inc.
its Subsidiaries listed on Schedule 1 hereto
(the "Borrowers")
BANKBOSTON, N.A.,
BANK ONE, WISCONSIN,
HARRIS TRUST AND SAVINGS BANK,
LASALLE NATIONAL BANK,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
FIRSTAR BANK MILWAUKEE, N.A.,
FLEET BANK, N.A.,
PARIBAS,
PNC BANK, NATIONAL ASSOCIATION,
COMERICA BANK,
FIFTH THIRD BANK,
HIBERNIA NATIONAL BANK
(the "Banks")
and
BANKBOSTON, N.A., as Agent
BANK ONE, WISCONSIN, as Co-Agent
HARRIS TRUST AND SAVINGS BANK, as Co-Agent
LASALLE NATIONAL BANK, as Co-Agent
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Agent
<PAGE>
ii
TABLE OF CONTENTS
ss.1. DEFINITIONS AND RULES OF INTERPRETATION................................1
ss.1.1. Definitions.................................................1
ss.1.2. Rules of Interpretation.....................................12
ss.2. THE REVOLVING CREDIT FACILITY..........................................13
ss.2.1. Commitment to Lend..........................................13
ss.2.2. Reduction of Total Commitment...............................13
ss.2.3. The Notes...................................................14
ss.2.4. Interest on Loans...........................................14
ss.2.5. Election of Eurodollar Rate; Notice of Election;
Interest Periods; Minimum Amounts.........................14
ss.2.6. Requests for Revolving Credit Loans.........................15
ss.2.7. Funds for Loans.............................................16
ss.2.8. Maturity of the Loans.......................................17
ss.2.9. Mandatory Repayments of the Loans...........................17
ss.2.10. Optional Prepayments or Repayments of Loans.................17
ss.3. LETTERS OF CREDIT......................................................18
ss.3.1. Letter of Credit Commitments................................18
ss.3.2. Reimbursement Obligation of the Borrowers...................18
ss.3.3. Letter of Credit Payments...................................19
ss.3.4. Obligations Absolute........................................20
ss.3.5. Reliance by Agent...........................................20
ss.4. FEES, PAYMENTS, AND COMPUTATIONS; JOINT AND SEVERAL LIABILITY..........20
ss.4.1. Fees........................................................20
ss.4.2. Payments....................................................21
ss.4.3. Computations................................................22
ss.4.4. Capital Adequacy............................................22
ss.4.5. Certificate.................................................23
ss.4.6. Interest on Overdue Amounts.................................23
ss.4.7. Interest Limitation.........................................23
ss.4.8. Eurodollar Indemnity .......................................23
ss.4.9. Illegality; Inability to Determine Eurodollar Rate .........24
ss.4.10. Additional Costs, Etc......................................24
ss.4.11. Concerning Joint and Several Liability of the Borrowers....25
ss.4.12. New Borrowers .............................................27
ss.5. REPRESENTATIONS AND WARRANTIES ........................................27
ss.5.1. Corporate Authority ........................................27
ss.5.2. Governmental Approvals .....................................28
ss.5.3. Title to Properties; Leases ................................28
ss.5.4. Financial Statements; Solvency .............................28
<PAGE>
-iii-
ss.5.5. No Material Changes, Etc ...................................29
ss.5.6. Permits, Franchises, Patents, Copyrights, Etc ..............29
ss.5.7. Litigation .................................................29
ss.5.8. No Materially Adverse Contracts, Etc .......................30
ss.5.9. Compliance With Other Instruments, Laws, Etc ...............30
ss.5.10. TaxStatus .................................................30
ss.5.11. No Event of Default .......................................30
ss.5.12. Holding Company and Investment Company Acts ...............31
ss.5.13. Absence of Financing Statements, Etc ......................31
ss.5.14. Employee Benefit Plans ....................................31
ss.5.15. Use of Proceeds ...........................................32
ss.5.16. Environmental Compliance ..................................32
ss.5.17. Perfection of Security Interests ..........................33
ss.5.18. Certain Transactions ......................................33
ss.5.19. Subsidiaries ..............................................34
ss.5.20. Capitalization ............................................34
ss.5.21. True Copies of Charter and Other Documents ................34
ss.5.22. Disclosure ................................................35
ss.5.23. Year 2000 Compliance ......................................35
ss.6. AFFIRMATIVE COVENANTS OF THE BORROWERS ................................35
ss.6.1. Punctual Payment ...........................................35
ss.6.2. Maintenance of Office ......................................35
ss.6.3. Records and Accounts .......................................35
ss.6.4. Financial Statements, Certificates and Information .........36
ss.6.5. Corporate Existence and Conduct of Business ................37
ss.6.6. Maintenance of Properties ..................................38
ss.6.7. Insurance ..................................................38
ss.6.8. Taxes ......................................................38
ss.6.9. Inspection of Properties, Books, and Contracts .............39
ss.6.10. Compliance with Laws, Contracts, Licenses and
Permits; Maintenance of Material Licenses and Permits ......39
ss.6.11. ENVIRONMENTAL INDEMNIFICATION ..............................39
ss.6.12. Further Assurances .........................................40
ss.6.13. Notice of Potential Claims or Litigation ...................40
ss.6.14. Notice of Certain Events Concerning Insurance
and Environmental Claims ...................................40
ss.6.15. Response Actions ...........................................41
ss.6.16. Notice of Default ......................................... 41
ss.6.17. Closure and Post Closure Liabilities .......................41
<PAGE>
-iv-
ss.7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS ...........................41
ss.7.1. Restrictions on Indebtedness ...............................41
ss.7.2. Restrictions on Liens ......................................43
ss.7.3. Restrictions on Investments ................................44
ss.7.4. Mergers, Consolidations, Sales .............................45
ss.7.5. Sale and Leaseback .........................................46
ss.7.6. Restricted Distributions and Redemptions ...................46
ss.7.7. Employee Benefit Plans .....................................46
ss.7.8. Negative Pledges ...........................................47
ss.8. FINANCIAL COVENANTS OF THE BORROWERS ..................................47
ss.8.1. Leverage Ratio .............................................47
ss.8.2. Interest Coverage Ratio ....................................48
ss.8.3. Funded Debt to Capitalization Ratio ........................48
ss.8.4. Profitable Operations ......................................48
ss.8.5. Capital Expenditures .......................................48
ss.9. CLOSING CONDITIONS ....................................................48
ss.9.1. Corporate Action ...........................................48
ss.9.2. Loan Documents, Etc ........................................48
ss.9.3. Certified Copies of Charter Documents ......................49
ss.9.4. Incumbency Certificate .....................................49
ss.9.5. Validity of Liens ..........................................49
ss.9.6. UCC Search Results .........................................49
ss.9.7. Certificates of Insurance ..................................49
ss.9.8. Opinion of Counsel .........................................50
ss.9.9. Environmental Permit Certificate ...........................50
ss.10. CONDITIONS OF ALL LOANS ..............................................50
ss.10.1. Representations True; No Event of Default .................50
ss.10.2. Performance; No Event of Default ..........................50
ss.10.3. No Legal Impediment .......................................50
ss.10.4. Governmental Regulation ...................................51
ss.10.5. Proceedings and Documents .................................51
ss.11. COLLATERAL SECURITY ..................................................51
ss.12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT ...........51
ss.12.1. Events of Default and Acceleration ........................51
ss.12.2. Termination of Commitments ................................54
ss.12.3. Remedies ..................................................54
ss.13. SETOFF ...............................................................55
ss.14. THE AGENT ............................................................55
ss.14.1. Appointment of Agent, Powers and Immunities ...............55
<PAGE>
-v-
ss.14.2. Actions By Agent ..........................................56
ss.14.3. INDEMNIFICATION ...........................................56
ss.14.4. Reimbursement .............................................57
ss.14.5. Documents .................................................57
ss.14.6. Non-Reliance on Agent and Other Banks .....................57
ss.14.7. Resignation of Agent ......................................58
ss.14.8. Action by the Banks, Consents, Amendments, Waivers, Etc ...58
ss.15. EXPENSES .............................................................59
ss.16. INDEMNIFICATION ......................................................60
ss.17. SURVIVAL OF COVENANTS, ETC ...........................................60
ss.18. ASSIGNMENT AND PARTICIPATION .........................................61
ss.19. PARTIES IN INTEREST ..................................................62
ss.20. NOTICES, ETC .........................................................62
ss.21. MISCELLANEOUS ........................................................62
ss.22. ENTIRE AGREEMENT, ETC ................................................63
ss.23. WAIVER OF JURY TRIAL .................................................63
ss.24. GOVERNING LAW ........................................................63
ss.25. SEVERABILITY .........................................................64
Schedules & Exhibits
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Loan and Letter of Credit Request
Exhibit C Form of Compliance Certificate
Exhibit D Form of Environmental Compliance Certificate
Exhibit E Parent's Standard Due Diligence Practices
Schedule 1 Subsidiaries of the Parent
Schedule 5.7 Litigation
Schedule 5.16 Environmental Matters
Schedule 5.18 Certain Transactions
Schedule 5.20(b) Outstanding Stock Options
Schedule 6.7 Insurance
Schedule 7.1(b) Existing Indebtedness
Schedule 7.2(g) Existing Liens
<PAGE>
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
September 17, 1998 (the "Agreement"), by and among (a) SUPERIOR SERVICES, INC.,
a Wisconsin corporation (the "Parent"), the subsidiaries of the Parent
identified on Schedule 1 hereto (the "Subsidiaries", and collectively with the
Parent, the "Borrowers"), (b) BANKBOSTON, N.A. ("BKB"), a national banking
association having its principal place of business at 100 Federal Street,
Boston, Massachusetts 02110, LASALLE NATIONAL BANK ("LaSalle"), a national
banking association having its principal place of business at 135 South LaSalle
Street, Chicago, Illinois 60603, BANK ONE, WISCONSIN ("Bank One"), a Wisconsin
banking association having its principal place of business at 111 East Wisconsin
Avenue, Milwaukee, Wisconsin 53201, BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association having its place of business at 231
South LaSalle Street, Chicago, Illinois 60697 ("BOA"), HARRIS TRUST AND SAVINGS
BANK, an Illinois banking association having its principal place of business at
111 West Monroe Street, Chicago Illinois 60690 ("Harris"), and the other lending
institutions which become parties hereto (each a "Bank" and, collectively, the
"Banks"), and (c) BANKBOSTON, N.A., as agent for the Banks (the "Agent").
WHEREAS, the Banks, the Agent, and the Borrowers wish to amend and
restate the Existing Credit Agreement (defined below) to increase the Total
Commitment and to amend certain terms and provisions thereof;
NOW THEREFORE, subject to the satisfaction of the conditions set forth
in ss.9 hereof, the Borrowers, the Banks, and the Agent hereby agree that the
Existing Credit Agreement is hereby amended and restated in its entirety as set
forth herein.
1. ss.1. DEFINITIONS AND RULES OF INTERPRETATION.
a. ss.1.1. Definitions. The following terms shall have the meanings set forth in
this ss.1 or elsewhere in the provisions of this Agreement referred to below:
Accountants. See ss.5.4(a).
Agent. BKB acting as agent for the Banks.
Agent's Head Office. The Agent's head office is located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agreement. This Second Amended and Restated Revolving Credit
Agreement, including the Schedules and Exhibits hereto.
<PAGE>
-2-
Applicable Commitment Rate. The Applicable Commitment Rate shall be as
set forth in the Pricing Table.
Applicable Eurodollar Margin. The Applicable Eurodollar Margin on
Eurodollar Loans shall be as set forth in the Pricing Table. Any change in the
Applicable Margin shall become effective on the first day of each Interest
Period which begins three (3) or more days after receipt by the Banks of
financial statements delivered pursuant to ss.6.4(a) or (b) hereof which
indicate a change in the Leverage Ratio and in the Applicable Eurodollar Margin
in accordance with the Pricing Table. If at any time the financial statements
required to be delivered pursuant to ss.6.4(a) or (b) hereof are not delivered
within the time periods specified in such subsections, the Applicable Eurodollar
Margin shall be 1.50% on which such financial statements were required to be
delivered but before the time of actual receipt of such financial statements,
subject to adjustment upon actual receipt of such financial statements.
Applicable Laws. See ss.6.10.
Applicable L/C Margin. The Applicable L/C Margin on Letters of Credit
shall be as set forth in the Pricing Table. The effective date of a change in
the Applicable L/C Margin shall be the first day after receipt by the Banks of
financial statements delivered pursuant to ss.6.4(a) or (b) hereof which
indicate a change in the Leverage Ratio and in the Applicable L/C Margin in
accordance with the Pricing Table. If at any time the financial statements
required to be delivered pursuant to ss.6.4(a) or (b) hereof are not delivered
within the time periods specified in such subsections, the Applicable L/C Margin
shall be 1.50% with respect to any Financial Letter of Credit and 1.25% with
respect to any other Letter of Credit issued on which such financial statements
were required to be delivered but before actual receipt of such financial
statements, subject to adjustment upon actual receipt of such financial
statements.
Balance Sheet Date. December 31, 1997.
Banks: See Preamble.
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by the Agent at its head office in Boston, Massachusetts as its
"base rate" (it being understood that such rate is a reference rate and not
necessarily the lowest rate of interest charged by the Agent) or (b) one percent
(1%) above the overnight federal funds effective rate, as published by the Board
of Governors of the Federal Reserve System, as in effect from time to time.
Base Rate Loans. Loans bearing interest calculated by reference to the
Base Rate.
Borrowers. See Preamble.
<PAGE>
-3-
Business Day. Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include (a) any item customarily charged directly to expense or depreciated over
a useful life of twelve (12) months or less in accordance with generally
accepted accounting principles, or (b) any item obtained through an acquisition
permitted by ss.7.4 hereof.
Capital Expenditures. Amounts paid or indebtedness incurred by the
Borrowers in connection with the purchase or lease by the Borrowers of Capital
Assets that would be required to be capitalized and shown on the balance sheet
of such Person in accordance with generally accepted accounting principles.
CERCLA. See definition of Release.
certified. With respect to the financial statements of any Person, such
statements as audited by a firm of independent auditors, whose report expresses
the opinion, without qualification, that such financial statements present
fairly the financial position of such Person.
CFO. See ss.6.4(b).
Closing Date. The date on which the conditions precedent set forth in
ss.9 are satisfied.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time.
Collateral. All of the property, rights and interests of the Borrowers
that are or are intended to be subject to the
security interests created by the Stock Pledge Agreement.
Commitment. With respect to each Bank, the amount determined by
multiplying such Bank's Commitment Percentage by the Total Commitment specified
in ss.2.1 hereof, as the same may be reduced from time to time.
Commitment Fee. See ss.4.1.
Commitment Percentage. With respect to each Bank, the percentage set
forth beside its name below (subject to adjustment upon any assignments pursuant
to ss.18):
Bank Percentage
BKB 18.18181818%
<PAGE>
-4-
Bank One 14.54545455%
Harris 10.54545455%
LaSalle 10.54545455%
BOA 10.54545455%
Firstar 7.27272727%
Fleet 4.72727273%
Paribas 4.72727273%
PNC 4.72727273%
Comerica 4.72727273%
Fifth Third 4.72727273%
Hibernia 4.72727273%
Company Balance Sheet Date. March 31, 1998.
Compliance Certificate. See ss.6.4(c).
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrowers
consolidated in accordance with GAAP.
Consolidated Earnings Before Interest, Taxes and Amortization or EBITA.
For any period, the Consolidated Net Income (or Deficit) of the Borrowers, plus
(a) interest expense, (b) income taxes, and (c) amortization expense relating to
intangible assets for such period, to the extent that each was deducted in
determining Consolidated Net Income (or Deficit), provided that, for purposes of
calculating the financial covenants pursuant to ss.8 hereof, the portion of
EBITA derived from Subsidiaries acquired since the date of the most recent
financial statements delivered to the Banks pursuant to ss.6.4 hereof shall be
included in the calculation of EBITA if (i) the financial statements of such
acquired Subsidiaries have been audited for the period sought to be included by
an independent accounting firm satisfactory to the Agent or (ii) the Borrowers
provide the Agent with such other historical financial statements in form and
substance satisfactory to the Agent and the Agent consents to such inclusion.
Such acquired EBITA will be further adjusted to add back owner's compensation
and the net benefits of internalizing waste disposal, each as certified by the
CFO and, in the case of net benefits, with the approval of the Agent.
Consolidated Earnings Before Interest, Taxes, Depreciation and
Amortization or EBITDA. For any period, EBITA plus depreciation expense, to the
extent such expense was deducted in determining Consolidated Net Income (or
Deficit).
Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of the Borrowers after deduction of all expenses, taxes, and other
proper charges, determined in accordance with GAAP.
<PAGE>
-5-
Consolidated Net Worth. The excess of Consolidated Total Assets over
Consolidated Total Liabilities, less, to the extent otherwise includable in the
computation of Consolidated Net Worth, any subscriptions receivable, plus the
value of any preferred stock to the extent otherwise excluded in the computation
of Consolidated Net Worth.
Consolidated Tangible Assets. The Consolidated Total Assets less the
sum of:
(a) the total book value of all assets of the Borrowers on a
consolidated basis properly classified as intangible assets under GAAP,
including such items as good will, the value of all non-competition agreements
and waste collection routes, the purchase price of acquired assets in excess of
the fair market value thereof, trademarks, trade names, service marks, brand
names, copyrights, patents and licenses, and rights with respect to the
foregoing on the consolidated balance sheet of the Borrowers; plus
(b) all amounts representing any write-up in the book value of any
consolidated assets resulting from a revaluation thereof subsequent to the
Company Balance Sheet Date.
Consolidated Tangible Net Worth. The excess of Consolidated Tangible
Assets over Consolidated Total Liabilities.
Consolidated Total Assets. All assets of the Borrowers determined on a
consolidated basis in accordance with GAAP.
Consolidated Total Interest Expense. For any period, the aggregate
amount of interest expense required to be paid or accrued by the Borrowers
during such period on all Indebtedness of the Borrowers outstanding during all
or any part of such period, including capitalized interest expense for such
period.
Consolidated Total Liabilities. All liabilities of the Borrowers
determined on a consolidated basis in accordance with GAAP.
Consulting Engineer. An environmental consulting firm acceptable to the
Agent.
Default. See ss.12.
Disposal (or Disposed). See definition of Release.
Distribution. The declaration or payment of any dividend or
distribution on or in respect of any shares of any class of capital stock, any
partnership interests or any membership interests of any Person, other than
dividends or other distributions
<PAGE>
-6-
payable solely in shares of common stock, partnership interests or membership
units of such Person, as the case may be; the purchase, redemption, or other
retirement of any shares of any class of capital stock, partnership interests or
membership units of such Person, directly or indirectly through a Subsidiary or
otherwise; the return of equity capital by any Person to its shareholders,
partners or members as such; or any other distribution on or in respect of any
shares of any class of capital stock, partnership interest or membership unit of
such Person.
Dollars or $. Dollars in lawful currency of the United States of
America.
Drawdown Date. The date on which any Loan is made or is to be made, and
the date on which any Loan is converted or continued in accordance with ss.2.5.
EBITA. See definition of Consolidated Earnings Before Interest, Taxes
and Amortization.
EBITDA. See definition of Consolidated Earnings Before Interest, Taxes,
Depreciation and Amortization.
Employee Benefit Plan. Any employee benefit plan within the meaning of
ss.3(3) of ERISA maintained or contributed to by any Borrower or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws. See ss.5.16(a).
EPA. See ss.5.16(b).
ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with
any Borrower under ss.414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of ss.4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Escrowed Shares. Shares of common stock of the Parent which have been
placed in escrow in connection with the acquisition of a subsidiary and held
against potential indemnification claims made by the Parent against the former
shareholders of such subsidiary.
Eurodollar Business Day. Any Business Day on which dealings in foreign
currency and exchange are carried on among banks in London, England.
<PAGE>
-7-
Eurodollar Interest Determination Date. For any Interest Period, the
date two Eurodollar Business Days prior to the first day of such Interest
Period.
Eurodollar Loans. Loans bearing interest calculated by reference to the
Eurodollar Rate plus the Applicable Eurodollar Margin.
Eurodollar Offered Rate. The rate per annum at which deposits of
dollars are offered to the Agent by prime banks in whatever Eurodollar interbank
market may be selected by the Agent, in its sole discretion, acting in good
faith, at or about 11:00 a.m. local time in such interbank market, on the
Eurodollar Interest Determination Date for a period equal to the period of such
Interest Period in an amount substantially equal to the principal amount
requested to be loaned at or converted to a rate based on the Eurodollar Rate.
Eurodollar Rate. The rate per annum, rounded upwards to the nearest
1/16 of 1%, determined by the Agent with respect to an Interest Period in
accordance with the following formula:
Eurodollar Rate = Eurodollar Offered Rate
1-Reserve Rate
Event of Default. See ss.12.
Existing Credit Agreement. That certain Amended and Restated Revolving
Credit Agreement dated as of March 26, 1997, as amended, by and among (a) the
Parent (formerly known as Superior Environmental Services, Inc.) and the
Subsidiaries of the Parent listed on Schedule 1 thereto, (b) BKB, LaSalle, Bank
One and BOA, and (c) BKB, as Agent.
Financial Letter of Credit. A Letter of Credit where the event which
triggers payment is financial, such as the failure to pay money, and not
performance-related, such as failure to ship a product or provide a service, as
set forth in greater detail in the letter dated March 30, 1995 from the Board of
Governors of the Federal Reserve System or in any applicable directive or letter
ruling of the Board of Governors of the Federal Reserve System issued subsequent
thereto.
Funded Debt. Consolidated Indebtedness of the Borrowers for borrowed
money and guarantees of debt for borrowed money recorded on the Consolidated
balance sheet of the Borrowers, including noncontingent Reimbursement
Obligations of the Borrowers with respect to Letters of Credit and the amount of
any Indebtedness of such Persons for Capitalized Leases which corresponds to
principal.
generally accepted accounting principles or GAAP. When used in general,
generally accepted accounting principles means (1) principles that are
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board
<PAGE>
-8-
and its predecessors, in effect for the fiscal year ended on the Balance Sheet
Date, as shall be concurred in by independent certified public accountants of
recognized standing whose report expresses an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles) as
to financial statements in which such principles have been applied; and (2) when
used with reference to the Borrowers, such principles shall include (to the
extent consistent with such principles) the accounting practices reflected in
the consolidated financial statements for the year ended on the Balance Sheet
Date.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of ss.3(2) of ERISA maintained or contributed to by any Borrower or any
ERISA Affiliate, the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Hazardous Substances. See ss.5.16(b).
Indebtedness. All obligations, contingent or otherwise, that in
accordance with GAAP should be classified upon the obligor's balance sheet as
liabilities, or to which reference should be made by footnotes thereto,
including in any event and whether or not so classified: (a) all debt and
similar monetary obligations (including capitalized leases and operating leases
with an original term longer than 3 years), whether direct or indirect; (b) all
liabilities secured by any mortgage, pledge, security interest, lien, charge, or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the liability secured thereby shall have been assumed; and (c)
all guarantees, endorsements and other contingent obligations in respect of
indebtedness of others, whether direct or indirect, including any obligation to
supply funds to or in any manner to invest in, directly or indirectly, the
debtor, to purchase indebtedness, or to assure the owner of indebtedness against
loss, through an agreement to purchase goods, supplies, or services for the
purpose of enabling the debtor to make payment of the indebtedness held by such
owner or otherwise, and the obligations to reimburse the issuer in respect of
any letters of credit.
Interest Period. With respect to each Eurodollar Loan:
(a) initially, the period commencing on the date of a conversion from a
Base Rate Loan into a Eurodollar Loan or the making of a Eurodollar Loan, and
ending one (1), two (2), three (3), or six (6) months thereafter, as the case
may be, as the Borrowers may select; and
(b) thereafter, each subsequent Interest Period shall begin on the day
immediately following the last day of the preceding Interest Period and end one
(1), two (2), three (3), or six (6) months thereafter, as the case may be, as
the Borrowers may select;
<PAGE>
-9-
(c) provided that any Interest Period which would otherwise end on a
day which is not a Business Day shall be deemed to end on the next Business Day
unless the next Business Day would carry such Interest Period into another
calendar month, in which event such Interest Period shall be deemed to end on
the immediately preceding Business Day.
Investments. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Letter of Credit Applications. Letter of Credit Applications in such
form as may be agreed upon by any Borrower and the Agent from time to time which
are entered into pursuant to ss.3 hereof as such Letter of Credit Applications
are amended, varied or supplemented from time to time.
Letter of Credit Fee. See ss.4.1(b).
Letter of Credit Participation. See ss.3.1(b).
Letters of Credit. Standby Letters of Credit issued or to be issued by
the Agent under ss.3 hereof for the account of the Borrowers.
Leverage Ratio. See ss.8.1.
Loan and Letter of Credit Request. See ss.2.6.
Loan Documents. This Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, and the Stock Pledge Agreement.
Loans. Revolving credit loans made or to be made by the Banks to the
Borrowers pursuant to ss.2.
<PAGE>
-10-
Majority Banks. As of any date, the Banks holding fifty-one percent
(51%) of the outstanding principal amount of the Loans on such date; and if no
such principal is outstanding, the Banks whose aggregate Commitments constitute
fifty-one percent (51%) of the Total Commitment.
Maturity Date. September 17, 2003.
Maximum Drawing Amount. The maximum aggregate amount from time to time
that the beneficiaries may draw under outstanding Letters of Credit.
Maximum Rate. With respect to each Bank, the maximum lawful nonusurious
rate of interest (if any) which under Applicable Law such Bank may charge the
Borrowers on the Loans and other Obligations from time to time.
Multiemployer Plan. Any multiemployer plan within the meaning of
ss.3(37) of ERISA maintained or contributed to by any Borrower or any ERISA
Affiliate.
Notes. The promissory notes of the Borrowers evidencing the Loans
hereunder, dated as of the date of this Agreement and in substantially the form
of Exhibit A hereto.
Obligations. All indebtedness, obligations and liabilities of the
Borrowers to any of the Banks or the Agent, individually or collectively,
existing on the date of this Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising or incurred under any Swap Contract between the
Borrowers and any Bank, or under this Agreement or any of the other Loan
Documents or in respect of any of the Loans made or Reimbursement Obligations
incurred or the Letters of Credit, the Notes or any other instrument at any time
evidencing any thereof.
Parent. See Preamble.
PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of
ERISA and any successor entity or entities having similar responsibilities.
Permitted Liens. See ss.7.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
<PAGE>
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Pricing Table:
- - --------------- ---------------- ----------------- ------------ ---------------
Applicable Applicable Applicable Applicable
Leverage Ratio Base Rate Margin Eurodollar Margin L/C Margin Commitment Rate
(per annum) (per annum) (per annum) per annum)
- - --------------- ---------------- ----------------- ------------ ---------------
- - --------------- ---------------- ----------------- ------------ ---------------
less than or 0.00% 0.75% 0.75% 0.250%
equal to 2.00:1
- - --------------- ---------------- ----------------- ------------ ---------------
- - --------------- ---------------- ----------------- ------------ ---------------
greater than 0.00% 1.00% 1.00% 0.250%
2.00:1 and less
than or or
equal to 2.50:1
- - --------------- ---------------- ----------------- ------------ ---------------
- - --------------- ---------------- ----------------- ------------ ---------------
greater than 0.00% 1.25% 1.25% 0.250%
2.50:1 and
less than or
equal to
3.00:1
- - --------------- ---------------- ----------------- ------------ ---------------
- - --------------- ---------------- ----------------- ------------ ---------------
greater than 0.00% 1.50% 1.50% 0.250%
3.00:1
- - --------------- ---------------- ----------------- ------------ ---------------
Real Property. All real property heretofore, now, or hereafter owned or
leased by the Borrowers.
Reimbursement Obligation. The Borrowers' obligation to reimburse the
Agent and the Banks on account of any drawing under any Letter of Credit as
provided in ss.3.2.
RCRA. See definition of Release.
Release. Shall have the meaning specified in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
ss.ss.9601 et seq. ("CERCLA") and the term "Disposal" (or "Disposed") shall have
the meaning specified in the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss.ss.6901 et seq. ("RCRA") and regulations promulgated thereunder;
provided, that in the event either CERCLA or RCRA is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply as of
the effective date of such amendment and provided further, to the extent that
the laws of a state wherein the property lies establishes a meaning for
"Release" or "Disposal" which is broader than specified in either CERCLA or
RCRA, such broader meaning shall apply.
Remaining Permitted Life. The number of months remaining in any
landfill's useful life, determined by dividing (a) the remaining permitted
capacity of such landfill by (b) the most recent estimate of the current rate of
monthly use.
<PAGE>
-12-
Reserve Rate. The rate, expressed as a decimal, at which the Banks
would be required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any subsequent or similar regulation
relating to such reserve requirements) against "Eurocurrency Liabilities" (as
such term is defined in Regulation D), or against any other category of
liabilities which might be incurred by the Banks to fund Loans bearing interest
based on the Eurodollar Rate, if such liabilities were outstanding.
Stock Pledge Agreement. The Stock Pledge Agreement, amended and
restated as of the Closing Date, among the Borrowers and the Agent in form and
substance satisfactory to the Agent.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority of the
outstanding capital stock or other interest entitled to vote generally.
Swap Contracts. Any agreement (including any master agreement and any
agreement, whether or not in writing, relating to any single transaction) that
is an interest rate swap agreement, basis swap, forward rate agreement,
commodity swap, commodity option, equity or equity index swap or option, bond
option, interest rate option, forward foreign exchange agreement, rate cap,
collar or floor agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or other similar agreement (including any
option to enter into any of the foregoing).
Total Commitment. See ss.2.1.
Year 2000 Compliance. The risk that computer applications used by the
Borrowers may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to, and any date after, December 31,
1999.
ss.1.2. Rules of Interpretation.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
<PAGE>
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(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms capitalized but not otherwise defined
herein have the meanings assigned to them by generally accepted accounting
principles applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include," "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein.
(h) Reference to a particular "ss." refers to that section of
this Agreement unless otherwise indicated.
(i) The words "herein," "hereof," "hereunder" and words of
like import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
ss.2. THE REVOLVING CREDIT FACILITY.
ss.2.1. Commitment to Lend. Subject to the terms and conditions set forth
in this Agreement, each of the Banks severally agrees to lend to the Borrowers
and the Borrowers may borrow, repay, and reborrow from time to time between the
Closing Date and the Maturity Date, upon notice by the Borrowers to the Agent
given in accordance with ss.2.6, its Commitment Percentage of such sums as are
requested by the Borrowers, provided that the outstanding amount of Loans, the
Maximum Drawing Amount of the Letters of Credit and unpaid Reimbursement
Obligations shall not exceed a maximum aggregate amount outstanding of
$275,000,000 at any time, as such amount may be reduced pursuant to ss.2.2
hereof (the "Total Commitment"). The Loans shall be made pro rata in accordance
with each Bank's Commitment Percentage. Each request for a Loan hereunder shall
constitute a representation and warranty by the Borrowers that the conditions
set forth in ss.9 and ss.10, as the case may be, have been satisfied on the date
of such request.
ss.2.2. Reduction of Total Commitment.
(a) The Borrowers shall have the right at any time and from time to
time upon two (2) Business Days' prior written notice to the Agent to reduce by
$1,000,000 or an integral multiple thereof or terminate entirely the Total
Commitment, whereupon the Commitments of the Banks shall be reduced pro rata in
accordance with their respective Commitment Percentages of the amount specified
in such notice or, as the
<PAGE>
-14-
case may be, terminated. The Agent will notify the Banks promptly after
receiving any notice of the Borrowers delivered pursuant to this ss.2.2.
(b) No reduction or termination of the Commitments once made may be
revoked; the portion of the Commitments reduced or terminated may not be
reinstated; and amounts in respect of such reduced or terminated portion may not
be reborrowed.
ss.2.3. The Notes. The Loans shall be evidenced by separate promissory
notes of the Borrowers in substantially the form of Exhibit A hereto (each a
"Note"), dated as of the Closing Date and completed with appropriate insertions.
One Note shall be payable to the order of each Bank in a principal amount equal
to such Bank's Commitment or, if less, the outstanding amount of all Loans made
by such Bank, plus interest accrued thereon, as set forth below. The Borrowers
irrevocably authorize each Bank to make or cause to be made, in connection with
a Drawdown Date of any Loan or at the time of receipt of any payment of
principal on such Bank's Note, an appropriate notation on such Bank's records
reflecting the making of such Loan or the receipt of such payment (as the case
may be). The outstanding amount of the Loans set forth on such Bank's record
shall be prima facie evidence of the principal amount thereof owing and unpaid
to such Bank, but the failure to record, or any error in so recording, any such
amount shall not limit or otherwise affect the obligations of the Borrowers
hereunder or under any Note to make payments of principal of or interest on any
Note when due.
ss.2.4. Interest on Loans. The outstanding principal amount of the
Loans shall bear interest at the rate per annum equal to (a) the Base Rate, or
(b) at the Borrowers' option as provided herein, the Eurodollar Rate plus the
Applicable Eurodollar Margin. Interest shall be payable (x) quarterly in arrears
on the first Business Day of the next succeeding quarter, commencing October 1,
1998, on Base Rate Loans, (y) on the last day of the applicable Interest Period,
and if such Interest Period is longer than three (3) months, also on the last
day of the third month following the commencement of such Interest Period, on
Eurodollar Loans, and (z) on the Maturity Date for all Loans.
ss.2.5. Election of Eurodollar Rate; Notice of Election; Interest
Periods; Minimum Amounts.
(a) At the Borrowers' option, so long as no Default or Event
of Default has occurred and is then continuing, the Borrowers may (i) elect to
convert any Base Rate Loan or a portion thereof to a Eurodollar Loan, (ii) at
the time of any Loan and Letter of Credit Request, specify that such requested
Loan shall be a Eurodollar Loan, or (iii) upon expiration of the applicable
Interest Period, elect to maintain an existing Eurodollar Loan as such, provided
that the Borrowers give notice to the Agent pursuant to ss.2.5(b) hereof. Upon
determining any Eurodollar
<PAGE>
-15-
Rate, the Agent shall forthwith provide notice thereof to the Borrowers and the
Banks, and each such notice to the Borrowers and the Banks shall be considered
prima facie correct and binding, absent manifest error.
(b) Three (3) Eurodollar Business Days prior to the making of
any Eurodollar Loan or the conversion of any Base Rate Loan to a Eurodollar
Loan, or, in the case of an outstanding Eurodollar Loan, the expiration date of
the applicable Interest Period, the Borrowers shall give telephonic notice
(confirmed by telecopy on the same Eurodollar Business Day) to the Agent not
later than 11:00 a.m. (Boston time) of its election pursuant to ss.2.5(a). Each
such notice delivered to the Agent shall specify the aggregate principal amount
of the Loans to be borrowed or maintained as or converted to Eurodollar Loans
and the requested duration of the Interest Period that will be applicable to
such Eurodollar Loan, and shall be irrevocable and binding upon the Borrowers.
If the Borrowers shall fail to give the Agent notice of their election hereunder
together with all of the other information required by this ss.2.5(b) with
respect to any Loan, such Loan shall be deemed a Base Rate Loan. In the event
that the Borrowers fail to provide any such notice with respect to the
continuation of any Eurodollar Loan as such, then such Eurodollar Loan shall be
automatically converted to a Base Rate Loan at the end of the then expiring
Interest Period relating thereto.
(c) Notwithstanding anything herein to the contrary, the
Borrowers may not specify an Interest Period that would extend beyond the
Maturity Date.
(d) All Eurodollar Loans shall be in a minimum amount of not
less than $1,000,000 and in integral multiples of $100,000 above such amount. In
no event shall the Borrowers have more than seven (7) different maturities of
Eurodollar Loans outstanding at any time.
(e) All Base Rate Loans shall be in a minimum amount of not
less than $500,000 and in integral multiples of $100,000 above such amount.
ss.2.6. Requests for Revolving Credit Loans. The Borrowers shall give
to the Agent written notice in the form of Exhibit B hereto (or telephonic
notice confirmed by telecopy on the same Business Day in the form of Exhibit B
hereto) of each Loan requested hereunder (a "Loan and Letter of Credit Request")
not later than 11:00 a.m. Boston time (a) one (1) Business Day prior to the
proposed Drawdown Date of any Base Rate Loan, or (b) three (3) Eurodollar
Business Days prior to the proposed Drawdown Date of any Eurodollar Loan. Each
such notice shall be given by the Parent and shall specify the principal amount
of the Loan requested and shall include a current Loan and Letter of Credit
Request, reflecting the Maximum Drawing Amount of all Letters of Credit
outstanding. Each Loan and Letter of Credit Request shall be irrevocable and
binding on the Borrowers and shall obligate the Borrowers to accept the Loan
requested from the Banks on the proposed Drawdown
<PAGE>
-16-
Date. Each of the representations and warranties made by or on behalf of any of
the Borrowers to the Banks or the Agent in this Agreement or any other Loan
Document shall be true and correct in all material respects when made and shall,
for all purposes of this Agreement, be deemed to be repeated on and as of the
date of the submission of any Loan and Letter of Credit Request and on and as of
the Drawdown Date of such Loan or the date of issuance of such Letter of Credit
(except to the extent of changes resulting from transactions contemplated or
permitted by this Agreement and the other Loan Documents and changes occurring
in the ordinary course of business that singly or in the aggregate are not
materially adverse, or to the extent that such representations and warranties
expressly relate to an earlier date). The Agent shall notify each Bank of each
Loan and Letter of Credit Request received by the Agent not later than 5:00 p.m.
Boston time on the date of the request.
ss.2.7. Funds for Loans.
(a) Not later than 1:00 p.m. (Boston time) on the proposed Drawdown
Date of any Loans, each of the Banks will make available to the Agent, at its
Head Office, in immediately available funds, the amount of such Bank's
Commitment Percentage of the amount of the requested Loans. Upon receipt from
each Bank of such amount, and upon receipt of the documents required by ss.ss.9
and 10 and the satisfaction of the other conditions set forth therein, to the
extent applicable, the Agent will make available to the Borrowers the aggregate
amount of such Loans made available to the Agent by the Banks. The failure or
refusal of any Bank to make available to the Agent at the aforesaid time and
place on any Drawdown Date the amount of its Commitment Percentage of the
requested Loans shall not relieve any other Bank from its several obligation
hereunder to make available to the Agent the amount of such other Bank's
Commitment Percentage of any requested Loans.
(b) The Agent may, unless notified to the contrary by any Bank prior to
a Drawdown Date, assume that such Bank has made available to the Agent on such
Drawdown Date the amount of such Bank's Commitment Percentage of the Loans to be
made on such Drawdown Date, and the Agent may (but it shall not be required to),
in reliance upon such assumption, make available to the Borrowers a
corresponding amount. If any Bank makes available to the Agent such amount on a
date after such Drawdown Date, such Bank shall pay to the Agent on demand an
amount equal to the product of (i) the average computed for the period referred
to in clause (iii) below, of the weighted average interest rate paid by the
Agent for federal funds acquired by the Agent during each day included in such
period, times (ii) the amount of such Bank's Commitment Percentage of such
Loans, times (iii) a fraction, the numerator of which is the number of days that
elapse from and including such Drawdown Date to the date on which the amount of
such Bank's Commitment Percentage of such Loans shall become immediately
available to the Agent, and the denominator of which is 365. A statement of the
Agent submitted to such Bank with respect to any amounts owing under this
paragraph shall be prima facie evidence, absent manifest error, of the
<PAGE>
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amount due and owing to the Agent by such Bank. If the amount of such Bank's
Commitment Percentage of such Loans is not made available to the Agent by such
Bank within three (3) Business Days following such Drawdown Date, the Agent
shall be entitled to recover such amount from the Borrowers on demand, with
interest thereon at the rate per annum applicable to the Loans made on such
Drawdown Date.
ss.2.8. Maturity of the Loans. The Loans shall be due and payable on
the Maturity Date. The Borrowers promise to pay on the Maturity Date all Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon.
ss.2.9. Mandatory Repayments of the Loans. If at any time the
outstanding amount of the Loans plus the Maximum Drawing Amount of all
outstanding Letters of Credit plus unpaid Reimbursement Obligations exceeds the
Total Commitment, whether by reduction of the Total Commitment or otherwise,
then the Borrowers shall immediately pay the amount of such excess to the Agent
for application to the Loans, or if no Loans shall be outstanding, to be held by
the Agent as collateral security for the Reimbursement Obligations, provided,
however, that if the amount of cash collateral held by the Agent pursuant to
this ss.2.9 exceeds the amount of the Obligations the Agent shall return such
excess to the Borrowers.
ss.2.10. Optional Prepayments or Repayments of Loans. The Borrowers
shall have the right, at their election, to repay or prepay the outstanding
amount of the Loans, as a whole or in part, at any time without penalty or
premium. The Borrowers shall give the Agent, no later than 11:00 a.m. (Boston
time) on the Business Day of such proposed prepayment or repayment, written
notice (or telephonic notice confirmed in writing) of any proposed prepayment or
repayment pursuant to this ss.2.10, specifying the proposed date of prepayment
or repayment of Loans and the principal amount to be paid; provided that the
Borrowers may not make any prepayment of any Eurodollar Loan on a date other
than the last day of the applicable Interest Period unless the Borrowers pay all
required fees pursuant to ss.4.8 hereof.
ss.3. LETTERS OF CREDIT.
ss.3.1. Letter of Credit Commitments.
(a) Subject to the terms and conditions hereof and the
execution and receipt of a Loan and Letter of Credit Request reflecting the
Maximum Drawing Amount of all Letters of Credit (including the requested Letter
of Credit) and a Letter of Credit Application, the Agent, on behalf of the Banks
and in reliance upon the agreement of the Banks set forth in ss.3.1(b) and upon
the representations and warranties of the Borrowers contained herein, agrees to
issue standby letters of credit, in such form as may be requested from time to
time by the Borrowers and
<PAGE>
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agreed to by the Agent; provided, however, that, after giving effect to such
request, the aggregate Maximum Drawing Amount of all letters of credit issued at
any time under this ss.3.1(a) (the "Letters of Credit") shall not exceed
$30,000,000, and no Letter of Credit shall have an expiration date later than
the earlier of (i) one (1) year after the date of issuance of the Letter of
Credit (which may incorporate automatic renewals for periods of up to one (1)
year, provided that the Agent may, upon 30 days' notice to the beneficiary,
cancel such Letter of Credit which has been renewed beyond its initial one (1)
year term), or (ii) thirty (30) days prior to the Maturity Date.
(b) Each Bank severally agrees that it shall be absolutely
liable, without regard to the occurrence of any Default or Event of Default or
any other condition precedent whatsoever, to the extent of such Bank's
Commitment Percentage thereof, to reimburse the Agent on demand for the amount
of each draft paid by the Agent under each Letter of Credit to the extent that
such amount is not reimbursed by the Borrowers pursuant to ss.3.2 (such
agreement for a Bank being called herein the "Letter of Credit Participation" of
such Bank).
(c) Each such payment made by a Bank shall be treated as the
purchase by such Bank of a participating interest in the Borrowers'
Reimbursement Obligation under ss.3.2 in an amount equal to such payment. Each
Bank shall share in accordance with its participating interest in any interest
which accrues pursuant to ss.3.2.
ss.3.2. Reimbursement Obligation of the Borrowers. In order to induce
the Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrowers hereby agree to reimburse or pay to the Agent
with respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder as follows:
(a) on each date that any draft presented under any Letter of
Credit is honored by the Agent or the Agent otherwise makes payment with respect
thereto, (i) the amount paid by the Agent under or with respect to such Letter
of Credit, and (ii) the amount of any taxes, fees, charges or other costs and
expenses whatsoever incurred by the Agent or any Bank in connection with any
payment made by the Agent or any Bank under, or with respect to, such Letter of
Credit; and
(b) upon the Maturity Date or the acceleration of the
Reimbursement Obligations with respect to all Letters of Credit in accordance
with ss.12, an amount equal to the then Maximum Drawing Amount of all Letters of
Credit, which amount shall be held by the Agent for the benefit of the Banks and
the Agent as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office
in immediately available funds. Interest on any and all amounts remaining unpaid
by
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the Borrowers under this ss.3.2 at any time from the date such amounts become
due and payable (whether as stated in this ss.3.2, by acceleration or otherwise)
until payment in full (whether before or after judgment) shall be payable to the
Agent on demand at the rate specified in ss.4.6 for overdue amounts.
ss.3.3. Letter of Credit Payments. If any draft shall be presented or
other demand for payment shall be made under any Letter of Credit, the Agent
shall notify the Borrowers of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. On the date that such draft is paid or other
payment is made by the Agent, the Agent shall promptly notify the Banks of the
amount of any unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each Bank
shall make available to the Agent, at the Agent's Head Office, in immediately
available funds, such Bank's Commitment Percentage of such Reimbursement
Obligation, together with an amount equal to the product of (a) the weighted
average, computed for the period referred to in clause (c) below, of the
interest rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, times (b) the amount equal to such Bank's
Commitment Percentage of such unpaid Reimbursement Obligation, times (c) a
fraction, the numerator of which is the number of days that have elapsed from
and including the date the Agent paid the draft presented for honor or otherwise
made payment until the date on which such Bank's Commitment Percentage of such
unpaid Reimbursement Obligation shall become immediately available to the Agent,
and the denominator of which is 365. The responsibility of the Agent to the
Borrowers and the Banks shall be only to determine that the documents (including
each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter of
Credit.
ss.3.4. Obligations Absolute. The Borrowers' obligations under this
ss.3 shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrowers may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. Subject to the obligations of the Banks
pursuant to Article V of the Uniform Commercial Code, the Borrowers further
agree with the Agent and the Banks that the Agent and the Banks shall not be
responsible for, and the Borrowers' Reimbursement Obligations under ss.3.2 shall
not be affected by, among other things, the validity or genuineness of documents
or of any endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, fraudulent or forged, or any dispute between
or among the Borrowers, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrowers against the beneficiary of
any Letter of Credit or any such transferee. The Agent and the Banks shall not
be liable for any error, omission, interruption or delay in transmission,
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dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit. The Borrowers agree that any action taken
or omitted by the Agent or any Bank under or in connection with each Letter of
Credit and the related drafts and documents, if done in good faith, shall be
binding upon the Borrowers and shall not result in any liability on the part of
the Agent or any Bank to the Borrowers.
ss.3.5. Reliance by Agent. To the extent not inconsistent with ss.3.4,
the Agent shall be entitled to rely, and shall be fully protected in relying
upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent.
ss.4. FEES, PAYMENTS, AND COMPUTATIONS; JOINT AND SEVERAL LIABILITY.
ss.4.1. Fees.
(a) The Borrowers agree to pay to the Agent, for the accounts
of the Banks, a fee (the "Commitment Fee") equal to the Applicable Commitment
Rate multiplied by the amount of the unused portion of the Total Commitment
during each calendar quarter or portion thereof from the Closing Date to the
Maturity Date (or to the date of termination in full of the Total Commitment, if
earlier). The Commitment Fee shall be payable quarterly in arrears on the first
day of each calendar quarter for the immediately preceding calendar quarter
commencing on October 1, 1998, with a final payment on the Maturity Date.
(b) Letter of Credit Fees. The Borrowers shall pay in advance
on the date of issuance of each Letter of Credit an issuance fee to the Agent
equal to one eighth of one percent (1/8%) per annum (the "Issuance Fee") on the
Maximum Drawing Amount of each Letter of Credit, plus a fee (the "Letter of
Credit Fee") equal to (a) the Applicable L/C Margin multiplied by the Maximum
Drawing Amount of each outstanding Financial Letter of Credit, or (b) the
Applicable L/C Margin minus 0.50%, multiplied by the Maximum Drawing Amount of
all other Letters of Credit, provided, however, that the Letter of Credit Fee
with respect to non-Financial Letters of Credit shall not be less than 0.50%,
such Letter of Credit Fee (but not the Issuance Fee) shall be paid quarterly in
advance on the first Business Day of each fiscal quarter, and shall be for the
accounts of the Banks in accordance with their respective Commitment
Percentages. In addition to the Issuance Fee and the Letter of Credit Fee, the
Borrowers shall pay to the Agent, for its own account, all related customary
administrative fees in accordance with customary practice.
<PAGE>
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(b) Upfront Fees. The Borrowers shall pay to the Agent, for
the benefit of the Banks and the Agent, upfront fees, pursuant to the terms of a
fee letter agreement previously entered between the Parent and the Agent.
(c) Agent's Fees. The Borrowers shall pay an annual Agent's
fee, pursuant to the terms of a fee letter agreement previously entered between
the Parent and the Agent.
ss.4.2. Payments.
(a) All payments of principal, interest, Reimbursement
Obligations, fees and any other amounts due hereunder or under any of the other
Loan Documents shall be made to the Agent, for the respective accounts of the
Banks and the Agent, to be received at the Agent's Head Office in immediately
available funds by 12:00 p.m. (Boston time) on any due date. The Agent shall, as
promptly as practicable thereafter, effect appropriate wire transfers of such
payments to the Banks as applicable.
(b) All payments by the Borrowers hereunder and under any of
the other Loan Documents shall be made without setoff or counterclaim and free
and clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein unless
the Borrowers are compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrowers with respect to any amount payable
by them hereunder or under any of the other Loan Documents, the Borrowers will
pay to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks or the Agent to receive the same net amount which
the Banks or the Agent would have received on such due date had no such
obligation been imposed upon the Borrowers. In the event that the Borrowers are
required to make such deduction or withholding as a result of the fact that a
Bank is organized outside of the United States, such Bank shall use its
reasonable best efforts to transfer its Loans to an affiliate organized within
the United States if such transfer would have no adverse effect on such Bank or
the Loans. The Borrowers will deliver promptly to the Bank certificates or other
valid vouchers for all taxes or other charges deducted from or paid with respect
to payments made by the Borrowers hereunder or under such other Loan Document.
(c) The Borrowers shall pay at closing, fees on the Banks'
Commitments as previously agreed upon with the Agent and the Borrowers.
<PAGE>
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ss.4.3. Computations. All computations of interest on Base Rate Loans
and of Commitment Fees, Letter of Credit Fees or other fees shall, unless
otherwise expressly provided herein, be based on a 365-day year (or 366-day
year, as applicable) and paid for the actual number of days elapsed. All
computations of interest on Eurodollar Loans shall, unless otherwise expressly
provided herein, be based on a 360-day year and paid for the actual number of
days elapsed. Whenever a payment hereunder or under any of the other Loan
Documents becomes due on a day that is not a Business Day, the due date for such
payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension.
ss.4.4. Capital Adequacy. If any present or future law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) or the interpretation thereof by a court or governmental authority
with appropriate jurisdiction affects the amount of capital required or expected
to be maintained by any Bank or the Agent or any corporation controlling such
Bank or the Agent, and such Bank or the Agent determines that the amount of
capital required to be maintained by it is increased by or based upon the
existence of such Bank's or the Agent's Loans, Letter of Credit Participations
or Letters of Credit, or commitment with respect thereto, then such Bank or the
Agent may notify the Borrowers of such fact. To the extent that the costs of
such increased capital requirements are not reflected in the Base Rate (if
relating to Base Rate Loans), the Borrowers and such Bank or (as the case may
be) the Agent shall thereafter attempt to negotiate in good faith, within thirty
(30) days of the day on which the Borrowers receive such notice, an adjustment
payable hereunder that will adequately compensate such Bank or the Agent in
light of these circumstances. If the Borrowers and such Bank or the Agent are
unable to agree to such adjustment within thirty (30) days of the date on which
the Borrowers receive such notice, then commencing on the date of such notice
(but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that will,
in such Bank's or the Agent's reasonable determination, provide adequate
compensation. Each Bank and the Agent shall allocate such cost increases among
its customers in good faith and on an equitable basis.
ss.4.5. Certificate. A certificate setting forth any additional amounts
payable pursuant to ss.4.4 and a reasonable explanation of such amounts which
are due, submitted by any Bank or the Agent to the Borrowers, shall be
conclusive, absent manifest error, that such amounts are due and owing.
ss.4.6. Interest on Overdue Amounts. Overdue principal and (to the
extent permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall bear
interest compounded monthly and payable on demand at a rate per annum equal to
the Base Rate plus two (2) percentage points until such amount shall be paid in
full (after, as well as before, judgment).
<PAGE>
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ss.4.7. Interest Limitation. Notwithstanding any other term of this
Agreement or any Note or any other document referred to herein or therein, the
maximum amount of interest which may be charged to or collected from any person
liable hereunder or under any Note by any Bank shall be absolutely limited to,
and shall in no event exceed, the maximum amount of interest which could
lawfully be charged or collected under applicable law (including, to the extent
applicable, the provisions of Section 5197 of the Revised Statutes of the United
States of America, as amended, 12 U.S.C. Section 85, as amended), so that the
maximum of all amounts constituting interest under applicable law, howsoever
computed, shall never exceed as to any Person liable therefor such lawful
maximum, and any term of this Agreement, the Notes, the Letter of Credit
Applications, or any other document referred to herein or therein which could be
construed as providing for interest in excess of such lawful maximum shall be
and hereby is made expressly subject to and modified by the provisions of this
paragraph.
ss.4.8. Eurodollar Indemnity. The Borrowers agree to indemnify the
Banks and the Agent and to hold them harmless from and against any loss, cost or
expenses (including loss of anticipated profits) that the Banks and the Agent
may sustain or incur as a consequence of (a) default by the Borrowers in payment
of the principal amount of or any interest on any Eurodollar Loans as and when
due and payable, including any such loss or expense arising from interest or
fees payable by any Bank or the Agent to lenders of funds obtained by it in
order to maintain its Eurodollar Loans, or (b) default by the Borrowers in
making a borrowing or conversion after the Borrowers have given (or are deemed
to have given) notice pursuant to ss.2.5 or ss.2.6, the making of any payment of
a Eurodollar Loan or the making of any conversion of any such Eurodollar Loan to
a Base Rate Loan on a day that is not the last day of the applicable Interest
Period with respect thereto, including interest or fees payable by any Bank to
lenders of funds obtained by it in order to maintain any such Loans.
ss.4.9. Illegality; Inability to Determine Eurodollar Rate.
Notwithstanding any other provision of this Agreement, if (a) the introduction
of, any change in, or any change in the interpretation of, any law or regulation
applicable to the Agent or any Bank shall make it unlawful, or any central bank
or other governmental authority having jurisdiction thereof shall assert that it
is unlawful, for any Bank or the Agent to perform its obligations in respect of
any Eurodollar Loans, or (b) if the Majority Banks or the Agent shall reasonably
determine with respect to Eurodollar Loans that (i) by reason of circumstances
affecting any Eurodollar interbank market, adequate and reasonable methods do
not exist for ascertaining the Eurodollar Rate which would otherwise be
applicable during any Interest Period, or (ii) deposits of Dollars in the
relevant amount for the relevant Interest Period are not available to the Banks
or the Agent in any Eurodollar interbank market, or (iii) the Eurodollar Rate
does not or will not accurately reflect the cost to the Banks or the Agent of
obtaining or maintaining the applicable Eurodollar Loans during any Interest
Period, then the Banks or the Agent shall promptly give telephonic, telex or
cable notice of such
<PAGE>
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determination to the Borrowers (which notice shall be conclusive and binding
upon the Borrowers). Upon such notification by the Banks or the Agent, the
obligation of the Banks or the Agent to make Eurodollar Loans shall be suspended
until the Banks or the Agent determine that such circumstances no longer exist,
and the outstanding Eurodollar Loans shall continue to bear interest at the
applicable rate based on the Eurodollar Rate until the end of the applicable
Interest Period, and thereafter shall be deemed converted to Base Rate Loans in
equal principal amounts.
ss.4.10. Additional Costs, Etc. If any present or future applicable
law, which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law), shall impose on any
Bank any tax, levy, impost, duty, charge fees, deduction or withholdings of any
nature or requirements with respect to this Agreement, the other Loan Documents,
the Loans, such Bank's Commitment, the Letters of Credit or any class of loans
or commitments or letters of credit of which any of the Loans, the Commitment or
the Letters of Credit forms a part, and the result of any of the foregoing is:
(i) to increase the cost to such Bank of making, funding,
issuing, renewing, extending or maintaining the Loans, such Bank's Commitment,
or the Letters of Credit; or
(ii) to reduce the amount of principal, interest or other
amount payable to such Bank hereunder on account of such Bank's Commitment, the
Loans, or drawings under the Letters of Credit, or
(iii) to require such Bank to make any payment or to forego
any interest or other sum payable hereunder, the amount of which payment or
foregone interest or other sum is calculated by reference to the gross amount of
any sum receivable or deemed received by such Bank from the Borrowers hereunder,
then, and in each such case, the Borrowers will, upon demand made by such Bank
at any time and from time to time and as often as the occasion therefor may
arise, pay to such Bank such additional amounts as will be sufficient to
compensate such Bank for such additional cost, reduction, payment or foregone
interest or other sum (after such Bank shall have allocated the same fairly and
equitably among all customers of any class generally affected thereby).
ss.4.11. Concerning Joint and Several Liability of the Borrowers.
<PAGE>
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(a) Each of the Borrowers is accepting joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Banks under this Agreement, for
the mutual benefit, directly and indirectly, of each of the Borrowers and in
consideration of the undertakings of each other Borrower to accept joint and
several liability for the Obligations.
(b) Each of the Borrowers, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Borrowers with respect to
the payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this ss.4.11), it being the intention
of the parties hereto that all of the Obligations shall be the joint and several
Obligations of each of the Borrowers without preferences or distinction among
them.
(c) If and to the extent that any of the Borrowers shall fail
to make any payment with respect to any of the Obligations as and when due or to
perform any of the Obligations in accordance with the terms thereof, then in
each such event the other Borrowers will make such payment with respect to, or
perform, such Obligation.
(d) The Obligations of each of the Borrowers under the
provisions of this ss.4.11 constitute full recourse Obligations of each of the
Borrowers enforceable against each such corporation to the full extent of its
properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstance whatsoever.
(e) Except as otherwise expressly provided in this Agreement,
each of the Borrowers hereby waives notice of acceptance of its joint and
several liability, notice of any Loans made under this Agreement, notice of any
action at any time taken or omitted by the Banks under or in respect of any of
the Obligations, and, generally, to the extent permitted by applicable law, all
demands, notices and other formalities of every kind in connection with this
Agreement. Each of the Borrowers hereby assents to, and waives notice of, any
extension or postponement of the time for the payment of any of the Obligations,
the acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
the Banks at any time or times in respect of any default by any of the Borrowers
in the performance or satisfaction of any term, covenant, condition or provision
of this Agreement, any and all other indulgences whatsoever by the Banks in
respect of any of the Obligations, and the taking, addition, substitution or
release, in whole or in part, at any time or times, of any security for any of
the Obligations or the addition, substitution or release, in whole or in part,
of any of the Borrowers. Without limiting the generality of the foregoing, each
of the Borrowers assents to any other action or delay in acting or failure to
act
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on the part of the Banks with respect to the failure by any of the Borrowers to
comply with any of its respective Obligations, including, without limitation,
any failure strictly or diligently to assert any right or to pursue any remedy
or to comply fully with applicable laws or regulations thereunder, which might,
but for the provisions of this ss.4.11, afford grounds for terminating,
discharging or relieving any of the Borrowers, in whole or in part, from any of
its Obligations under this ss.4.11, it being the intention of each of the
Borrowers that, so long as any of the Obligations hereunder remain unsatisfied,
the Obligations of such Borrowers under this ss.4.11 shall not be discharged
except by performance and then only to the extent of such performance. The
Obligations of each of the Borrowers under this ss.4.11 shall not be diminished
or rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, re-construction or similar proceeding with respect to any of the
Borrowers or the Banks. The joint and several liability of the Borrowers
hereunder shall continue in full force and effect notwithstanding any
absorption, merger, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of any of the Borrowers or the
Banks.
(f) The provisions of this ss.4.11 are made for the benefit of
the Banks and their successors and assigns, and may be enforced in good faith by
them from time to time against any or all of the Borrowers as often as the
occasion therefor may arise and without requirement on the part of the Banks
first to marshal any of their claims or to exercise any of their rights against
any other Borrower or to exhaust any remedies available to them against any
other Borrower or to resort to any other source or means of obtaining payment of
any of the Obligations hereunder or to elect any other remedy. The provisions of
this ss.4.11 shall remain in effect until all of the Obligations shall have been
paid in full or otherwise fully satisfied. If at any time, any payment, or any
part thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by the Banks upon the insolvency, bankruptcy
or reorganization of any of the Borrowers, or otherwise, the provisions of this
ss.4.11 will forthwith be reinstated in effect, as though such payment had not
been made.
ss.4.12. New Borrowers. Any newly-created or acquired Subsidiaries
shall become Borrowers hereunder by signing Notes, entering into an amendment to
this Agreement with the other parties hereto providing that such Subsidiary
shall become a Borrower hereunder, and providing such other documentation as the
Banks or the Agent may reasonably request, including, without limitation,
documentation with respect to conditions specified in ss.9 hereof. In such
event, the Agent is hereby authorized by the parties to amend Schedule 1 hereto
to include such Subsidiary as a Borrower hereunder. The Parent hereby agrees to
pledge all of the stock of such Subsidiary to the Agent for the benefit of the
Banks pursuant to the terms of the Stock Pledge Agreement and cause such
Subsidiary to join the Stock Pledge Agreement.
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ss.5. REPRESENTATIONS AND WARRANTIES. The Borrowers jointly and
severally represent and warrant to the Banks that on and as of the date of this
Agreement (any disclosure on a schedule pursuant to this ss.5 shall be deemed to
apply to all relevant representations and warranties, regardless of whether such
schedule is referenced in each relevant representation):
ss.5.1. Corporate Authority.
(a) Incorporation; Good Standing. Each of the Borrowers (i) is a
corporation duly organized, validly existing and in good standing or in current
status under the laws of its respective state of incorporation, (ii) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated, and (iii) is in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
in which its property or business as presently conducted or contemplated makes
such qualification necessary except where a failure to be so qualified would not
have a material adverse effect on the business, assets or financial condition of
such Borrower.
(b) Authorization. The execution, delivery and performance of its Loan
Documents and the transactions contemplated hereby and thereby (i) are within
the corporate authority of each of the Borrowers, (ii) have been duly authorized
by all necessary corporate proceedings, (iii) do not conflict with or result in
any material breach or contravention of any provision of law, statute, rule or
regulation to which any of the Borrowers is subject or any judgment, order,
writ, injunction, license or permit applicable to any of the Borrowers so as to
materially adversely affect the assets, business or any activity of any of the
Borrowers, and (iv) do not conflict with any provision of the corporate charter
or bylaws of any Borrower or any agreement or other instrument binding upon any
Borrower.
(c) Enforceability. The execution, delivery and performance of the Loan
Documents will result in valid and legally binding obligations of the Borrowers
enforceable against each in accordance with the respective terms and provisions
hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
ss.5.2. Governmental Approvals. The execution, delivery and performance
by the Borrowers of the Loan Documents and the transactions contemplated hereby
and thereby do not require any approval or consent of, or filing with, any
governmental agency or authority other than those already obtained.
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ss.5.3. Title to Properties; Leases. The Borrowers own all of the
assets reflected in the consolidated balance sheets as at the Balance Sheet Date
or acquired since that date (except property and assets sold or otherwise
disposed of in the ordinary course of business since that date), subject to no
mortgages, capitalized leases, conditional sales agreements, title retention
agreements, liens or other encumbrances except Permitted Liens.
ss.5.4. Financial Statements; Solvency.
(a) There has been furnished to the Banks (i) audited
consolidated financial statements of the Borrowers dated the Balance Sheet Date,
certified by an independent accounting firm of national standing acceptable to
the Banks (the "Accountants") and (ii) unaudited consolidated financial
statements of the Borrowers dated the Company Balance Sheet Date. Said financial
statements have been prepared in accordance with GAAP (but, in the case of any
such financial statements which are unaudited, only to the extent that GAAP is
applicable to interim unaudited reports), fairly present in all material
respects the financial condition of the Borrowers, on a consolidated basis, as
at the close of business on the date thereof and the results of operations for
the period then ended. There are no contingent liabilities of the Borrowers as
of such date involving material amounts known to the officers of the Borrowers
which have not been disclosed in said balance sheets and the related notes
thereto, as the case may be.
(b) The Borrowers (both before and after giving effect to the
transactions contemplated by this Agreement) are solvent (i.e., they have assets
having a fair value in excess of the amount required to pay their probable
liabilities on their existing debts as they become absolute and matured) and
have, and expect to have, the ability to pay their debts from time to time
incurred in connection therewith as such debts mature.
ss.5.5. No Material Changes, Etc. Since the Company Balance Sheet Date,
there have occurred no material adverse changes in the financial condition or
business of the Borrowers as shown on or reflected in the consolidated balance
sheet of the Borrowers as at the Company Balance Sheet Date, or the consolidated
statement of income for the fiscal year then ended other than changes in the
ordinary course of business which have not had any material adverse effect
either individually or in the aggregate on the business or financial condition
of the Parent or the Borrowers. Since the Company Balance Sheet Date, no
Borrower has made any Distribution other than to the Parent.
ss.5.6. Permits, Franchises, Patents, Copyrights, Etc. Each of the
Borrowers possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, including permits required under applicable
Environmental
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Laws, and rights in respect of the foregoing, adequate for the conduct of its
business substantially as now conducted without known conflict with any rights
of others.
ss.5.7. Litigation. Except as shown on Schedules 5.7 and 5.16 hereto,
there are no actions, suits, proceedings or investigations of any kind pending
or, to the knowledge of the Borrowers, threatened against any Borrower before
any court, tribunal or administrative agency or board which, if adversely
determined, might, either in any case or in the aggregate, materially adversely
affect the properties, assets, financial condition or business of the Borrowers,
considered as a whole, or materially impair the right of the Borrowers,
considered as a whole, to carry on business substantially as now conducted, or
result in any substantial liability not adequately covered by insurance, or for
which adequate reserves are not maintained on the consolidated balance sheet or
which question the validity of any of the Loan Documents or any action taken or
to be taken pursuant hereto or thereto.
ss.5.8. No Materially Adverse Contracts, Etc. None of the Borrowers is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Borrowers'
officers has or is expected in the future to have a materially adverse effect on
the business, assets or financial condition of the Borrowers as a whole. None of
the Borrowers is a party to any contract or agreement which in the judgment of
the Borrowers' officers has or is expected to have any materially adverse effect
on the business of the Borrowers as a whole, except as otherwise reflected in
adequate reserves.
ss.5.9. Compliance With Other Instruments, Laws, Etc. None of the
Borrowers is violating any provision of its charter documents or by-laws or any
agreement or instrument by which any of them may be subject or by which any of
them or any of their properties may be bound or any decree, order, judgment, or
any statute, license, rule or regulation, in a manner which could result in the
imposition of substantial penalties or materially and adversely affect the
financial condition, properties or business of any of the Borrowers.
ss.5.10. Tax Status. The Borrowers have made or filed all federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which any of them is subject (unless and only to the extent that
any Borrower has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes); and have paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith; and have set aside on their books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Borrowers know of no basis for any
such claim.
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ss.5.11. No Event of Default. No Default or Event of Default has
occurred and is continuing as of the date of this Agreement.
ss.5.12. Holding Company and Investment Company Acts. None of the
Borrowers is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company," as such terms are defined in
the Public Utility Holding Company Act of 1935; nor is any of them a "registered
investment company," or an "affiliated company" or a "principal underwriter" of
a "registered investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
ss.5.13. Absence of Financing Statements, Etc. Except as contemplated
by ss.7.2 of this Agreement, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry, or other public office, which
purports to cover, affect or give notice of any present or possible future lien
on, or security interest in, any assets or property of any of the Borrowers or
rights thereunder.
ss.5.14. Employee Benefit Plans.
(a) In General. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions.
(b) Terminability of Welfare Plans. Under each Employee Benefit Plan
which is an employee welfare benefit plan within the meaning of ss.3(1) or
ss.3(2)(B) of ERISA, no benefits are due unless the event giving rise to the
benefit entitlement occurs prior to plan termination (except as required by
Title I, part 6 of ERISA.) Each Borrower or ERISA Affiliate, as appropriate, may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of such
Borrower or ERISA Affiliate without liability to any Person.
(c) Guaranteed Pension Plans. None of the Borrowers is a sponsor of, or
contributor to, a Guaranteed Pension Plan.
(d) Multiemployer Plans. No Borrower, nor any ERISA Affiliate has
incurred any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under ss.4201 of ERISA or as a result of a sale of assets
described in ss.4204 of ERISA. No Borrower, nor any ERISA Affiliate has been
notified that any Multiemployer Plan is in reorganization or is insolvent under
and within the meaning of ss.4241 or
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ss.4245 of ERISA or that any Multiemployer Plan intends to terminate or has been
terminated under ss.4041A of ERISA.
ss.5.15. Use of Proceeds. The proceeds of the Loans shall be used as
follows: (a) to repay the existing Indebtedness of the Borrowers; (b) for
general corporate purposes; (c) for acquisitions permitted pursuant to ss.7.4
hereof; and (d) for working capital purposes. No proceeds of the Loans shall be
used in any way that will violate Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
ss.5.16. Environmental Compliance. The Borrowers have taken all
necessary steps to investigate the past and present condition and usage of the
Real Properties and the operations conducted thereon and, based upon such
diligent investigation, have determined that, except as shown on Schedule 5.16:
(a) None of the Borrowers, nor any operator of their properties, is in
violation, or alleged violation, of any judgment, decree, order, law, permit,
license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under RCRA, CERCLA, the Superfund Amendments
and Reauthorization Act of 1986, the Federal Clean Water Act, the Federal Clean
Air Act, the Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to health, safety or the
environment (the "Environmental Laws"), which violation would have a material
adverse effect on the business, assets or financial condition of the Borrowers
on a consolidated basis.
(b) None of the Borrowers has received notice from any third party,
including, without limitation: any federal, state or local governmental
authority, (i) that any one of them has been identified by the United States
Environmental Protection Agency ("EPA") as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C.
ss.6903(5), any hazardous substances as defined by 42 U.S.C. ss.9601(14), any
pollutant or contaminant as defined by 42 U.S.C. ss.9601(33) or any toxic
substance, oil or hazardous materials or other chemicals or substances regulated
by any Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or has ordered
that any Borrower conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint, legal or
administrative proceeding arising out of any third party's incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the
release of Hazardous Substances.
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(c) (i) No portion of the Real Property has been used for the handling,
processing, storage or disposal of Hazardous Substances except in material
compliance with applicable Environmental Laws; and no underground tank or other
underground storage receptacle for Hazardous Substances is located on such
properties; (ii) in the course of any activities conducted by the Borrowers, or
operators of the Real Property, no Hazardous Substances have been generated or
are being used on such properties except in material compliance with applicable
Environmental Laws; (iii) there have been no unpermitted Releases or threatened
Releases of Hazardous Substances on, upon, into or from the Real Property, which
Releases would have a material adverse effect on the value of such properties;
(iv) to the best of the Borrowers' knowledge, there have been no Releases on,
upon, from or into any real property in the vicinity of the Real Property which,
through soil or groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of, such properties; and
(v) in addition, any Hazardous Substances that have been generated on the Real
Property have been transported offsite only by carriers having an identification
number issued by the EPA, treated or disposed of only by treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities, to the best of the Borrowers'
knowledge, have been and are operating in material compliance with such permits
and applicable Environmental Laws.
(d) None of the Real Property is or shall be subject to any applicable
environmental clean-up responsibility law or environmental restrictive transfer
law or regulation, by virtue of the transactions set forth herein and
contemplated hereby.
ss.5.17. Perfection of Security Interests. The Collateral and the
Agent's rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Borrowers are the owners of the
Collateral free from any lien, security interest, encumbrance and any other
claim or demand, other than liens in favor of the Agent for the benefit of the
Banks to secure the Obligations and Permitted Liens. The Stock Pledge Agreement
is effective to create in favor of the Agent, for the benefit of the Banks, a
legal, valid and enforceable first priority security interest in the Collateral.
The certificates for the shares of such Collateral have been delivered to the
Agent.
ss.5.18. Certain Transactions. Except as set forth on Schedule 5.18 and
except for arm's length transactions pursuant to which the Borrowers make
payments in the ordinary course of business upon terms no less favorable than
the Borrowers could obtain from third parties, none of the officers, directors,
or employees of the Borrowers is presently a party to any transaction with the
Borrowers (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Borrowers,
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any corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
ss.5.19. Subsidiaries. Schedule 1 sets forth a complete and accurate
list of the Subsidiaries of the Parent (other than Sharps Incinerator of Fort,
Inc.), including the name of each Subsidiary and its jurisdiction of
incorporation, together with the number of authorized and outstanding shares of
each Subsidiary. Each Subsidiary listed on Schedule 1 is wholly owned by the
Parent and is a Borrower hereunder, 100% of the stock of which has been pledged
to the Agent on behalf of the Banks pursuant to the Stock Pledge Agreement. The
Parent has good and marketable title to all of the shares it purports to own of
the stock of each such Subsidiary, free and clear in each case of any lien other
than Permitted Liens. All such shares have been duly issued and are fully paid
and non-assessable (except as provided in Wis. Stat. ss.180.0622).
ss.5.20. Capitalization.
(a) Capital Stock. As of the date hereof, the authorized
capital stock of the Parent consists of (i) 100,000,000 shares of Common stock
(par value $0.01 per share) of which 17,485,549 are outstanding; and (ii)
500,000 shares of preferred stock, undesignated series, of which none are
outstanding. All such shares have been duly issued and are fully paid and
non-assessable (except as provided in Wis. Stat. ss.180.0622).
(b) Options, Etc. Except as set forth on Schedule 5.20(b), no
Person has outstanding any rights (either preemptive or otherwise) or options
(except for the options for common stock issued to employees in accordance with
a bona fide option plan approved by the Board of Directors of the Parent) to
subscribe for or purchase from the Parent, or any warrants or other agreements
providing for or requiring the issuance by the Parent of, any capital stock or
any securities convertible into or exchangeable for its capital stock.
ss.5.21. True Copies of Charter and Other Documents. The Borrowers have
furnished the Agent copies, in each case true and complete as of the Closing
Date, of (a) all charter and other incorporation documents (together with any
amendments thereto) and (b) by-laws (together with any amendments thereto).
ss.5.22. Disclosure. No representation or warranty made by the
Borrowers in this Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to the Banks or the Agent by or on
behalf of or at the request of the Borrowers in connection with any of the
transactions contemplated by the Loan Documents contains any untrue statement of
a material fact or omits to state a
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material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances in which they are made.
ss.5.23. Year 2000 Compliance. The Borrowers have reviewed the areas
within their business and operations which could be adversely affected by, and
have developed or are developing a program to address on a timely basis, the
Year 2000 Compliance. Based on such review and program, the Year 2000 Compliance
will not have a material adverse effect on the Borrowers' business and
operations.
ss.6. AFFIRMATIVE COVENANTS OF THE BORROWERS. The Borrowers jointly and
severally covenant and agree that, so long as any Loan or Note is outstanding or
the Banks have any obligation to make Loans or the Agent has any obligation to
issue, extend, or renew any Letters of Credit hereunder:
ss.6.1. Punctual Payment. The Borrowers will duly and punctually pay or
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, fees and other amounts provided for in this Agreement and the other
Loan Documents, all in accordance with the terms of this Agreement and such
other Loan Documents.
ss.6.2. Maintenance of Office. The Borrowers will maintain their chief
executive offices at 10150 West National Avenue, Suite 350, West Allis,
Wisconsin 53227, or at such other place in the United States of America as the
Borrowers shall designate upon 30 days' prior written notice to the Agent.
ss.6.3. Records and Accounts. Each of the Borrowers will keep true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with GAAP and with the requirements of all regulatory
authorities, and will maintain adequate accounts and reserves for all taxes
(including income taxes), depreciation, depletion, obsolescence and amortization
of its properties, all other contingencies, and all other proper reserves.
ss.6.4. Financial Statements, Certificates and Information. The
Borrowers will deliver to the Banks:
(a) as soon as practicable, but, in any event not later than 90 days
after the end of each fiscal year of the Borrowers, the consolidated and
consolidating balance sheets of Borrowers as at the end of such year, statements
of cash flows, and the related consolidated and consolidating statements of
operations, each setting forth in comparative form the figures for the previous
fiscal year, all such consolidated and consolidating financial statements to be
in reasonable detail, prepared in accordance with GAAP and, with respect to the
consolidated financial statements, certified by the Accountants. In addition,
simultaneously therewith, the Borrowers shall use their best efforts to provide
the Banks with a written statement from such Accountants to
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the effect that the Borrowers are in compliance with the covenants set forth in
ss.8 hereof, and that, in making the examination necessary to said
certification, nothing has come to the attention of such Accountants that would
indicate that any Default or Event of Default exists, or, if such Accountants
shall have obtained knowledge of any then existing Default or Event of Default
they shall disclose in such statement any such Default or Event of Default;
provided, that such Accountants shall not be liable to the Banks for failure to
obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than 45 days
after the end of each fiscal quarter of the Borrowers, copies of the
consolidated and consolidating balance sheets and statement of operations of the
Borrowers as at the end of such quarter, subject to year end adjustments, and
the related statement of cash flows, all in reasonable detail and prepared in
accordance with GAAP, with a certification by the principal financial or
accounting officer of the Borrowers (the "CFO") that the consolidated financial
statements are prepared in accordance with GAAP and fairly present the
consolidated financial condition of the Borrowers as at the close of business on
the date thereof and the results of operations for the period then ended;
(c) simultaneously with the delivery of the financial statements
referred to in (a) and (b) above, a statement in the form of Exhibit C hereto
(the "Compliance Certificate") certified by the CFO that the Borrowers are in
compliance with the covenants contained in ss.ss.6, 7 and 8 hereof as of the end
of the applicable period setting forth in reasonable detail computations
evidencing such compliance, provided that if the Borrowers shall at the time of
issuance of such certificate or at any other time obtain knowledge of any
Default or Event of Default, the Borrowers shall include in such certificate or
otherwise deliver forthwith to the Banks a certificate specifying the nature and
period of existence thereof and what action the Borrowers propose to take with
respect thereto and a certificate of the Borrowers' Chief Operating Officer in
the form attached hereto as Exhibit D with respect to environmental matters;
(d) contemporaneously with or promptly following the delivery thereof
to the board of directors of the Parent, copies of the financial statements,
financial projections, and variance reports concerning the Parent in
substantially the same form in which such information is supplied to the board
of directors of the Parent;
(e) contemporaneously with, or promptly following, the filing or
mailing thereof, copies of all material of a financial nature filed with the
Securities and Exchange Commission or sent to the stockholders of the Parent or
any of the Borrowers; and
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(f) from time to time, such other financial data and other information
(including accountants' management letters) as the Agent or any of the Banks may
reasonably request.
The Borrowers hereby authorize the Banks to disclose any information
obtained pursuant to this Agreement to all appropriate governmental regulatory
authorities where required by law; provided, however, that the Banks shall, to
the extent practicable and allowable under law, notify the Borrowers within a
reasonable period prior to the time any such disclosure is made; and provided
further, that this authorization shall not be deemed to be a waiver of any
rights to object to the disclosure by the Banks of any such information which
any Borrower has or may have under the federal Right to Financial Privacy Act of
1978, as in effect from time to time.
ss.6.5. Corporate Existence and Conduct of Business. Except where the
failure of a Borrower to remain so qualified would not materially adversely
impair the financial condition of the Borrowers on a consolidated basis, each
Borrower will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, corporate rights and
franchises; effect and maintain its foreign qualifications, licensing,
domestication or authorization except as terminated by its Board of Directors in
the exercise of its reasonable judgment; use its best efforts to comply with all
applicable laws; and shall not become obligated under any contract or binding
arrangement which, at the time it was entered into would materially adversely
impair the financial condition of the Borrowers on a consolidated basis. Each
Borrower will continue to engage primarily in the businesses now conducted by it
and in related businesses.
ss.6.6. Maintenance of Properties. The Borrowers will cause all
material properties used or useful in the conduct of their businesses to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrowers may be necessary so that the businesses carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this section shall prevent any Borrower from
discontinuing the operation and maintenance of any of its properties if such
discontinuance is, in the judgment of such Borrower, desirable in the conduct of
its or their business and which does not in the aggregate materially adversely
affect the businesses of the Borrowers on a consolidated basis.
ss.6.7. Insurance. The Borrowers will maintain with financially sound
and reputable insurance companies, funds or underwriters insurance of the kinds,
covering the risks (other than risks arising out of or in any way connected with
personal liability of any officers and directors thereof) and in the relative
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proportionate amounts usually carried by reasonable and prudent companies
conducting businesses similar to that of the Borrowers, but in no event less
than the amounts and coverages set forth in Schedule 6.7 hereto. In addition,
the Borrowers will furnish from time to time, upon the Agent's request, a
summary of the insurance coverage of each of the Borrowers, which summary shall
be in form and substance satisfactory to the Agent and, if requested by the
Agent, will furnish to the Agent copies of the applicable policies.
ss.6.8. Taxes. The Borrowers will each duly pay and discharge, or cause
to be paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges (other than taxes, assessments and
other governmental charges imposed by foreign jurisdictions which in the
aggregate are not material to the business or assets of any Borrower on an
individual basis or of the Borrowers on a consolidated basis) imposed upon it
and its real properties, sales and activities, or any part thereof, or upon the
income or profits therefrom, as well as all claims for labor, materials, or
supplies, which if unpaid might by law become a lien or charge upon any of its
property; provided, however, that any such tax, assessment, charge, levy or
claim need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings and if such Borrower shall
have set aside on its books adequate reserves with respect thereto; and
provided, further, that such Borrower will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.
ss.6.9. Inspection of Properties, Books, and Contracts. The Borrowers
shall permit the Banks, the Agent or any of their designated representatives,
upon reasonable notice prior to a Default and at any time after and during the
continuance of a Default, to visit and inspect any of the properties of the
Borrowers, to examine the books of account of the Borrowers (including the
making of periodic accounts receivable reviews), or contracts (and to make
copies thereof and extracts therefrom), and to discuss the affairs, finances and
accounts of the Borrowers with, and to be advised as to the same by, their
officers, all at such times and intervals as the Banks may reasonably request.
ss.6.10. Compliance with Laws, Contracts, Licenses and Permits;
Maintenance of Material Licenses and Permits. Each Borrower will (i) comply with
the provisions of its charter documents and by-laws and all agreements and
instruments by which it or any of its properties may be bound; and (ii) comply
with all applicable laws and regulations (including but not limited to state and
federal securities laws, ERISA laws and Environmental Laws), decrees, orders,
judgments, licenses and permits, including, without limitation, all
environmental permits hereto ("Applicable Laws"), except where noncompliance
with such Applicable Laws would not have a material adverse effect in the
aggregate on the consolidated financial condition, properties or businesses of
the Borrowers. If at any time while the Notes,
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or any Loan or Letter of Credit is outstanding or any Bank or the Agent has any
obligation to make Loans or issue Letters of Credit hereunder, any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order
that any Borrower may fulfill any of its obligations hereunder, such Borrower
will immediately take or cause to be taken all reasonable steps within the power
of such Borrower to obtain such authorization, consent, approval, permit or
license and furnish the Banks with evidence thereof.
ss.6.11. ENVIRONMENTAL INDEMNIFICATION. THE BORROWERS COVENANT AND
AGREE THAT THEY WILL INDEMNIFY AND HOLD THE BANKS HARMLESS FROM AND AGAINST ANY
AND ALL CLAIMS, EXPENSE, DAMAGE, LOSS OR LIABILITY INCURRED BY THE BANKS
(INCLUDING ALL COSTS OF LEGAL REPRESENTATION INCURRED BY THE BANKS) RELATING TO
(A) ANY RELEASE OR THREATENED RELEASE OF HAZARDOUS SUBSTANCES ON THE REAL
PROPERTY; (B) ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO CONDITIONS
AT THE REAL PROPERTY OR THE OPERATIONS CONDUCTED THEREON; OR (C) THE
INVESTIGATION OR REMEDIATION OF OFFSITE LOCATIONS AT WHICH THE BORROWERS OR
THEIR PREDECESSORS ARE ALLEGED TO HAVE DIRECTLY OR INDIRECTLY DISPOSED OF
HAZARDOUS SUBSTANCES. IT IS EXPRESSLY ACKNOWLEDGED BY THE BORROWERS THAT THIS
COVENANT OF INDEMNIFICATION SHALL INCLUDE CLAIMS, EXPENSE, DAMAGE, LOSS OR
LIABILITY INCURRED BY THE BANKS BASED UPON THE BANKS' NEGLIGENCE, AND THIS
COVENANT SHALL SURVIVE ANY FORECLOSURE OR ANY MODIFICATION, RELEASE OR DISCHARGE
OF THE STOCK PLEDGE AGREEMENT OR THE PAYMENT OF THE LOANS AND SHALL INURE TO THE
BENEFIT OF THE BANKS, THEIR SUCCESSORS AND ASSIGNS.
ss.6.12. Further Assurances. The Borrowers will cooperate with the
Banks and execute such further instruments and documents as the Banks shall
reasonably request to carry out to the Banks' satisfaction the transactions
contemplated by this Agreement.
ss.6.13. Notice of Potential Claims or Litigation. The Borrowers shall
deliver to the Banks, within 30 days of receipt thereof, written notice of the
initiation of any action, claim, complaint, or any other notice of dispute or
potential litigation (including without limitation any alleged violation of any
Environmental Law), wherein the potential liability is in excess of $500,000,
together with a copy of each such notice received by any Borrower.
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ss.6.14. Notice of Certain Events Concerning Insurance and
Environmental Claims.
(a) The Borrowers will provide the Banks with written notice
as to any cancellation or material change in any insurance of any of the
Borrowers within ten (10) Business Days after such Borrower's receipt of any
notice (whether formal or informal) of such cancellation or change by any of its
insurers.
(b) The Borrowers will promptly notify the Banks in writing of
any of the following events:
(i) upon any Borrower obtaining knowledge of any violation
of any Environmental Law regarding the Real Property or any Borrower's
operations, which violation could have a material adverse effect on the Real
Property or on any Borrower's operations; (ii) upon any Borrower obtaining
knowledge of any potential or known Release or threat of Release of any
Hazardous Substance at, from, or into the Real Property which it reports in
writing or is reportable by it in writing to any governmental authority and
which is material in amount or nature or which could materially affect the value
of the Real Property; (iii) upon any Borrower's receipt of any notice of
violation of any Environmental Laws or of any Release or threatened Release of
Hazardous Substances, including a notice or claim of liability or potential
responsibility from any third party (including without limitation any federal,
state or local governmental officials) and including notice of any formal
inquiry, proceeding, demand, investigation or other action with regard to (A)
any Borrower's, or any Person's operation of the Real Property, (B)
contamination on, from or into the Real Property, or (C) investigation or
remediation of offsite locations at which any Borrower, or any of their
predecessors is alleged to have directly or indirectly Disposed of Hazardous
Substances; or (iv) upon any Borrower obtaining knowledge that any expense or
loss has been incurred by such governmental authority in connection with the
assessment, containment, removal or remediation of any Hazardous Substances with
respect to which any Borrower may be liable or for which a lien may be imposed
on the Real Property.
ss.6.15. Response Actions. The Borrowers covenant and agree that if any
Release or Disposal of Hazardous Substances shall occur or shall have occurred
on the Real Property, the Borrowers will cause the prompt containment and
removal of such Hazardous Substances and remediation of the Real Property as
necessary to comply with all Environmental Laws or to preserve the value of the
Real Property.
ss.6.16. Notice of Default. The Borrowers will promptly notify the
Banks in writing of the occurrence of any Default or Event of Default. If any
Person shall give any notice or take any other action in respect of a claimed
default (whether or not constituting an Event of Default) under this Agreement
or any other note, evidence of Indebtedness, indenture or other obligation
evidencing Indebtedness in excess of
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$250,000 as to which any Borrower is a party or obligor, whether as principal or
surety, the Borrowers shall forthwith give written notice thereof to the Banks,
describing the notice of action and the nature of the claimed default.
ss.6.17. Closure and Post Closure Liabilities. The Borrowers shall at
all times adequately accrue, in accordance with GAAP and as required by
applicable Environmental Laws, all closure and post closure liabilities with
respect to the operations of the Borrowers.
ss.7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. The Borrowers agree
that, so long as any Loan or any Note is outstanding or the Banks have any
obligation to make Loans or the Agent has any obligation to issue, extend or
renew any Letters of Credit hereunder:
ss.7.1. Restrictions on Indebtedness. None of the Borrowers shall
become or be a guarantor or surety of, or otherwise create, incur, assume, or be
or remain liable, contingently or otherwise, with respect to any Indebtedness,
or become or be responsible in any manner (whether by agreement to purchase any
obligations, stock, assets, goods or services, or to supply or advance any
funds, assets, goods or services or otherwise) with respect to any undertaking
or Indebtedness of any other Person, or incur any Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under this
Agreement or the Loan Documents;
(b) Other existing Indebtedness listed on Schedule 7.1(b) hereto, on
the terms and conditions in effect as of the date hereof, together with any
renewals, extensions or refinancings thereof on terms which are not materially
different than those in effect as of the date hereof; provided that no such
Indebtedness may be prepaid without prior written consent of the Banks;
(c) Current liabilities incurred in the ordinary course of business not
incurred through (i) the borrowing of money or (ii) the obtaining of credit
except for credit on an open account basis customarily extended and in fact
extended in connection with normal purchases of goods and services;
(d) Indebtedness in respect of taxes, assessments, governmental charges
or levies and claims for labor, materials and supplies to the extent that
payment therefor shall not at the time be required to be made in accordance with
the provisions of ss.6.8 and Indebtedness of the Borrowers secured by liens of
carriers, warehousemen, mechanics and materialmen permitted by ss.7.2;
(e) Indebtedness in respect of judgments or awards which have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which any Borrower shall at
the time in good
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faith be prosecuting an appeal or proceedings for review and in respect of which
a stay of execution shall have been obtained pending such appeal or review and
in respect of which the Borrowers have maintained adequate reserves;
(f) incurrence by any Borrower of guaranty, suretyship or
indemnification obligations in connection with any Borrower's performance of
services for its respective customers in the ordinary course of its business;
(g) Other Indebtedness of the Borrowers incurred after the date hereof
through the borrowing of money or the obtaining of credit, jointly not to exceed
an aggregate amount of $30,000,000 outstanding at any time;
(h) Indebtedness with respect to equipment leases owing by any Borrower
to any other Borrower which is a financing company; and
(i) Indebtedness with respect to equipment leases or equipment chattel
mortgages in an aggregate amount not to exceed $30,000,000 at any time
outstanding;
provided that no Subsidiary of the Parent may have aggregate Indebtedness (other
than Indebtedness permitted by ss.ss.7.1(a), (b) and (h) hereof and Indebtedness
of such Subsidiary to the Parent) in excess of $10,000,000 at any one time
outstanding.
ss.7.2. Restrictions on Liens. None of the Borrowers will create or
incur or suffer to be created or incurred or to exist any lien, encumbrance,
mortgage, pledge, charge, restriction or other security interest of any kind
upon any property or assets of any character, whether now owned or hereafter
acquired, or upon the income or profits therefrom; or transfer any of such
property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; or acquire, or agree
or have an option to acquire, any property or assets upon conditional sale or
other title retention or purchase money security agreement, device or
arrangement; or suffer to exist for a period of more than 30 days after the same
shall have been incurred any Indebtedness or claim or demand against it which if
unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any
priority whatsoever over its general creditors; or sell, assign, pledge or
otherwise transfer any accounts, contract rights, general intangibles or chattel
paper, with or without recourse, except as follows (the "Permitted Liens"):
(a) Liens securing Indebtedness permitted under ss.7.1(g) incurred in
connection with the lease or acquisition of property or fixed assets useful or
intended to be used in carrying on the business of the Borrowers, provided that
such Liens shall encumber only the property or assets so acquired and shall not
exceed the fair
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market value thereof and provided further that the aggregate amount of
Indebtedness secured by such liens shall not exceed $30,000,000;
(b) Liens to secure taxes, assessments and other government charges or
claims for labor, material or supplies in respect of obligations not overdue;
(c) Deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or other
social security obligations;
(d) Liens in respect of judgments or awards, the Indebtedness with
respect to which is permitted by ss.7.1(e);
(e) Liens of carriers, warehousemen, mechanics and materialmen, and
other like liens, in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue;
(f) Encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's liens under leases
to which any Borrower is a party, and other minor liens or encumbrances none of
which in the opinion of the respective Borrower interferes materially with the
use of the property affected in the ordinary conduct of the business of such
Borrower, which defects do not individually or in the aggregate have a material
adverse effect on the business of such Borrower individually or of the Borrowers
on a consolidated basis;
(g) Liens existing as of the date hereof and listed on Schedule 7.2(g)
on the terms and conditions in effect as of the date hereof;
(h) Liens granted pursuant to the Stock Pledge Agreement;
(i) Liens securing Indebtedness permitted by ss.7.1(i) hereof, provided
that such Liens shall encumber only the equipment being leased or acquired and
shall not exceed the fair market value thereof; and
(j) A first mortgage granted to Grant E. Milliron, an individual
residing in the State of Ohio ("Milliron"), securing the Parent's obligation to
pay royalties pursuant to Article 25 of the draft Purchase Agreement and Plan of
Reorganization dated as of May 14, 1997 among Milliron Waste Management, Inc.,
Gem Leasing, Inc., North Central Management, Inc., Milliron Paper Recycling,
Inc., and Richland County Transfer & Recycling, Inc., each an Ohio corporation,
Milliron, the Parent, and Superior of Ohio, an Ohio corporation and a Subsidiary
of the Parent.
ss.7.3. Restrictions on Investments. None of the Borrowers shall make
or permit to exist or to remain outstanding any Investment in any Subsidiary
unless both
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before and after giving effect thereto there does not exist a Default or Event
of Default and no Default or Event of Default would be created by the making of
such Investment. None of the Borrowers shall make or permit to exist or to
remain outstanding any other Investment other than:
(a) Investments in obligations of the United States of America and
agencies thereof and obligations guaranteed by the United States of America that
are due and payable within one year from the date of acquisition;
(b) certificates of deposit, time deposits or repurchase agreements
which are fully insured or are issued by commercial banks organized under the
laws of the United States of America or any state thereof and having a combined
capital, surplus, and undivided profits of not less than $100,000,000;
(c) commercial paper maturing not more than nine months from the date
of issue, provided that, at the time of purchase, such commercial paper is not
rated lower than "P-1" by Moody's Investors Service, Inc., or "A-1" by Standard
& Poor's Corporation;
(d) Investments associated with insurance policies required or allowed
by state law to be posted as financial assurance for landfill closure and
post-closure liabilities;
(e) Investments by any Borrower in any Subsidiary of such Borrower
which is also a Borrower; and
(f) Existing Investments by the Borrowers in Land & Gas Reclamation,
Inc.
ss.7.4. Mergers, Consolidations, Sales. None of the Borrowers shall be
a party to any merger, consolidation or exchange of stock, or purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other Person except as otherwise
provided in this ss.7.4, or sell, transfer, convey or lease any assets or group
of assets (except sales of equipment in the ordinary course of business) or sell
or assign, with or without recourse, any receivables. The Borrowers may purchase
or otherwise acquire all or substantially all of the assets or stock of any
class of, or joint venture interest in, any Person provided that (a) the
Borrowers are in current compliance with and, giving effect to the proposed
acquisition (including any borrowings made or to be made in connection
therewith), will continue to be in compliance with all of the covenants in ss.8
hereof on a pro forma historical combined basis as if the transaction occurred
on the first day of the period of measurement, and in the event that the value
given in connection with any such acquisition exceeds $20,000,000, including
deferred payments and the aggregate amount of all liabilities assumed, the Agent
shall have been provided with
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(i) a Compliance Certificate demonstrating such compliance, (ii) such other
information (in form and substance satisfactory to the Agent) as the Agent may
reasonably request, including, without limitation, historical financial
statements, projections and due diligence summaries, (b) at the time of such
acquisition, no Default or Event of Default has occurred and is continuing, and
such acquisition will not otherwise create a Default or an Event of Default
hereunder; (c) the business to be acquired is predominantly in the same lines of
business as the Borrowers; (d) the business to be acquired operates
predominantly in the continental United States; (e) all of the assets to be
acquired shall be owned by an existing or newly created Subsidiary of the Parent
which is a Borrower, 100% of the stock of which has been or will be pledged to
the Agent on behalf of the Banks or, in the case of a stock acquisition, the
acquired company shall become or shall be merged with a wholly-owned Subsidiary
of the Parent that is a Borrower; (f) a copy of the purchase agreement, together
with audited (if available, or otherwise unaudited) financial statements for any
Subsidiary to be acquired or created for the preceding two (2) fiscal years
shall have been furnished to the Banks; (g) each acquisition of a landfill or a
hazardous waste treatment, storage or disposal facility is preceded by the
Parent's standard due diligence practices as set forth in Exhibit E hereto,
including a review by a Consulting Engineer (which Consulting Engineer shall not
be an affiliate of such Borrower if the cash consideration to be paid by such
Borrower in connection with any such acquisition, including deferred payments
and the aggregate amount of all liabilities assumed, exceeds $5,000,000), and a
copy of the Consulting Engineer's report shall have been furnished to the Banks,
if requested; (h) the cash consideration to be paid by such Borrower in
connection with any such acquisition (including deferred payments and the
aggregate amount of all liabilities assumed) shall not exceed 10% of
Consolidated Tangible Assets (as determined prior to such acquisition) without
the consent of the Agent and the Majority Banks; (i) the board of directors and
(if required by applicable law) the shareholders, or the equivalent thereof, of
the business to be acquired has approved such acquisition; and (j) if such
acquisition is made by a merger, such Borrower shall be the surviving entity.
Any Subsidiary of the Parent may merge with any other Subsidiary of the Parent,
provided that the surviving corporation is a Borrower.
ss.7.5. Sale and Leaseback. None of the Borrowers shall enter into any
arrangement, directly or indirectly, whereby any Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property or
lease other property which such Borrower intends to use for substantially the
same purpose as the property being sold or transferred, without the prior
written consent of the Banks.
ss.7.6. Restricted Distributions and Redemptions. None of the Borrowers
will declare or pay (i) any cash Distributions (other than from insurance
proceeds), or (ii) any other Distributions which would result in a reduction of
the Borrowers' Consolidated Tangible Net Worth. In addition, the Borrowers shall
not redeem, convert, retire or otherwise acquire shares of any class of capital
stock of the
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Borrowers in an aggregate amount in excess of $100,000 in any year, other than
Escrowed Shares cancelled in connection with indemnification claims against the
former shareholders of the Subsidiaries of the Parent. The Borrowers shall not
effect or permit any change in or amendment to any document or instrument
pertaining to the terms of the Borrowers' capital stock.
ss.7.7. Employee Benefit Plans. None of the Borrowers nor any ERISA
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of ss.406
of ERISA or ss.4975 of the Code which could result in a material liability for
any Borrower; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated funding
deficiency," as such term is defined in ss.302 of ERISA, whether or not such
deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could result
in the imposition of a lien or encumbrance on the assets of any Borrower
pursuant to ss.302(f) or ss.4068 of ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (within the meaning of ss.4001 of ERISA) of all Guaranteed
Pension Plans exceeding the value of the aggregate assets of such Plans,
disregarding for this purpose the benefit liabilities and assets of any such
Plan with assets in excess of benefit liabilities.
The Borrowers will (i) promptly upon filing the same with the
Department of Labor or Internal Revenue Service, furnish to the Banks a copy of
the most recent actuarial statement required to be submitted under ss.103(d) of
ERISA and Annual Report, Form 5500, with all required attachments, in respect of
each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish
to the Banks any notice, report or demand sent or received in respect of a
Guaranteed Pension Plan under ss.ss.302, 4041, 4042, 4043, 4063, 4065, 4066 and
4068 of ERISA, or in respect of a Multiemployer Plan, under ss.ss.4041A, 4202,
4219, or 4245 of ERISA.
ss.7.8. Negative Pledges. No Borrower will pledge any of its assets to
any Person other than to the Agent for the benefit of the Banks, nor will any
Borrower grant any negative pledges on their assets to any Person other than
hereunder.
ss.8. FINANCIAL COVENANTS OF THE BORROWERS. The Borrowers agree that,
so long as any Loan or any Note is outstanding or the Banks have any obligation
to make Loans or the Agent has any obligation to issue, extend or renew any
Letters of Credit hereunder:
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ss.8.1. Leverage Ratio. As of the end of any fiscal quarter of the
Borrowers commencing with the fiscal quarter ending September 30, 1998, the
ratio of (a) Funded Debt as at the end of such quarter to (b) EBITDA for the
period of four (4) consecutive fiscal quarters ending on such date (the
"Leverage Ratio") shall not exceed 3.25:1.
ss.8.2. Interest Coverage Ratio. As of the end of any fiscal quarter of
the Borrowers commencing with the fiscal quarter ending September 30, 1998, the
ratio of (i) EBITA for the period of four (4) consecutive fiscal quarters ending
on such date to (ii) Consolidated Total Interest Expense for such period shall
not be less than 3.00:1.
ss.8.3. Funded Debt to Capitalization Ratio. The Borrowers shall not at
any time permit the ratio of (a) Funded Debt to (b) the sum of Funded Debt plus
Consolidated Net Worth to exceed 55%.
ss.8.4. Profitable Operations. The Borrowers will not permit
Consolidated Net Income to be less than $0 (i) for any two consecutive fiscal
quarters or (ii) for any fiscal year.
ss.8.5. Capital Expenditures. The Borrowers, in the aggregate, will not
make Capital Expenditures in any fiscal year that exceed 1.75 times the
depreciation expense taken in such fiscal year; provided, however, that, if
during any fiscal year the amount of Capital Expenditures permitted for that
fiscal year is not so utilized, such unutilized amount may be utilized in the
next succeeding fiscal year but not in any subsequent fiscal year.
ss.9. CLOSING CONDITIONS.
The obligations of the Banks to make the Loans and the Agent to issue
Letters of Credit on the Closing Date and otherwise be bound by the terms of
this Agreement shall be subject to the satisfaction of each of the following
conditions precedent:
ss.9.1. Corporate Action. All corporate action necessary for the valid
execution, delivery and performance by each Borrower of the Loan Documents shall
have been duly and effectively taken, and evidence thereof satisfactory to the
Agent shall have been provided to the Agent.
ss.9.2. Loan Documents, Etc. Each of the Loan Documents shall have been
duly and properly authorized, executed and delivered by the respective parties
thereto and shall be in full force and effect in a form satisfactory to the
Banks.
ss.9.3. Certified Copies of Charter Documents. The Agent shall have
received from the Borrowers a copy, certified by a duly authorized officer of
such Person to be true and complete on the Closing Date, of each of (a) its
charter or other
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incorporation documents (including certificates of merger and name changes) as
in effect on such date of certification, and (b) its by-laws as in effect on
such date.
ss.9.4. Incumbency Certificate. The Agent shall have received an
incumbency certificate, dated as of the Closing Date, signed by duly authorized
officers giving the name and bearing a specimen signature of each individual who
shall be authorized: (a) to sign the Loan Documents on behalf of the Borrowers;
(b) to make Loan and Letter of Credit Requests; and (c) to give notices and to
take other action on the Borrowers' behalf under the Loan Documents.
ss.9.5. Validity of Liens. The Stock Pledge Agreement shall be
effective to create in favor of the Agent a legal, valid and enforceable first
security interest in and lien upon the Collateral, subject only to Permitted
Liens. All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Agent to protect and preserve such
security interests shall have been duly effected. The Agent shall have received
evidence thereof in form and substance satisfactory to the Agent.
ss.9.6. UCC Search Results. The Agent shall have received the results
of UCC searches with respect to the Borrowers indicating no liens other than
Permitted Liens and otherwise in form and substance satisfactory to the Agent.
ss.9.7. Certificates of Insurance. The Agent shall have received (i) a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, or within 15 days prior thereto, identifying insurers, types of
insurance, insurance limits, and policy terms, and otherwise describing the
insurance coverage and (ii) copies of all policies evidencing such insurance (or
certificates therefor signed by the insurer or an agent authorized to bind the
insurer).
ss.9.8. Opinion of Counsel. The Banks shall have received favorable
legal opinions from counsel to the Borrowers, addressed to the Banks, dated as
of the Closing Date, in form and substance satisfactory to the Banks.
ss.9.9. Environmental Permit Certificate. The Banks shall have received
an environmental permit certificate from the Parent satisfactory to the Agent
concerning principal operating permits at the Parent's and its Subsidiaries'
principal operating facilities.
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ss.10. CONDITIONS OF ALL LOANS.
The obligations of the Banks to make any Loan (including without
limitation the obligation of the Agent to issue any Letter of Credit) on and
subsequent to the Closing Date is subject to the following conditions precedent:
ss.10.1. Representations True; No Event of Default. Each of the
representations and warranties of the Borrowers contained in this Agreement or
in any document or instrument delivered pursuant to or in connection with this
Agreement shall be true as of the date as of which they were made and shall also
be true at and as of the time of any Drawdown Date with the same effect as if
made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Agreement and changes occurring
in the ordinary course of business which singly or in the aggregate are not
materially adverse, or to the extent that such representations and warranties
relate expressly to an earlier date) and no Default or Event of Default shall
have occurred and be continuing.
ss.10.2. Performance; No Event of Default. The Borrowers shall have
performed and complied with all terms and conditions herein required to be
performed or complied with by them prior to or at the time of any Loan, and at
the time of any Loan, there shall exist no Event of Default or condition which
would result in an Event of Default upon consummation of such Loan (including
without limitation any amounts to be drawn under a Letter of Credit). Each
request by the Borrowers for a Loan (including without limitation each request
for issuance of a Letter of Credit) subsequent to the first Loan shall
constitute certification by the Borrowers that the conditions specified in
ss.ss.10.1 and 10.2 will be duly satisfied on the date of such Loan or Letter of
Credit issuance.
ss.10.3. No Legal Impediment. No change shall have occurred in any law
or regulations thereunder or interpretations thereof which in the reasonable
opinion of the Banks would make it illegal for the Banks to make Loans
hereunder.
ss.10.4. Governmental Regulation. The Banks shall have received such
statements in substance and form reasonably satisfactory to the Banks as they
shall require for the purpose of compliance with any applicable regulations of
the Comptroller of the Currency or the Board of Governors of the Federal Reserve
System.
ss.10.5. Proceedings and Documents. All proceedings in connection with
the transactions contemplated by this Agreement and all documents incident
thereto shall have been delivered to the Banks as of the date hereof in form and
substance satisfactory to the Banks, including without limitation a Letter of
Credit and Loan Request in the form attached hereto as Exhibit B, and the Banks
shall have received
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all information and such counterpart originals or certified or other copies of
such documents as the Banks may reasonably request.
ss.11. COLLATERAL SECURITY. The Obligations shall be secured by a
perfected security interest (having, with respect to each category of
Collateral, the respective rights and priorities set forth herein and in the
Stock Pledge Agreement) in all of the Collateral, whether now owned or hereafter
acquired, pursuant to the terms of the Stock Pledge Agreement.
ss.12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT.
ss.12.1. Events of Default and Acceleration. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice and/or lapse of time, "Defaults")
shall occur:
(a) if the Borrowers shall fail to pay any principal of the Loans when
the same shall become due and payable, whether at the Maturity Date or any
accelerated date of maturity or at any other date fixed for payment;
(b) if the Borrowers shall fail to pay any interest or fees or other
amounts owing hereunder within five (5) Business Days after the same shall
become due and payable whether at the Maturity Date or any accelerated date of
maturity or at any other date fixed for payment;
(c) if the Borrowers shall fail to comply with the covenants contained
inss.ss.6, 7 or 8 hereof;
(d) if the Borrowers shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other than
those specified in subsections (a), (b), and (c) above) within 30 days after
written notice of such failure has been given to the Borrowers by the Banks;
(e) if any representation or warranty contained in this Agreement or in
any document or instrument delivered pursuant to or in connection with this
Agreement shall prove to have been false in any material respect upon the date
when made or repeated;
(f) if any Borrower shall fail to pay at maturity, or within any
applicable period of grace, any and all obligations for borrowed money (other
than the Obligations) or any guaranty with respect thereto in an aggregate
amount greater than $250,000, or fail to observe or perform any material term,
covenant or agreement contained in any agreement by which it is bound,
evidencing or securing borrowed money in an aggregate amount greater than
$250,000 for such period of time as would, or would have permitted (assuming the
giving of appropriate notice if
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required) the holder or holders thereof or of any obligations issued thereunder
to accelerate the maturity thereof; or
(g) if any Borrower makes an assignment for the benefit of creditors,
or admits in writing its inability to pay or generally fails to pay its debts as
they mature or become due, or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of any Borrower or of any
substantial part of the assets of any Borrower or commences any case or other
proceeding relating to any Borrower under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, or takes any action
to authorize or in furtherance of any of the foregoing, or if any such petition
or application is filed or any such case or other proceeding is commenced
against any Borrower or any Borrower indicates its approval thereof, consent
thereto or acquiescence therein;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating any Borrower bankrupt or
insolvent, or approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of any Borrower in an
involuntary case under federal bankruptcy laws as now or hereafter constituted,
and such decree or order remains in effect for more than sixty (60) days,
whether or not consecutive;
(i) if there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any final
judgment against any Borrower which, with other outstanding final judgments
against any Borrower, exceeds in the aggregate $500,000 after taking into
account any undisputed insurance coverage;
(j) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Banks shall have determined in their
reasonable discretion that such event reasonably could be expected to result in
liability of any Borrower to the PBGC or the Plan in an aggregate amount
exceeding $500,000 and such event in the circumstances occurring reasonably
could constitute grounds for the termination of such Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan; or a trustee shall have been appointed by the United
States District Court to administer such Plan; or the PBGC shall have instituted
proceedings to terminate such Plan;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or with
the express prior written agreement, consent or approval of the Banks, or any
action at law, suit or in equity or other legal proceeding to cancel, revoke or
rescind any of the Loan Documents shall be commenced by or on behalf of the
Borrowers or any of their respective stockholders, or any court or any other
governmental or regulatory
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authority or agency of competent jurisdiction shall make a determination that,
or issue a judgment, order, decree or ruling to the effect that, any one or more
of the Loan Documents is illegal, invalid or unenforceable in accordance with
the terms thereof;
(l) any person or group of persons (within the meaning of Section 13 or
14 of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of 20% or more of the
outstanding shares of common stock of the Parent; or, during any period of
twelve consecutive calendar months, individuals who were directors of the Parent
on the first day of such period shall cease to constitute a majority of the
board of directors of the Parent; or
(m) If either George Farr or William Dietrich shall cease to hold
offices of Chief Financial Officer (in the case of George Farr) or President and
Chief Executive Officer (in the case of William Dietrich) or are disabled,
incapacitated, or otherwise unable or unwilling to perform the duties of such
offices for a period in excess of one hundred eighty (180) consecutive days,
unless a replacement reasonably satisfactory to the Agent is found;
then, and in any such event, so long as the same may be continuing, upon the
request of the Majority Banks, the Agent shall, by notice in writing to the
Borrowers, declare all amounts owing with respect to this Agreement, the Notes
and the other Loan Documents and all Reimbursement Obligations to be, and they
shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrowers; provided that in the event of any
Event of Default specified in ss.12(g) or 12(h), all such amounts shall become
immediately due and payable automatically and without any requirement of notice
from the Agent or any Bank. Upon demand by the Majority Banks after the
occurrence of any Event of Default, the Borrowers shall immediately provide to
the Agent cash in an amount equal to the aggregate Maximum Drawing Amount of all
Letters of Credit outstanding, to be held by the Agent as collateral security
for the Obligations.
ss.12.2. Termination of Commitments. If any Event of Default shall
occur, any unused portion of the Total Commitment hereunder shall forthwith
terminate and the Banks shall be relieved of all obligations to make Loans to or
issue Letters of Credit for the account of any of the Borrowers; or if on any
Drawdown Date the conditions precedent to the making of the Loans to be made on
such Drawdown Date or the issuance of any Letters of Credit to be issued on such
date are not satisfied (except as a consequence of a default on the part of the
Banks), the Majority Banks may by notice to the Borrowers, terminate the unused
portion of the Total Commitment hereunder, and upon such Notice being given,
such unused portion of the Total Commitment hereunder shall terminate
immediately and the Banks shall be
<PAGE>
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relieved of all further obligations to make Loans to or issue Letters of Credit
for the account of the Borrowers hereunder. No termination of any portion of the
Total Commitment hereunder shall relieve the Borrowers of any of their existing
Obligations to the Banks hereunder or elsewhere.
ss.12.3. Remedies. Subject to ss.14.8, in case any one or more of the
Events of Default shall have occurred and be continuing, and whether or not the
Majority Banks shall have accelerated the maturity of the Loans pursuant to
ss.12.1, each Bank, if owed any amount with respect to the Loans or the
Reimbursement Obligations, may proceed to protect and enforce its rights by suit
in equity, action at law or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Agreement
and the other Loan Documents or any instrument pursuant to which the Obligations
or the Guaranteed Obligations to such Bank are evidenced, including, without
limitation, as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any legal or
equitable right of such Bank. No remedy herein conferred upon any Bank or the
Agent or the holder of any Note or purchaser of any Letter of Credit
Participation is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.
ss.13. SETOFF. Regardless of the adequacy of any collateral, during the
continuance of an Event of Default, any deposits or other sums credited by or
due from any Bank to the Borrowers and any securities or other property of the
Borrowers in the possession of such Bank may be applied to or set off against
the payment of the Obligations and any and all other liabilities, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrowers to the Banks. The Banks agree among
themselves that, if a Bank shall obtain payment on any loan outstanding under
this Agreement through the exercise of a right of offset, banker's lien or
counterclaim, or from any other source (other than by way of a pro rata payment
under this Agreement or a required payment under a Note), it shall promptly make
such adjustments with the other Banks as shall be equitable to the end that all
the Banks shall share the benefits of such payments pro rata in accordance with
the aggregate unpaid amount of the Notes held by each Bank immediately prior to
the payment obtained by such Bank as aforesaid. The Banks further agree among
themselves that if any payment to a Bank obtained by such Bank through the
exercise of a right of offset, banker's lien or counterclaim, or from any other
source (other than by way of a pro rata payment) as aforesaid shall be rescinded
or must otherwise be restored, the Banks who shall have shared the benefit of
such payment shall return their share of that benefit to the Bank whose payment
shall have been rescinded or otherwise restored.
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ss.14. THE AGENT.
ss.14.1. Appointment of Agent, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents, provided, however, the Agent is hereby
authorized to serve only as an administrative and collateral agent for the Banks
and to exercise such powers as are reasonably incidental thereto and as are set
forth in this Agreement and the other Loan Documents. The Agent hereby
acknowledges that it does not have the authority to negotiate any agreement
which would bind the Banks or agree to any amendment, waiver or modification of
any of the Loan Documents or bind the Banks except as set forth in this
Agreement or the Loan Documents. Except as provided in this ss.14 and in the
other Loan Documents, the Agent shall take action or refrain from acting only
upon instructions of the Majority Banks and no action taken or failure to act
without the consent of the Majority Banks shall be binding on any Bank which has
not consented. Each Bank irrevocably authorizes the Agent to execute the Stock
Pledge Agreement and all other instruments relating thereto and to take such
action on behalf of each of the Banks and to exercise all such powers as are
expressly delegated to the Agent under the Loan Documents and all related
documents, together with such other powers as are reasonably incidental thereto.
It is agreed that the duties, rights, privileges and immunities of the Agent, in
its capacity as issuer of Letters of Credit hereunder, shall be identical to its
duties, rights, privileges and immunities as a Bank as provided in this ss.14.
The Agent shall not have any duties or responsibilities or any fiduciary
relationship with any Bank except those expressly set forth in this Agreement.
Neither the Agent nor any of its affiliates shall be responsible to the Banks
for any recitals, statements, representations or warranties made by the
Borrowers or any other Person whether contained herein or otherwise or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, the other Loan Documents or any other document referred to or
provided for herein or therein or for any failure by the Borrowers or any other
Person to perform its obligations hereunder or thereunder or in respect of the
Notes. The Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Agent shall exercise
the same care in administering the Loan as its exercises with respect to similar
transactions entered into solely for its own account; however, neither the Agent
nor any of its directors, officers, employees or agents shall be responsible for
any action taken or omitted to be taken in good faith by it or them hereunder or
in connection herewith, except for its or their own gross negligence or willful
misconduct. The Agent in its separate capacity as a Bank shall have the same
rights and powers hereunder as any other Bank.
ss.14.2. Actions By Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement as it reasonably
deems appropriate unless it shall first have received such advice or concurrence
of the Majority Banks
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and shall be indemnified to its reasonable satisfaction by the Majority Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any of the Loan Documents in accordance with a request of the Majority Banks,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon the Banks and all future holders of the Notes or any Letter of
Credit Participation.
ss.14.3. INDEMNIFICATION. WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWERS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, THE BANKS AGREE TO
INDEMNIFY THE AGENT, RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE COMMITMENT
PERCENTAGES, FOR ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY
KIND OR NATURE WHATSOEVER (OTHER THAN LOSSES WITH RESPECT TO THE AGENT'S PRO
RATA SHARE OF THE OBLIGATIONS) WHICH MAY AT ANY TIME BE IMPOSED ON, INCURRED BY
OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY DOCUMENTS CONTEMPLATED BY OR
REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
OR THE ENFORCEMENT OF ANY OF THE TERMS HEREOF OR THEREOF OR OF ANY SUCH OTHER
DOCUMENTS; PROVIDED, THAT NO BANK SHALL BE LIABLE FOR ANY OF THE FOREGOING TO
THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
AGENT (OR ANY AGENT THEREOF), IT BEING THE INTENT OF THE PARTIES HERETO THAT ALL
SUCH INDEMNIFIED PARTIES SHALL BE INDEMNIFIED FOR THEIR ORDINARY SOLE OR
CONTRIBUTORY NEGLIGENCE.
ss.14.4. Reimbursement. Without limiting the provisions of ss.14.3, the
Banks and the Agent hereby agree that the Agent shall not be obliged to make
available to any Person any sum which the Agent is expecting to receive for the
account of that Person until the Agent has determined that it has received that
sum. The Agent may, however, disburse funds prior to determining that the sums
which the Agent expects to receive have been finally and unconditionally paid to
the Agent, if the Agent wishes to do so. If and to the extent that the Agent
does disburse funds and it later becomes apparent that the Agent did not then
receive a payment in an amount equal to the sum paid out, then any Person to
whom the Agent made the funds available shall, on demand from the Agent, refund
to the Agent the sum paid to that Person. If, in the opinion of the Agent, the
distribution of any amount received by it in such capacity hereunder or under
the Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been
<PAGE>
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adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the Agent
is to be repaid, each Person to whom any such distribution shall have been made
shall either repay to the Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
ss.14.5. Documents. The Agent will forward to each Bank, promptly after
the Agent's receipt thereof, a copy of each notice or other document furnished
to the Agent for such Bank hereunder; provided, however, that, notwithstanding
the foregoing, the Agent may furnish to the Banks a monthly summary with respect
to Letters of Credit issued hereunder in lieu of copies of the related Letter of
Credit Applications.
ss.14.6. Non-Reliance on Agent and Other Banks. Each Bank represents
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of the financial condition and affairs of the Borrowers and
decision to enter into this Agreement and the other Loan Documents and agrees
that it will, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own appraisals and decisions in taking or not
taking action under this Agreement or any other Loan Document. The Agent shall
not be required to keep informed as to the performance or observance by the
Borrowers of this Agreement, the other Loan Documents or any other document
referred to or provided for herein or therein or by any other Person of any
other agreement or to make inquiry of, or to inspect the properties or books of,
any Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning any person which may come into the
possession of the Agent or any of its affiliates. Each Bank shall have access to
all documents relating to the Agent's performance of its duties hereunder at
such Bank's request. Unless any Bank shall promptly object to any action taken
by the Agent hereunder (other than actions to which the provisions of ss.14.8
are applicable and other than actions which constitute gross negligence or
willful misconduct by the Agent), such Bank shall conclusively be presumed to
have approved the same.
ss.14.7. Resignation of Agent. The Agent may resign at any time by
giving 60 days' prior written notice thereof to the Banks and the Borrowers.
Upon any such resignation, the Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Banks and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a financial institution having a
combined capital and surplus in
<PAGE>
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excess of $150,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation, the provisions of
this Agreement shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent. Any new
Agent appointed pursuant to this ss.14.7 shall immediately issue new Letters of
Credit in place of Letters of Credit previously issued by the Agent.
ss.14.8. Action by the Banks, Consents, Amendments, Waivers, Etc.
Except as otherwise expressly provided in this ss.14.8, any action to be taken
(including the giving of notice) may be taken or any consent or approval
required or permitted by the Agreement or any other Loan Document to be given by
the Banks may be given, and any term of this Agreement, any other Loan Document
or any other instrument, document or agreement related to this Agreement or the
other Loan Documents or mentioned therein may be amended and the performance or
observance by the Borrowers or any other person of any of the terms thereof and
any Default or Event of Default (as defined in any of the above-referenced
documents or instruments) may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Majority Banks; provided, however, that no such consent or
amendment which affects the rights, duties or liabilities of the Agent (in its
capacity as Agent) shall be effective without the written consent of the Agent.
Notwithstanding the foregoing, no amendment, waiver or consent shall do any of
the following unless in writing and signed by ALL of the Banks: (a) increase the
principal amount of the Total Commitment (or subject the Banks to any additional
obligations) other than in accordance with ss.2.2 hereof, (b) reduce the
principal of or interest on the Notes (including, without limitation, interest
on overdue amounts) or any fees payable hereunder, (c) postpone any date fixed
for any payment in respect of principal or interest (including, without
limitation, interest on overdue amounts) on the Notes, or any fees payable
hereunder; (d) change the definition of "Majority Banks" or number of Banks
which shall be required for the Banks or any of them to take any action under
the Loan Documents; (e) amend this ss.14.8; (f) change the Commitment Percentage
of any Bank, except as permitted under ss.18 hereof; or (g) except as otherwise
permitted hereunder, release any Collateral with an aggregate value in excess of
$1,000,000.
ss.15. EXPENSES. Whether or not the transactions contemplated herein
shall be consummated, the Borrowers hereby promise to reimburse (i) the Agent
for all reasonable out-of-pocket fees and disbursements (including all
reasonable attorneys' fees and Consulting Engineers' fees), incurred or expended
in connection with the preparation, filing or recording, or interpretation of
this Agreement, the other Loan Documents, or any amendment, modification,
approval, consent or waiver hereof or thereof, and (ii) any Bank or the Agent
for all reasonable out-of-pocket expenses
<PAGE>
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(including without limitation reasonable attorneys' fees and costs, which
attorneys may be employees of any Bank or the Agent, and reasonable consulting,
accounting, appraisal, investment banking and similar professional fees and
charges) incurred by any Bank or the Agent in connection with (A) the
enforcement of or preservation of rights under any of the Loan Documents against
the Borrowers or the administration thereof after the occurrence of a Default or
Event of Default and (B) any litigation, proceeding or dispute whether arising
hereunder or under any of the other Loan Documents, in any way related to any
Bank's or the Agent's relationship with the Borrowers hereunder. The Borrowers
will pay any taxes (including any interest and penalties in respect thereof)
other than the Banks' federal and state income taxes, payable on or with respect
to the transactions contemplated by this Agreement (the Borrowers hereby
agreeing to indemnify the Banks with respect thereto).
ss.16. INDEMNIFICATION. THE BORROWERS AGREE TO INDEMNIFY AND HOLD
HARMLESS THE AGENT AND THE BANKS, AS WELL AS THEIR SHAREHOLDERS, DIRECTORS,
AGENTS, OFFICERS, SUBSIDIARIES AND AFFILIATES, FROM AND AGAINST ALL DAMAGES,
LOSSES, SETTLEMENT PAYMENTS, OBLIGATIONS, LIABILITIES, CLAIMS, SUITS, PENALTIES,
ASSESSMENTS, CITATIONS, DIRECTIVES, DEMANDS, JUDGMENTS, ACTIONS OR CAUSES OF
ACTION, WHETHER STATUTORILY CREATED OR UNDER THE COMMON LAW, AND REASONABLE
COSTS AND EXPENSES INCURRED, SUFFERED, SUSTAINED OR REQUIRED TO BE PAID BY AN
INDEMNIFIED PARTY BY REASON OF OR RESULTING FROM THE TRANSACTIONS CONTEMPLATED
HEREBY, EXCEPT ANY OF THE FOREGOING WHICH RESULT FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY. IN ANY INVESTIGATION, PROCEEDING OR
LITIGATION, OR THE PREPARATION THEREFOR, EACH BANK AND THE AGENT SHALL BE
ENTITLED TO SELECT ITS OWN COUNSEL, AND, IN ADDITION TO THE FOREGOING INDEMNITY,
THE BORROWERS AGREE TO PAY PROMPTLY THE REASONABLE FEES AND EXPENSES OF SUCH
COUNSEL. IN THE EVENT OF THE COMMENCEMENT OF ANY SUCH PROCEEDING OR LITIGATION,
THE BORROWERS SHALL BE ENTITLED TO PARTICIPATE IN SUCH PROCEEDING OR LITIGATION
WITH COUNSEL OF THEIR CHOICE AT THEIR EXPENSE, PROVIDED THAT SUCH COUNSEL SHALL
BE REASONABLY SATISFACTORY TO THE BANKS AND THE AGENT. THE COVENANTS OF THIS
ss.16 SHALL SURVIVE PAYMENT OR SATISFACTION OF PAYMENT OF AMOUNTS OWING WITH
RESPECT TO THE NOTES OR ANY OTHER LOAN DOCUMENT, IT BEING THE INTENT OF THE
PARTIES HERETO THAT ALL SUCH INDEMNIFIED PARTIES SHALL BE INDEMNIFIED FOR THEIR
ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE.
<PAGE>
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ss.17. SURVIVAL OF COVENANTS, ETC. Unless otherwise stated herein, all
covenants, agreements, representations and warranties made herein, in the other
Loan Documents or in any documents or other papers delivered by or on behalf of
the Borrowers pursuant hereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Banks of the Loans and
the issuance, extension or renewal of any Letters of Credit, as herein
contemplated, and shall continue in full force and effect so long as any amount
due under this Agreement, any Letter of Credit or the Notes remains outstanding
and unpaid or any Bank has any obligation to make any Loans or issue any Letters
of Credit hereunder. All statements contained in any certificate or other paper
delivered by or on behalf of the Borrowers pursuant hereto or in connection with
the transactions contemplated hereby shall constitute representations and
warranties by the Borrowers hereunder.
ss.18. ASSIGNMENT AND PARTICIPATION. It is understood and agreed that
each Bank shall have the right to assign or participate at any time all or a
portion of its Commitment and interests in the risk relating to any Loans and
outstanding Letters of Credit hereunder in an amount equal to or greater than
$5,000,000 (which assignment shall be of an equal percentage of the Commitment,
the Loans and outstanding Letters of Credit) to additional banks or other
financial institutions so long as the Agent will be the Agent hereunder and with
the prior written consent of the Agent and, unless a Default or an Event of
Default shall have occurred and be continuing, the Borrowers, which approvals
shall not be unreasonably withheld; and further, and that each bank or other
financial institution which executes and delivers to the Banks and the Borrowers
hereunder a counterpart joinder in form and substance satisfactory to the Banks
and such bank or financial institution shall, on the date specified in such
counterpart joinder, become a party to this Agreement and the other Loan
Documents for all purposes of this Agreement, and its Commitment shall be as set
forth in such counterpart joinder. Upon the execution and delivery of such
counterpart joinder and payment by the assigning bank of an assignment fee in
the amount of $3,500 to the Agent, (a) the Borrowers shall issue to such bank or
other financial institution a Note in the amount of such bank's or other
financial institution's Commitment dated the Closing Date or such other date as
may be specified by the Agent and otherwise completed in substantially the form
of Exhibit A hereto; (b) the Agent shall distribute to the Borrowers, the Banks
and such bank or financial institution a schedule reflecting such changes; (c)
this Agreement shall be appropriately amended to reflect (i) the status of such
bank or financial institution as a party hereto and (ii) the status and rights
of the Banks and Agent hereunder; and (d) the Borrowers shall take such action
as the Agent may reasonably request to perfect any security interests in favor
of the Banks, including any bank or financial institution which becomes a party
to this Agreement. The documents evidencing any such participation may provide
that, except with the consent of the bank or financial institution that is a
party thereto, such Bank will not consent to (a)
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the reduction in or forgiveness of the stated principal of or rate of interest
on or Commitment Fee with respect to the portion of any Loan subject to such
participation or assignment, (b) the extension or postponement of any stated
date fixed for payment of principal or interest or Commitment Fee with respect
to the portion of any Loan subject to such participation or assignment, or (c)
the waiver or reduction of any right to indemnification of such Bank hereunder.
Notwithstanding the foregoing, no syndication or participation shall operate to
increase the Total Commitment hereunder or otherwise alter the substantive terms
of this Agreement, except as contemplated under ss.2.2(c).
ss.19. PARTIES IN INTEREST. All the terms of this Agreement and the
other Loan Documents shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto and
thereto; provided that no Borrower shall assign or transfer its rights hereunder
without the prior written consent of the Banks.
ss.20. NOTICES, ETC. Except as otherwise expressly provided in this
Agreement, all notices and other communications made or required to be given
pursuant to this Agreement or the other Loan Documents shall be in writing and
shall be delivered in hand, mailed by United States first-class mail, postage
prepaid, or sent by telegraph, telex or telecopier and confirmed by letter,
addressed as follows:
(a) if to the Borrowers, at 1 Honey Creek Corporate Center, 125 South
84th Street, Suite 200, Milwaukee, Wisconsin 53214, Attention: George K. Farr,
Chief Financial Officer and Treasurer, telecopy number (414) 479-7400;
(b) if to the Agent or BKB, at 100 Federal Street, Boston,
Massachusetts 02110, Attention: Timothy M. Laurion, Director, telecopy number
617-434-2160;
or such other address for notice as shall have last been furnished in
writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (a) if delivered by hand to a responsible
officer of the party to which it is directed, at the time of the receipt thereof
by such officer, (b) if sent by registered or certified first-class mail,
postage prepaid, five Business Days after the posting thereof, and (c) if sent
by telex or cable, at the time of the dispatch thereof, if in normal business
hours in the country of receipt, or otherwise at the opening of business on the
following Business Day.
ss.21. MISCELLANEOUS. The rights and remedies herein expressed are
cumulative and not exclusive of any other rights which the Banks or Agent would
otherwise have. The captions in this Agreement are for convenience of reference
only and shall not define or limit the provisions hereof. This Agreement and any
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amendment hereof may be executed in several counterparts and by each party on a
separate counterpart, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one instrument. In proving
this Agreement it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom enforcement is sought.
ss.22. ENTIRE AGREEMENT, ETC. The Loan Documents and any other
documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except as provided in ss.14.8. No waiver shall extend
to or affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or omission on the part of the Agent or any Bank
in exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrowers shall entitle the
Borrowers to other or further notice or demand in similar or other
circumstances.
ss.23. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS HEREBY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION
REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE BORROWERS (a) CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY BANK OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR
THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS AND (b) ACKNOWLEDGE THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY
BECAUSE OF, AMONG OTHER THINGS, THE BORROWERS' WAIVERS AND CERTIFICATIONS
CONTAINED HEREIN.
ss.24. GOVERNING LAW. THIS AGREEMENT AND EACH OF THE OTHER LOAN
DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND
SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF SAID COMMONWEALTH (EXCLUDING THE LAWS
<PAGE>
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APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWERS CONSENT TO THE
JURISDICTION OF ANY OF THE FEDERAL OR STATE COURTS LOCATED IN THE COMMONWEALTH
OF MASSACHUSETTS IN CONNECTION WITH ANY SUIT TO ENFORCE THE RIGHTS OF ANY BANK
OR THE AGENT UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
ss.25. SEVERABILITY. The provisions of this Agreement are severable and
if any one clause or provision hereof shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or provision in any
other jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
<PAGE>
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
under seal as of the date first set forth above.
SUPERIOR SERVICES, INC.
SUPERIOR CRANBERRY CREEK LANDFILL, INC.
SUPERIOR CONSTRUCTION SERVICES, INC.
HARDROCK, INC.
SUMMIT, INC.
SUPERIOR SPECIAL SERVICES, INC.
VALLEY SANITATION CO., INC.
SUPERIOR SERVICES OF ELGIN, INC.
SUPERIOR GLACIER RIDGE, INC.
LAND & GAS RECLAMATION, INC.
SUPERIOR OF WISCONSIN, INC.
SUPERIOR EMERALD PARK LANDFILL, INC.
SUPERIOR FCR LANDFILL, INC.
SUPERIOR SEVEN MILE CREEK LANDFILL, INC.
SUPERIOR OAK RIDGE LANDFILL, INC.
SUPERIOR OF MISSOURI, INC.
SUPERIOR OF OHIO, INC.
SUPERIOR SERVICES OF MICHIGAN, INC.
SUPERIOR WASTE SERVICES OF PENNSYLVANIA, INC.
SUPERIOR GREENTREE LANDFILL, INC.
SUPERIOR HICKORY MEADOWS LANDFILL, INC.
NOBLE ROAD LANDFILL, INC.
RECOURSE RECOVERY TRANSFER & TRANSPORTATION, INC.
SUPERIOR EAGLE BLUFF LANDFILL, INC.
SUPERIOR WASTE SERVICES OF ALABAMA, INC.
SUPERIOR CEDAR HILL LANDFILL, INC.
SUPERIOR MAPLE HILL LANDFILL, INC.
IDEAL DISPOSAL SERVICE, INC.
JOHNSON DISOPOSAL SERVICE, INC.
TWR, INC.
ALABAMA WASTE SERVICES, INC.
SUPERIOR STAR RIDGE LANDFILL, INC.
EGGERS SANITATION, INC.
SUPERIOR CYPRESS ACRES LANDFILL, INC.
CBF, INC.
SUPERIOR WASTE SERVICES OF FLORIDA, INC.
LOVE'S DISPOSAL SERVICE, INC.
By: ________________________________________
George K. Farr, Chief Financial Officer
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BANKBOSTON, N.A.,
individually and as Agent
By:__________________________________________
Timothy M. Laurion, Director
BANK ONE, WISCONSIN
By:__________________________________________
Name:
Title:
HARRIS TRUST AND SAVINGS BANK
By:__________________________________________
Name:
Title:
LASALLE NATIONAL BANK
By:__________________________________________
Name:
Title:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:__________________________________________
Name:
Title:
FIRSTAR BANK MILWAUKEE, N.A.
By:__________________________________________
Name:
Title:
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FLEET BANK, N.A.
By:__________________________________________
Name:
Title:
PARIBAS
By:__________________________________________
Name:
Title:
By:__________________________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:__________________________________________
Name:
Title:
COMERICA BANK
By:__________________________________________
Name:
Title:
FIFTH THIRD BANK
By:__________________________________________
Name:
Title:
<PAGE>
-65-
HIBERNIA NATIONAL BANK
By:__________________________________________
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF SUPERIOR SERVICES, INC. AS OF AND FOR THE
NINE MONTH ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,490
<SECURITIES> 0
<RECEIVABLES> 58,449
<ALLOWANCES> (2,392)
<INVENTORY> 1,718
<CURRENT-ASSETS> 75,345
<PP&E> 399,617
<DEPRECIATION> (131,117)
<TOTAL-ASSETS> 449,501
<CURRENT-LIABILITIES> 50,181
<BONDS> 4,021
0
0
<COMMON> 301
<OTHER-SE> 292,286
<TOTAL-LIABILITY-AND-EQUITY> 449,501
<SALES> 0
<TOTAL-REVENUES> 215,885
<CGS> 0
<TOTAL-COSTS> 150,388
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,199
<INTEREST-EXPENSE> 1,796
<INCOME-PRETAX> 31,092
<INCOME-TAX> 16,374
<INCOME-CONTINUING> 14,718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,718
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
