AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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U S LIQUIDS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 76-0519797
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
411 N. SAM HOUSTON PARKWAY EAST, SUITE 400
HOUSTON, TEXAS 77060-3545
(281) 272-4500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GARY J. VAN ROOYAN
VICE PRESIDENT AND GENERAL COUNSEL
411 N. SAM HOUSTON PARKWAY EAST, SUITE 400
HOUSTON, TEXAS 77060-3545
(281) 272-4500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
JOHN D. ROBERTSON, ESQ. THOMAS J. MURPHY, ESQ.
HARTZOG CONGER & CASON MCDERMOTT, WILL & EMERY
201 ROBERT S. KERR, SUITE 1600 227 WEST MONROE STREET
OKLAHOMA CITY, OKLAHOMA 73102 CHICAGO, ILLINOIS 60606-5096
(405) 235-7000 (312) 372-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value............ 4,600,000 $23.19 $106,674,000 $29,656
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(1) Includes 600,000 shares that are subject to an over-allotment option granted
to the underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 on the basis of the
average of the high and low sales prices of the common stock on the American
Stock Exchange on February 11, 1999.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
SUBJECT TO COMPLETION -- FEBRUARY 16, 1999
================================================================================
PROSPECTUS
, 1999
<TABLE>
<CAPTION>
U S LIQUIDS INC.
[LOGO]
4,000,000 SHARES OF COMMON STOCK
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THE COMPANY: THE OFFERING:
<S> <C>
o We are a rapidly growing provider o The Company is offering 3,875,000 of
of liquid waste management the shares and an existing stockholder
services, including collection, is offering 125,000 of the shares.
processing, recovery and disposal
services. o The underwriters have an option to
purchase an additional 600,000
o U S Liquids Inc. shares from the Company and certain
411 N. Sam Houston Parkway East selling stockholders to cover
Suite 400 over-allotments.
Houston, Texas 77060-3545
(281) 272-4500 o There is an existing trading market
for these shares. The reported
o AMEX SYMBOL: USL last sales price on February 12, 1999
was $23 1/4 per share.
o We plan to use the proceeds from
this offering to repay outstanding
indebtedness, the vast majority of
which was incurred in connection
with our acquisition of various
businesses during 1998 and 1999.
We will not receive any proceeds
from the shares sold by the
selling stockholders.
o Closing: , 1999.
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Per Share Total
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<S> <C> <C> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Company:
Proceeds to selling stockholder:
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</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
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Neither the Securities and Exchange Commission nor any state securities
commission has determined whether this prospectus is truthful or complete. Nor
have they made, nor will they make, any determination as to whether anyone
should buy these securities. Any representation to the contrary is a criminal
offense.
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<PAGE>
DONALDSON, LUFKIN & JENRETTE DEUTSCHE BANK SECURITIES
<PAGE>
[Map Indicating Location of Facilities]
[Flowchart Describing Liquid Waste Treatment Process]
TABLE OF CONTENTS
Page
Prospectus Summary................... 3
Risk Factors......................... 8
Use of Proceeds...................... 14
Price Range of Common Stock and
Dividend Policy.................... 14
Capitalization....................... 15
Selected Financial Data.............. 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 18
Business............................. 27
Management........................... 40
Certain Transactions................. 42
Principal and Selling Stockholders... 43
Underwriting......................... 44
Incorporation of Certain Documents by
Reference.......................... 45
Available Information................ 46
Legal Matters........................ 46
Experts.............................. 46
Index to Financial Statements........ F-1
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED BY MORE DETAILED INFORMATION APPEARING IN OTHER
SECTIONS OF THIS PROSPECTUS. THE OTHER INFORMATION IS IMPORTANT, SO PLEASE READ
THIS PROSPECTUS CAREFULLY. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS
PROSPECTUS ASSUMES THE OVER-ALLOTMENT OPTION IS NOT EXERCISED.
THE COMPANY
We are a rapidly growing provider of liquid waste management services,
including collection, processing, recovery and disposal services. Our primary
focus of operations is industrial and commercial wastewater treatment, although
we also collect, process and dispose of oilfield waste. We operate 37 processing
facilities located in eleven states and serve over 40,000 customers. The
services that we provide to any particular customer vary depending on the type
of liquid waste generated, local regulations and the treatment capabilities of
local publicly-operated treatment works.
We provide liquid waste management services through a number of
subsidiaries that are organized into two divisions. The Wastewater Division
collects, processes and disposes of liquid waste (such as industrial wastewater,
grease and grit trap waste, bulk liquids and dated beverages, and certain
hazardous wastes) and recovers saleable by-products (such as fats, oils, feed
proteins, ethanol and solvents) from certain of the waste streams. Typically, we
process the liquid waste using a variety of physical, chemical, thermal and
biological techniques. Saleable by-products are recovered and sold, and any
remaining materials are sent to independent disposal sites. The Oilfield Waste
Division collects, processes and disposes of waste generated in oil and gas
exploration and production. The Wastewater Division generated $158.2 million, or
92.5%, of our pro forma revenues for the nine months ended September 30, 1998
and the Oilfield Waste Division generated the remaining $12.8 million, or 7.5%,
of such pro forma revenues.
According to The McIlvaine Company, the industrial and commercial
wastewater treatment market is highly fragmented with thousands of businesses
generating an estimated $25 billion in worldwide revenues in 1995. We believe
that the growth in demand for wastewater treatment services in the United States
is driven by the following trends:
o Municipalities refusing to accept certain industrial wastewaters
due to limited treatment capabilities and a lack of resources
needed to expand or modernize their treatment works;
o Industrial and commercial businesses avoiding the surcharges of
publicly-operated treatment works by using others to process and
dispose of their wastewater;
o Industrial and commercial businesses outsourcing their wastewater
treatment needs;
o Continued industrial and commercial expansion; and
o Increasingly strict regulations governing the disposal of
industrial wastewater and other liquid wastes, as well as more
stringent enforcement of these regulations.
STRATEGY
Our objective is to be the largest and most profitable liquid waste
management company in each of the markets in which we operate. Our management
team, which has significant operating and consolidation experience in the waste
management industry, intends to continue pursuing a focused growth strategy
based on the following key elements:
o ACQUISITIONS. We pursue acquisitions of liquid waste management
businesses in existing and new geographic markets. We also make
smaller "tuck-in" acquisitions in our existing markets in order to
increase our facility and equipment utilization and expand our market
penetration and range of services. We believe that the liquid waste
management industry is highly
3
<PAGE>
fragmented and that substantial acquisition opportunities exist
throughout North America. From our inception in November 1996 through
February 12, 1999, we have acquired 41 businesses.
o INTERNAL GROWTH. In order to further expand our customer base, we
have positioned ourselves as a multi-city, single source provider of
liquid waste management services for national and regional generators
of liquid waste. We also intend to expand the capacity and processing
capabilities of our existing liquid waste facilities, and to amend our
permits for certain facilities in order to receive additional liquid
waste streams.
o OPERATIONAL ENHANCEMENTS. We intend to continue to improve our
operations through collection route densification and consolidation
and increased facility and equipment utilization. We also expect to
realize economies of scale and cost savings by consolidating certain
administrative functions at our corporate offices.
o DECENTRALIZED MANAGEMENT. We manage our various businesses on a
decentralized basis, with local management maintaining responsibility
for the day-to-day operations, profitability and growth of the
business. We believe that this structure allows us to capitalize on
the considerable local and regional market knowledge and customer
relationships possessed by local management.
RECENT DEVELOPMENTS
Since the public offering that we conducted in June 1998 through February
12, 1999, we have strengthened the Company in several ways, including the
following:
o We have acquired 17 additional businesses engaged in the collection,
processing, recovery and disposal of liquid waste, including Romic
Environmental Technologies Corporation. Romic was acquired in January
1999 and had approximately $35.9 million of revenues during the nine
months ended September 30, 1998. Romic operates liquid waste
processing, and chemical and solvent recovery facilities in California
and Arizona. It also operates collection and transfer facilities in
California, Oregon and Washington. The 16 other businesses we acquired
had approximately $27.5 million of revenues during the nine months
ended September 30, 1998.
o In August 1998, we settled substantially all of the claims asserted
against us in four lawsuits relating to our Bourg, Louisiana landfarm.
Under the terms of the settlement, we agreed to expand the buffer zone
and build a berm along the western boundary of our landfarm. The cost
of these actions will not be material to our operating results.
o In September 1998, we entered into a new agreement with Newpark
Resources, Inc. Under the terms of the new agreement, Newpark agreed
to pay us at least $30.0 million. These payments are required to be
made in monthly installments and will permit Newpark to deliver to us
specified amounts of oilfield waste for processing and disposal.
o We increased the depth of our Board of Directors by adding two new
directors, each of whom has substantial experience with growth
companies. John N. Hatsopoulos became a director in December 1998. Mr.
Hatsopoulos is the retired President of Thermo Electron Corporation.
Roger A. Ramsey became a director in January 1999. Mr. Ramsey is the
retired Chairman and Chief Executive Officer of Allied Waste
Industries, Inc.
o To accommodate the growth in our business, we increased the size of
our credit facility in February 1999 from $100.0 million to $225.0
million.
4
<PAGE>
THE OFFERING
Common stock offered:
By the Company.................. 3,875,000 shares
By the selling stockholder...... 125,000 shares
Total...................... 4,000,000 shares
Common stock to be outstanding after
this
offering........................... 16,817,868 shares(a)
Use of proceeds...................... We intend to use the estimated net
proceeds of $85.0 million that we will
receive from this offering to repay
outstanding indebtedness. We will not
receive any proceeds from the shares sold
by the selling stockholder.
- -----------------------------
(a) Excludes 2,711,458 shares of common stock subject to outstanding options and
warrants that have a weighted average exercise price of $9.54 per share,
which options and warrants consist of: (1) 1,000,000 shares issuable
pursuant to a warrant issued to Sanifill, Inc., a wholly-owned subsidiary of
Waste Management, Inc., the resale of which shares is subject to certain
contractual restrictions extending through 2006, (2) 1,476,458 shares
issuable pursuant to outstanding director and employee stock options, (3)
112,500 shares issuable pursuant to warrants granted to certain underwriters
in connection with our initial public offering, and (4) 122,500 shares
issuable pursuant to other outstanding warrants and options. Also excludes
125,000 shares issuable pursuant to options, the vesting of which are
contingent upon the successful completion of certain corporate development
business activities.
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
HISTORICAL(A) PRO FORMA AS ADJUSTED(A)(B)
----------------------------------- -----------------------------------
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
DECEMBER 31, -------------------- DECEMBER 31, --------------------
1997 1997 1998 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues......................... $ 38,159 $ 27,313 $ 77,860 $229,718 $ 169,894 $ 170,968
Operating expenses............... 21,353 15,404 49,228 152,773 113,494 109,260
Depreciation and amortization.... 2,990 2,007 5,698 14,311 10,090 11,147
Selling, general and
administrative expenses........ 5,350 3,454 8,968 37,452 26,544 26,129
Pooling costs.................... 400 400 -- 400 400 --
------------ --------- --------- ------------ --------- ---------
Income from operations........... 8,066 6,048 13,966 24,782 19,366 24,432
Interest expense, net............ 1,734 1,367 2,310 104 38 147
Other (income) expense, net...... 41 130 (235) (386) (172) (622)
------------ --------- --------- ------------ --------- ---------
Income before provision for
income taxes................... 6,291 4,551 11,891 25,064 19,500 24,907
Provision for income taxes....... 2,416 1,746 4,835 10,276 7,995 10,212
------------ --------- --------- ------------ --------- ---------
Net income....................... $ 3,875 $ 2,805 $ 7,056 $ 14,788 $ 11,505 $ 14,695
============ ========= ========= ============ ========= =========
Diluted earnings per share....... $ 0.55 $ 0.42 $ 0.64 $ 0.82 $ 0.64 $ 0.81
============ ========= ========= ============ ========= =========
Diluted weighted average shares
outstanding(c)................. 7,078 6,726 10,956 17,961 17,964 18,080
EBITDA(d)........................ $ 11,056 $ 8,055 $ 19,664 $ 39,093 $ 29,456 $ 35,579
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998(A)
--------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(E) AS ADJUSTED(F)
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents........ $ 4,827 $ 5,595 $ 5,595
Working capital.................. 2,455 5,881 5,881
Property, plant and equipment,
net.............................. 78,275 95,166 95,166
Total assets..................... 221,317 297,329 297,329
Long-term obligations, net of
current maturities............... 43,910 91,668 6,679
Stockholders' equity............. 118,865 130,561 215,550
</TABLE>
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(a) See introduction to "Selected Financial Data" for a discussion of the
entities and periods covered by the historical and pro forma data set forth
herein.
(b) Pro forma for the effect of all of the acquisitions we have made through
February 12, 1999, and as adjusted to reflect our sale of 1,725,000 shares
in our initial public offering, 3,450,000 shares in our June 1998 offering
and 3,875,000 shares in this offering, and the application of the net
proceeds from each offering, as if each of the acquisitions and offerings
had occurred on January 1, 1997.
(c) The pro forma as adjusted diluted weighted average shares outstanding
includes: (1) 5,937,435 shares, 5,496,736 shares and 9,622,553 shares
outstanding for the year ended December 31, 1997 and for the nine months
ended September 30, 1997 and 1998, respectively, (2) 3,875,000 shares to be
issued in connection with this offering as if it occurred on January 1,
1997, (3) 6,827,864 shares, 7,265,964 shares and 3,209,872 shares for the
year ended December 31, 1997 and for the nine months ended September 30,
1997 and 1998, respectively, to reflect the effect of shares issued in
connection with all of our acquisitions through February 12, 1999 and our
initial public offering and our June 1998 offering, as if each had occurred
on January 1, 1997 and (4) 1,321,010 shares, 1,325,827 shares and 1,372,185
shares for the year ended December 31, 1997 and for the nine months ended
September 30, 1997 and 1998, respectively, representing the effect of
outstanding warrants and options to purchase common stock, using the
treasury stock method. Excludes 125,000 shares issuable pursuant to options,
the vesting of which are contingent upon the successful completion of
certain corporate development activities.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
6
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(d) EBITDA represents earnings presented above before interest, other (income)
expense, income taxes, depreciation and amortization expense. EBITDA is not
a measure of cash flow, operating results or liquidity, as determined in
accordance with generally accepted accounting principles, and differs from
net cash provided by operating activities as determined under generally
accepted accounting principles in that EBITDA excludes interest expense and
does not reflect the effects of changes in working capital or deferred
income tax items. EBITDA should not be considered in isolation or as an
alternative to, or more meaningful than, net income or cash flows provided
by operations, as determined in accordance with generally accepted
accounting principles. Our EBITDA amounts may not be comparable to EBITDA as
reported by or for other companies because we may not calculate EBITDA on
the same basis as other companies.
(e) Pro forma for the effect of our acquisitions consummated subsequent to
September 30, 1998 through February 12, 1999 as if each had occurred on
September 30, 1998.
(f) Pro forma for the effect of our acquisitions consummated subsequent to
September 30, 1998 through February 12, 1999 as if each had occurred on
September 30, 1998 and as adjusted to reflect our sale of 3,875,000 shares
of common stock in this offering and the application of the net proceeds.
See "Use of Proceeds" and "Capitalization."
7
<PAGE>
RISK FACTORS
Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should carefully consider
these risk factors, together with all the other information included or
incorporated by reference in this prospectus, before you decide whether to
purchase shares of our common stock.
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words.
You should read statements that contain these words carefully because they (1)
discuss our future expectations; (2) contain projections of our future results
of operations or of our financial condition; or (3) state other
"forward-looking" information. We believe it is important to communicate our
expectations to our investors. However, there may be events in the future that
we are not able to accurately predict or over which we have no control. The risk
factors listed in this section, as well as any cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should be
aware that the occurrence of the events described in these risk factors and
elsewhere in this prospectus could have a material adverse effect on our
business, results of operations and financial condition.
RISKS RELATED TO OPERATING AND INTERNAL GROWTH STRATEGY
Key elements of our strategy are to improve the profitability and increase
the revenues of our existing operations and any subsequently acquired
businesses. We intend to improve the profitability of our existing operations
and any subsequently acquired businesses by various means, including achieving
operating efficiencies and economies of scale. Our ability to increase the
revenues of our existing operations and any subsequently acquired businesses
will be affected by various factors, including:
o The demand for liquid waste collection, processing and disposal
services;
o Our ability to expand the range of services offered to
customers;
o Our ability to develop national and regional accounts
for our liquid waste management services and other
marketing programs; and
o The demand for by-products we recover from certain
liquid waste streams.
Many of these factors are beyond our control, and there can be no assurance
that our operating and internal growth strategies will be successful or that we
will be able to generate cash flow adequate for our operations and to support
internal growth.
MANAGEMENT OF GROWTH
To manage our growth effectively, we must implement and improve our
operational, financial and management information systems and controls, and
train, motivate and manage our employees. We periodically review and upgrade our
management information systems, as well as hire additional management and other
personnel in order to maintain the adequacy of our operational, financial and
management controls. If we fail to manage our growth effectively, our business,
results of operations and financial condition could be materially and adversely
affected.
RISKS RELATED TO OUR ACQUISITION STRATEGY AND ACQUISITION FINANCING
The Company was organized in November 1996. Since that time, we have
experienced rapid growth, primarily through acquisitions, and we intend to
acquire additional liquid waste management businesses. We expect to face
competition for acquisition candidates, which may limit the number of
acquisition opportunities and may lead to higher acquisition prices. We may not
be able to identify, acquire or manage additional businesses profitably or to
integrate successfully any acquired businesses
8
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without material costs, delays or other operational or financial problems.
Businesses that we acquire may have liabilities that we underestimate or do not
discover during our pre-acquisition investigations. These liabilities may
include those arising from environmental contamination or non-compliance by
prior owners with environmental laws or regulatory requirements, and for which
we, as a successor owner or operator, may be responsible. Certain environmental
liabilities, even if not expressly assumed by us, may be imposed on us under
certain legal principles of successor liability, including those under the
Comprehensive Environmental Response Compensation and Liability Act, as amended.
Further, each acquisition involves a number of other special risks that could
cause the acquired business to fail to meet our expectations. For example:
o The acquired business may not achieve expected results.
o We may not be able to retain key personnel of the acquired
business.
o We may not be able to successfully integrate the
acquired business in a timely manner or we may incur
substantial costs, delays or other operational or
financial problems during the integration process.
o It may be difficult to integrate a business with
personnel who have different business backgrounds
and corporate cultures than ours.
o Our management group may not be able to
effectively manage the combined entity or to
effectively implement our acquisition program
and internal growth strategy simultaneously.
We cannot readily predict the timing, size or success of our future
acquisitions or the associated capital requirements. We currently intend to
finance future acquisitions by using a combination of common stock and cash. If
shares of common stock are issued in connection with future acquisitions or
earn-out provisions of completed acquisitions, you may experience dilution in
the net tangible book value of your stock. If the common stock does not maintain
a sufficient market value, or potential acquisition candidates are not willing
to accept common stock as part of the consideration for the sale of their
businesses, we may be required to use more of our cash resources, if available,
or incur indebtedness in order to continue our acquisition program. We have a
$225.0 million credit facility with a group of banks under which we may borrow
to fund acquisitions and working capital requirements; however, under the credit
facility, the banks' consent is required for us to make certain acquisitions or
incur significant indebtedness (including, without limitation, debt assumed in
connection with acquisitions). As of February 12, 1999, the outstanding
principal balance of the credit facility was approximately $98.0 million. After
the consummation of this offering and the application of the net proceeds, we
anticipate that the outstanding principal balance of the credit facility will be
approximately $13.0 million. If we do not have sufficient cash resources to fund
our acquisition plans, our growth could be limited unless we are able to obtain
additional capital through debt or equity financings. We may not be able to
obtain such financing when required or such financing may only be available on
terms and conditions that are unacceptable to us.
COMPETITION
The liquid waste management industry is highly fragmented and very
competitive. We compete with other liquid waste processing facilities and
alternative methods of disposal of certain waste streams provided by area
landfills and injection wells, as well as the alternative of illegal disposal.
In addition, competitive products and services have been and are likely to
continue to be developed and marketed by others. Furthermore, future
technological change and innovation may result in a reduction in the amount of
liquid waste being generated or alternative methods of processing and disposal
being developed. The market for the various by-products that we sell is also
very competitive and is served by several large companies and a number of
smaller, privately-owned companies. With respect to our oilfield waste
operations, we must compete with alternative methods of off-site disposal of
oilfield waste. We also face competition from customers who develop or enhance
their own methods of disposal instead of using the services of liquid waste
management companies. Future technological
9
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change and innovation may increase the amount of internal oilfield waste
processing and disposal as well as the number of competitors in this market.
Increased use of internal processing and disposal methods and other competitive
factors could have a material adverse effect on our business, results of
operations and financial condition.
Our competitors may be better capitalized, have greater name recognition or
be able to provide services or products at a lower cost. In addition, as the
liquid waste market matures, competition can be expected to increase. As a
result of these and other competitive factors, our strategy may not be
successful and we may not be able to generate adequate cash flow to fund our
operations.
FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS
Our business is subject to numerous federal, state and local laws,
regulations and policies that govern environmental protection, zoning and other
matters. These laws and regulations have changed frequently in the past and it
is reasonable to expect additional changes in the future. If existing regulatory
requirements change, we may be required to make significant capital and
operating expenditures. Although we believe that we are presently in material
compliance with applicable laws and regulations, our operations may not continue
to comply with future laws and regulations. Governmental authorities may seek to
impose fines and penalties on us or seek to revoke or deny the issuance or
renewal of operating permits for failure to comply with applicable laws and
regulations. Under these circumstances, we might be required to curtail or cease
operations or conduct site remediation until a particular problem is remedied,
which could have a material adverse effect on our business, results of
operations and financial condition.
IMPACT OF FAILURE TO OBTAIN OR MAINTAIN NECESSARY GOVERNMENTAL APPROVALS
We operate in a highly regulated environment and are required to have
permits and approvals from federal, state and local governments. Any of these
permits or approvals or applications could be denied, revoked or modified under
various circumstances. In addition, if new environmental legislation or
regulations are enacted or existing legislation or regulations are amended or
are enforced differently, we might be required to obtain additional operating
permits or approvals. The process of obtaining or renewing a required permit or
approval can be lengthy and expensive and our efforts to obtain permits,
renewals or approvals may be opposed by citizens groups, adjacent landowners or
others. Our City Environmental facility in Detroit, Michigan has never been
granted a permit under the Resource Conservation and Recovery Act of 1976
("RCRA") and is continuing to operate under interim status, as allowed by
RCRA. In addition, our Romic facility in East Palo Alto, California is operating
under a RCRA permit that expired in 1991, but that allows for ongoing
operations. With respect to both facilities, all necessary applications, renewal
applications and other documentation were timely filed and applicable
regulations allow the facilities to continue to operate. However, we may not be
successful in obtaining or maintaining these and other required permits and
approvals and that failure could have a material adverse effect on our business,
results of operations and financial condition.
POTENTIAL ENVIRONMENTAL LIABILITY
We may be subject to liability for environmental damage that our processing
facilities and collection operations may have caused or may cause nearby
landowners, particularly as a result of the contamination of drinking water
sources or soil, including damage resulting from conditions existing prior to
our acquisition of the facilities or operations. Liability may also arise from
any off-site environmental contamination caused by hazardous substances, the
transportation, treatment or disposal of which we arranged or which was arranged
by the owners of businesses that we have acquired. Any substantial liabilities
for environmental damage could have a material adverse effect on our business,
results of operations and financial condition.
10
<PAGE>
During the ordinary course of our business, we may become involved in a
variety of legal and administrative proceedings relating to land use and
environmental laws and regulations, including actions or proceedings:
o By governmental agencies seeking to impose civil or criminal penalties
on us;
o By governmental agencies seeking to revoke or deny renewal of one or
more of our permits;
o By citizens groups, adjacent landowners or governmental agencies
opposing the issuance of a permit or approval to us or alleging
violations of the permits under which we operate; or
o By citizens groups and adjacent landowners seeking to impose liability
on us for environmental damage at any of our facilities (or facilities
formerly owned by us or any acquired business) or damage that those
facilities or other properties may have caused.
The adverse outcome of one or more of these proceedings could have a material
adverse effect on our business, results of operations and financial condition.
During the ordinary course of our operations, we have from time to time
received, and expect that we may in the future receive, citations or notices
from governmental authorities that our operations are not in compliance with our
permits or certain applicable environmental or land use laws and regulations. We
generally seek to work with the authorities to resolve the issues raised by
these citations or notices. However, we may not always be successful in this
regard and future citations or notices could have a material adverse effect on
our business, results of operations and financial condition.
Our subsidiary, Romic Environmental Technologies Corporation, has entered
into an administrative consent order with the United States Environmental
Protection Agency ("EPA") relating to the cleanup of soil and groundwater
contamination at its facility in East Palo Alto, California. A study to
determine the nature of the contamination has been completed and a corrective
measures study is nearing completion. Based upon the information gathered from
these studies, as of December 31, 1998, Romic had reserved approximately $2.2
million to cover its estimated costs at this facility. However, the ultimate
cost may exceed this reserve. Romic has also entered into administrative consent
orders and agreements with the EPA and the California Department of Toxic
Substances Control relating to three drum reconditioning or disposal sites to
which it delivered waste. Based upon the studies and remedial actions completed,
as of December 31, 1998, Romic had reserved approximately $775,000 to cover its
share of the estimated costs for these sites. However, the ultimate cost may
exceed this reserve. See "Business -- Legal Proceedings."
INSUFFICIENCY OF INSURANCE
While we maintain liability insurance, it is subject to coverage limits and
certain policies exclude coverage for damages resulting from environmental
contamination. Although there are currently numerous sources from which such
coverage may be obtained, it may not continue to be available to us on
commercially reasonable terms or the possible types of liabilities that may be
incurred by us may not be covered by our insurance. In addition, our insurance
carriers may not be able to meet their obligations under the policies or the
dollar amount of the liabilities may exceed our policy limits. Even a partially
uninsured claim, if successful and of significant magnitude, could have a
material adverse effect on our business, results of operations and financial
condition.
DEPENDENCE UPON OILFIELD WASTE EXEMPTION UNDER RCRA AND OTHER ENVIRONMENTAL
REGULATIONS
Oilfield waste is currently exempt from the requirements of RCRA, which is
the principal federal statute governing the handling and disposal of waste. In
recent years, proposals have been made to rescind or modify this exemption. The
repeal or modification of the exemption covering oilfield waste or modification
of applicable regulations or interpretations regarding the processing and
disposal of oilfield waste would require us to alter our method of processing
and disposing of oilfield waste. This could have a material adverse effect on
our business, results of operations and financial condition.
11
<PAGE>
Each of our operations is also dependent to varying degrees on the existence and
enforcement of local, state and federal environmental regulations. Any repeal or
relaxation of those regulations, or a failure of governmental authorities to
enforce the regulations, could result in decreased demand for our services and,
therefore, could have a material adverse effect on our business, results of
operations and financial condition. Our operations may also be adversely
affected by new regulations or changes in other applicable regulations.
DEPENDENCE ON OIL AND GAS INDUSTRY
Demand for our oilfield waste processing and disposal services depends in
large part upon the level of exploration for and production of oil and gas,
particularly in the Gulf Coast region. This demand, in turn, depends on, among
other things, oil and gas prices, expectations about future prices, the cost of
exploring for, producing and delivering oil and gas, the discovery rate of new
oil and gas reserves and the ability of oil and gas companies to raise capital.
Historically, prices for oil and gas have been extremely volatile and have
reacted to changes in the supply of and demand for oil and natural gas, domestic
and worldwide economic conditions and political instability in oil-producing
countries. Current levels of oil and gas exploration and production activities
may not be maintained. Prices for oil and natural gas are expected to continue
to be volatile and affect demand for our oilfield waste services. A material
decline in oil or natural gas prices or exploration activities could materially
affect the demand for our oilfield waste services and, therefore, our business,
results of operations and financial condition.
RELIANCE ON KEY PERSONNEL
We are highly dependent on our executive officers and senior management,
and we likely will depend on the senior management of any significant business
we acquire in the future. The loss of the services of any of our current
executive officers or key employees or any member of senior management of any
acquired business could have a material adverse effect on our business, results
of operations and financial condition. In addition, debt outstanding under our
credit facility may be accelerated by the lenders if, among other things,
Michael P. Lawlor, W. Gregory Orr or Earl J. Blackwell ceases to serve as an
executive officer of the Company and is not replaced within 60 days by an
individual reasonably satisfactory to the lenders. We have tried to reduce some
of this risk by maintaining key man life insurance in the amount of $5.0 million
on each of Messrs. Lawlor, Orr and Blackwell.
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in our revenues and operating results can occur from quarter to
quarter as a result of a number of factors, including:
o The consummation of acquisitions;
o The demand for our services by our customers;
o Weather conditions;
o The level of oil and gas exploration and production activity in the
Gulf Coast;
o The number of business days in a quarter; and
o General economic conditions.
Because a significant portion of our expenses are relatively fixed, a
variation in revenues could cause a significant variation in our quarterly
operating results and could result in losses.
VOLATILITY OF OUR STOCK PRICE
Our common stock was first publicly traded on August 20, 1997 and has
traded from a low of $12 5/8 per share to a high of $26 3/8 per share. The
market price of our common stock could continue to fluctuate substantially due
to a variety of factors, including:
12
<PAGE>
o Quarterly fluctuations in results of operations;
o Changes in the regulatory environment or market conditions affecting
the liquid waste management industry;
o Announcement and market acceptance of acquisitions;
o Changes in earnings estimates by analysts;
o Loss of key personnel;
o Changes in accounting principles or policies;
o Sales of common stock by existing stockholders;
o Announcements of key developments by competitors; and
o Economic and political conditions.
The market price for our common stock may also be affected by our ability
to meet analysts' expectations. Any failure to meet such expectations, even
slightly, could have an adverse effect on the market price of our common stock.
In addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has had a significant effect on the market prices
of securities issued by many companies for reasons unrelated to the operating
performance of these companies. In the past, following periods of volatility in
the market price of a company's securities, securities class action litigation
has often been instituted against the company. If similar litigation were
instituted against us, it could result in substantial costs and a diversion of
our management's attention and resources, which could have an adverse effect on
our business, results of operations and financial condition. See "Price Range
of Common Stock and Dividend Policy."
LACK OF DIVIDENDS
We have not paid dividends on our common stock and we do not anticipate
paying dividends in the foreseeable future. We intend to retain future earnings,
if any, to finance the expansion of our operations and for general corporate
purposes, including future acquisitions. In addition, our credit facility
prohibits us from paying dividends on our capital stock.
POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
Our Board of Directors is divided into three classes, with each class
serving a staggered three-year term. This classification system makes it more
difficult for stockholders to replace directors and may tend to discourage a
third party from making a tender offer or otherwise attempting to obtain control
of the Company. In addition, our Board of Directors is authorized to issue,
without further stockholder action, up to 5,000,000 shares of Preferred Stock
with rights that could adversely affect the rights of holders of common stock.
No shares of Preferred Stock are presently outstanding, and we have no present
plans to issue any such shares. The issuance of shares of Preferred Stock under
certain circumstances could have the effect of delaying, deterring or preventing
a change in control of the Company or other corporate action and of discouraging
bids for the common stock.
13
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 3,875,000 shares of common stock
offered by us are estimated to be approximately $85.0 million (approximately
$88.9 million if the underwriters' over-allotment option is exercised in full),
at an assumed offering price of $23 1/4 per share and after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses. We will not receive any proceeds from the sale of shares of common
stock by the selling stockholders.
We intend to apply the net proceeds from this offering against the
outstanding balance of our credit facility, the vast majority of which
indebtedness was incurred in connection with acquisitions completed in 1998 and
1999. See "Business -- Acquisition Program." As of February 12, 1999, the
outstanding principal balance of our credit facility was approximately $98.0
million. After this offering and the application of the net proceeds, we
anticipate that the outstanding principal balance of our credit facility will be
approximately $13.0 million. The credit facility expires on February 1, 2002 and
amounts currently outstanding under it bear interest at approximately 7.3% per
year.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock has been listed on the American Stock Exchange since
August 20, 1997. The trading symbol for our common stock is "USL." The
following table sets forth, for the periods indicated, the high and low sales
prices for the common stock as reported on the American Stock Exchange.
PRICE RANGE OF
COMMON STOCK
--------------
HIGH LOW
Year Ended December 31, 1997:
Third Quarter (beginning August
20)............................. $18 3/16 $ 13 1/8
Fourth Quarter.................. 19 3/8 12 5/8
Year Ended December 31, 1998:
First Quarter................... $20 3/4 $ 14 1/4
Second Quarter.................. 25 1/4 19
Third Quarter................... 23 1/8 14 5/8
Fourth Quarter.................. 23 14
Year Ended December 31, 1999:
First Quarter (through February
12, 1999)....................... $26 3/8 $ 20 3/8
On February 12, 1999, the reported last sale price of the common stock was
$23 1/4 per share.
We have not paid dividends on our common stock and we do not anticipate
paying dividends in the foreseeable future. We intend to retain future earnings,
if any, to finance the expansion of our operations and for general corporate
purposes, including future acquisitions. We are also prohibited from declaring
or paying cash dividends on our capital stock under the terms of our credit
facility.
14
<PAGE>
CAPITALIZATION
The following table sets forth our short-term debt and total capitalization
(1) as of September 30, 1998, (2) pro forma to reflect the effect of our
acquisitions that were consummated subsequent to September 30, 1998 through
February 12, 1999 as if each had occurred on September 30, 1998, and (3) pro
forma as adjusted to reflect our sale of 3,875,000 shares of common stock in
this offering and the application of the net proceeds. This table should be read
in conjunction with "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial statements
included or incorporated by reference in this prospectus.
AS OF SEPTEMBER 30, 1998
---------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
Current maturities of long-term
obligations........................ $ 4,564 $ 5,894 $ 5,894
========== ========== ===========
Long-term obligations, net of current
maturities......................... $ 43,910 $ 91,668 $ 6,679
Stockholders' equity:
Common stock....................... 123 128 167
Additional paid-in capital......... 108,043 119,734 204,684
Retained earnings.................. 10,699 10,699 10,699
---------- ---------- -----------
Total stockholders' equity...... 118,865 130,561 215,550
---------- ---------- -----------
Total capitalization.......... $ 162,775 $222,229 $ 222,229
========== ========== ===========
15
<PAGE>
SELECTED FINANCIAL DATA
The historical statement of operations data for the years ended December
31, 1995, 1996 and 1997 and the balance sheet data as of December 31, 1996 and
1997 have been derived from the consolidated financial statements audited by
Arthur Andersen LLP, which are filed separately and incorporated by reference in
this prospectus. The historical statement of operations data for the year ended
December 31, 1994 and the balance sheet data as of December 31, 1995 have been
derived from the consolidated financial statements audited by Arthur Andersen
LLP, which do not appear and are not incorporated by reference in this
prospectus. The historical statement of operations data for the year ended
December 31, 1993, and for the nine month periods ended September 30, 1997 and
1998 and the balance sheet data as of December 31, 1993 and 1994 and September
30, 1998 have been derived from our unaudited consolidated financial statements.
The unaudited consolidated financial statements for all periods have been
prepared on the same basis as the audited consolidated financial statements and
in our opinion reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of such data. The statement of
operations data below present depreciation and amortization expenses separately
from operating expenses and selling, general and administrative expenses.
Depreciation and amortization expenses are included in the operating expense and
selling, general and administrative expense captions set forth in the audited
financial statements.
The unaudited pro forma as adjusted statement of operations data set forth
below present certain financial information which gives effect to the following
events as if they each occurred on January 1, 1997: (1) all of our acquisitions
through February 12, 1999 and certain pro forma adjustments to the historical
financial statements of the businesses acquired, including adjustments to
depreciation and amortization expenses to reflect purchase price allocations,
adjustments to interest expense to reflect debt issued in connection with the
acquisitions, certain reductions in salaries and benefits payable to the owners
of the businesses acquired which were agreed to in connection with the
acquisitions and the related income tax effects of these adjustments, and (2)
our sale of 1,725,000 shares in our initial public offering, 3,450,000 shares in
the June 1998 offering, and 3,875,000 shares in this offering and the
application of the net proceeds from these offerings. The pro forma financial
information does not necessarily indicate the results we would have obtained if
these events had occurred on January 1, 1997 or our future results. The
unaudited pro forma balance sheet data as of September 30, 1998 gives effect to
all of our acquisitions consummated subsequent to September 30, 1998 through
February 12, 1999 as if each had occurred on September 30, 1998. The unaudited
pro forma as adjusted balance sheet data as of September 30, 1998 gives effect
to all of our acquisitions consummated subsequent to September 30, 1998 through
February 12, 1999 as if each had occurred on September 30, 1998 and has been
adjusted to reflect our sale of 3,875,000 shares of common stock in this
offering and the application of the net proceeds. This information should be
read in conjunction with the other financial statements and notes included or
incorporated by reference in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS
DATA -- HISTORICAL:
Revenues......................... $ 3,799 $ 8,039 $ 11,127 $ 14,285 $ 38,159 $ 27,313 $ 77,860
Operating expenses............... 1,822 7,422 9,776 11,369 21,353 15,404 49,228
Depreciation and amortization.... 104 136 159 424 2,990 2,007 5,698
Selling, general and
administrative expenses........ 1,813 643 863 1,437 5,350 3,454 8,968
Pooling costs.................... -- -- -- -- 400 400 --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations.... 60 (162) 329 1,055 8,066 6,048 13,966
Interest expense, net............ 112 110 159 397 1,734 1,367 2,310
Other (income) expense, net...... 13 (1) 18 (88) 41 130 (235)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision
for income taxes............... (65) (271) 152 746 6,291 4,551 11,891
Provision for income taxes....... -- (89) 49 255 2,416 1,746 4,835
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)................ $ (65) $ (182) $ 103 $ 491 $ 3,875 $ 2,805 $ 7,056
========= ========= ========= ========= ========= ========= =========
Basic earnings (loss) per common
share.......................... $ (0.04) $ (0.11) $ 0.06 $ 0.23 $ 0.65 $ 0.51 $ 0.73
========= ========= ========= ========= ========= ========= =========
Diluted earnings (loss) per
share.......................... $ (0.04) $ (0.11) $ 0.06 $ 0.23 $ 0.55 $ 0.42 $ 0.64
========= ========= ========= ========= ========= ========= =========
Weighted average shares
outstanding.................... 1,700 1,700 1,700 2,117 5,937 5,497 9,623
Diluted weighted average shares
outstanding.................... 1,700 1,700 1,700 2,139 7,078 6,726 10,956
EBITDA(a)........................ $ 164 $ (26) $ 488 $ 1,479 $ 11,056 $ 8,055 $ 19,664
</TABLE>
16
<PAGE>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, ----------------------
1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA -- PRO
FORMA AS ADJUSTED(B):
Revenues......................... $ 229,718 $ 169,894 $ 170,968
Operating expenses............... 152,773 113,494 109,260
Depreciation and amortization.... 14,311 10,090 11,147
Selling, general and
administrative expenses........ 37,452 26,544 26,129
Pooling costs.................... 400 400 --
------------ ---------- ----------
Income from operations........... 24,782 19,366 24,432
Interest expense, net............ 104 38 147
Other (income) expense, net...... (386) (172) (622)
------------ ---------- ----------
Income before provision for
income taxes................... 25,064 19,500 24,907
Provision for income taxes....... 10,276 7,995 10,212
------------ ---------- ----------
Net income....................... $ 14,788 $ 11,505 $ 14,695
============ ========== ==========
Basic earnings per common
share.......................... $ 0.89 $ 0.69 $ 0.88
============ ========== ==========
Diluted earnings per share....... $ 0.82 $ 0.64 $ 0.81
============ ========== ==========
Weighted average shares
outstanding(c)................. 16,640 16,638 16,707
Diluted weighted average shares
outstanding(c)(d).............. 17,961 17,964 18,080
EBITDA(a)........................ $ 39,093 $ 29,456 $ 35,579
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1998
HISTORICAL AS OF DECEMBER 31, ----------------------
----------------------------------------------------- PRO
1993 1994 1995 1996 1997 HISTORICAL FORMA(E)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 51 $ 25 $ 39 $ 5,604 $ 2,203 $ 4,827 $ 5,595
Working capital (deficit)........... (108) (301) (576) 223 2,122 2,455 5,881
Property, plant and equipment,
net............................... 867 911 1,680 34,582 39,110 78,275 95,166
Total assets........................ 1,277 1,410 3,007 46,851 55,016 221,317 297,329
Long-term obligations, net of
current maturities................ 1,077 1,191 1,596 23,668 16,644 43,910 91,668
Stockholders' equity................ (266) (455) (358) 1,538 20,906 118,865 130,561
</TABLE>
PRO FORMA
AS ADJUSTED(F)
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 5,595
Working capital (deficit)........... 5,881
Property, plant and equipment,
net............................... 95,166
Total assets........................ 297,329
Long-term obligations, net of
current maturities................ 6,679
Stockholders' equity................ 215,550
- -----------------------------
(a) EBITDA represents earnings presented above before interest, other (income)
expense, income taxes, depreciation and amortization expense. EBITDA is not
a measure of cash flow, operating results or liquidity, as determined in
accordance with generally accepted accounting principles, and differs from
net cash provided by operating activities as determined under generally
accepted accounting principles in that EBITDA excludes interest expense and
does not reflect the effects of changes in working capital or deferred tax
items. EBITDA should not be considered in isolation or as an alternative
to, or more meaningful than, net income or cash flows provided by
operations, as determined in accordance with generally accepted accounting
principles. Our EBITDA amounts may not be comparable to EBITDA as reported
by or for other companies because we may not calculate EBITDA on the same
basis as other companies.
(b) Pro forma for the effect of all of the acquisitions we have made through
February 12, 1999, and as adjusted to reflect our sale of 1,725,000 shares
in our initial public offering, 3,450,000 shares in our June 1998 offering
and 3,875,000 shares in this offering and the application of the net
proceeds from each offering, as if each of the acquisitions and offerings
had occurred on January 1, 1997.
(c) The pro forma as adjusted weighted average shares outstanding includes: (1)
5,937,435 shares, 5,496,736 shares and 9,622,553 shares outstanding for the
year ended December 31, 1997 and for the nine months ended September 30,
1997 and 1998, respectively, (2) 3,875,000 shares to be issued in
connection with this offering, and (3) 6,827,864 shares, 7,265,964 shares
and 3,209,872 shares for the year ended December 31, 1997 and for the nine
months ended September 30, 1997 and 1998, respectively, to reflect the
effect of shares issued in connection with all of our acquisitions through
February 12, 1999 and our initial public offering and our June 1998
offering, as if each had occurred on January 1, 1997.
(d) The pro forma as adjusted diluted weighted average shares outstanding
includes 1,321,010 shares, 1,325,827 shares and 1,372,185 shares for the
year ended December 31, 1997 and for the nine months ended September 30,
1997 and 1998, respectively, representing the effect of outstanding warrants
and options to purchase common stock, using the treasury stock method.
Excludes 125,000 shares issuable pursuant to options, the vesting of which
are contingent upon the successful completion of certain corporate
development activities.
(e) Pro forma for the effect of our acquisitions consummated subsequent to
September 30, 1998 through February 12, 1999 as if each had occurred on
September 30, 1998.
(f) Pro forma for the effect of our acquisitions consummated subsequent to
September 30, 1998 through February 12, 1999 as if each had occurred on
September 30, 1998 and as adjusted to reflect our sale of 3,875,000 shares
of common stock in this offering and the application of the net proceeds.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING SECTION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS. SOME OF THE INFORMATION IN THIS "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. YOU
CAN IDENTIFY THESE STATEMENTS BY FORWARD-LOOKING WORDS SUCH AS "MAY,"
"WILL," "EXPECT," "ANTICIPATE," "BELIEVE," "ESTIMATE," AND
"CONTINUE" OR SIMILAR WORDS. OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK
FACTORS."
OVERVIEW
We collect, process, recover and dispose of liquid waste through a number
of subsidiaries that are organized into two divisions. The Wastewater Division
collects, processes and disposes of liquid waste and recovers saleable
by-products from certain waste streams. We formed our Wastewater Division when
we acquired two companies in June 1997 in transactions that were accounted for
under the pooling-of-interests method of accounting. The Oilfield Waste Division
processes and disposes of waste generated in oil and gas exploration and
production. It was formed in December 1996 when we purchased our Louisiana and
Texas landfarms from Sanifill, Inc., a wholly-owned subsidiary of Waste
Management, Inc. Since our initial public offering in August 1997, the
Wastewater Division has acquired 37 businesses and the Oilfield Waste Division
has acquired one business.
Due to the number of acquisitions we have completed since December 31,
1997, this section addresses both historical and pro forma results of operations
and financial condition. The pro forma discussion addresses our results of
operations for the nine months ended September 30, 1997 and 1998 and the year
ended December 31, 1997, with certain pro forma adjustments as described in the
notes to the Pro Forma Financial Statements. The Pro Forma Financial Statements
(1) assume that all of our acquisitions made through February 12, 1999 were
completed on January 1, 1997, (2) include certain adjustments to the historical
financial statements of the businesses acquired, including adjustments to
depreciation and amortization expenses to reflect purchase price allocations,
adjustments to interest expense to reflect debt issued in connection with the
acquisitions, certain reductions in salaries and benefits payable to the owners
of the businesses acquired which were agreed to in connection with the
acquisitions and the related income tax effects of these adjustments, and (3)
are adjusted to reflect our sale of 1,725,000 shares in our initial public
offering, 3,450,000 shares in the June 1998 offering and 3,875,000 shares in
this offering, and the application of the net proceeds from these offerings, as
if each of these events had occurred on January 1, 1997. The pro forma results
of operations are not necessarily indicative of the results we would have
obtained had the acquired businesses been acquired or the offerings consummated
on January 1, 1997 or of our future results.
The historical discussion addresses our actual results of operations and
financial condition as shown in the Consolidated Financial Statements for the
nine months ended September 30, 1997 and 1998 and the years ended December 31,
1995, 1996 and 1997, which statements are filed separately and incorporated by
reference in this prospectus. These statements reflect, for all periods
presented, the historical results of operations of businesses that we acquired
and transactions that were accounted for under the pooling-of-interests method
of accounting and the results of operations of other acquired businesses from
their dates of acquisition.
The Wastewater Division generated $158.2 million, or 92.5%, of our pro
forma revenues for the nine months ended September 30, 1998. This Division
derives revenues from two principal sources: fees received for collecting and
processing liquid waste (such as industrial wastewater, grease and grit trap
waste, bulk liquids and dated beverages, and certain hazardous wastes) and
revenue obtained from the sale of by-products, including fats, oils, feed
proteins, industrial and fuel grade ethanol, solvents, aluminum, glass, plastic
and cardboard, recovered from waste streams. Some of our by-product sales
18
<PAGE>
involve the brokering of industrial and fuel grade ethanol produced by third
parties. During 1998, we curtailed these brokerage activities except where
necessary to meet our customers' volume and quality requirements. Collection and
processing fees charged to customers vary per gallon by waste stream according
to the constituents of the waste, expenses associated with processing the waste
and competitive factors. By-products are commodities and their prices fluctuate
based on market conditions. We anticipate that revenues from collection and
processing fees, which have higher margins than by-product sales, will increase
at a faster rate than revenues from sales of by-products. We anticipate that the
Wastewater Division will represent a growing share of our business because of
its projected internal growth and future acquisitions.
The Oilfield Waste Division generated $12.8 million, or 7.5%, of our pro
forma revenues for the nine months ended September 30, 1998. This Division
derives revenues from fees charged to customers for (1) processing and disposing
of oil and gas exploration and production waste, and (2) cleaning tanks, barges
and other vessels and containers used in the storage and transportation of
oilfield waste. The fees charged for processing and disposing of oilfield waste
are based on the composition of the waste and vary significantly. Accordingly,
we believe that total revenues are a better indicator of performance than is the
average fee charged. In order to match revenues with their related costs, when
waste is unloaded at one of our sites, we recognize the related revenue and
record a reserve for the estimated amount of expenses to be incurred to process
and dispose of the waste. As processing occurs, generally over nine to twelve
months, the reserve is depleted as expenses are incurred. Our operating margins
in the Oilfield Waste Division are typically higher than in the Wastewater
Division.
Newpark Resources, Inc. is the largest customer of the Oilfield Waste
Division. As described in "Certain Transactions," in September 1998, we
entered into a new 33-month agreement with Newpark. In this agreement, Newpark
agreed to pay us at least $30.0 million. Newpark paid us $3.0 million in
September 1998 and an additional $5.0 million between October 1, 1998 and
February 12, 1999. The remaining amounts are required to be paid to us in
monthly installments continuing through June 2001. These payments will permit
Newpark to deliver to us at no additional cost specified amounts of oilfield
waste for processing and disposal.
Operating expenses include compensation and overhead related to operations
workers, supplies and other raw materials, transportation charges, disposal fees
paid to third parties, real estate lease payments and energy and insurance costs
applicable to waste processing and disposal operations.
Selling, general and administrative expenses include management, clerical
and administrative compensation and overhead relating to our corporate offices
and each of our operating sites, as well as professional services and costs.
Depreciation and amortization expenses relate to our landfarms and other
depreciable or amortizable assets. Landfarms, which constitute approximately
14.8% of our pro forma net property, plant and equipment, are amortized over 25
years. Other depreciable or amortizable assets are amortized over periods
ranging from three to 40 years. Amortization expenses relating to acquisitions
have increased over time as a result of amortization of goodwill recorded in
connection with our acquisitions.
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PRO FORMA RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected pro
forma statement of operations data as a percentage of pro forma revenues:
NINE MONTHS
ENDED
SEPTEMBER 30,
------------------------
1997 1998
Revenues............................. 100.0% 100.0%
Operating expenses................... 66.8 63.9
Depreciation and amortization........ 5.9 6.5
Selling, general and administrative
expenses........................... 15.6 15.3
Pooling costs........................ 0.2 --
--------- ------------
Income from operations............... 11.5 14.3
Interest expense, net................ 0.0 0.1
Other (income) expense, net.......... (0.1) (0.4)
--------- ------------
Income before provision for income
taxes.............................. 11.6 14.6
Provision for income taxes........... 4.7 6.0
--------- ------------
Net income........................... 6.9% 8.6%
========= ============
PRO FORMA AS ADJUSTED RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
1997
REVENUES. Pro forma revenues for the nine months ended September 30, 1998
increased $1.1 million, or 0.6%, from $169.9 million for the nine months ended
September 30, 1997 to $171.0 million for the nine months ended September 30,
1998. The Wastewater Division contributed $154.8 million, or 91.1%, of the pro
forma revenues for the nine months ended September 30, 1997 and $158.2 million,
or 92.5%, of the pro forma revenues for the nine months ended September 30,
1998. Wastewater Division revenues can be further broken down into two
categories: (1) collection and processing fees, and (2) by-product sales.
Collection and processing fees generated $119.3 million, or 77.1%, and $128.7
million, or 81.4%, of the Wastewater Division's pro forma revenues for the nine
months ended September 30, 1997 and 1998, respectively. Revenues from collection
and processing of waste increased $9.4 million, or 7.9%, due to increased
volumes and increased pricing. By-product sales generated the remaining $35.5
million, or 22.9%, and $29.5 million, or 18.6%, of the Wastewater Division's pro
forma revenues for the nine months ended September 30, 1997 and 1998,
respectively. Revenues from the sale of by-products decreased $6.0 million, or
16.9%, due to a reduction in commodities prices and because we elected, during
1998, to reduce our ethanol brokering activities except where necessary to meet
our customers' volume and quality requirements. Brokered sales of ethanol
included in by-product sales were $13.6 million and $8.1 million for the nine
months ended September 30, 1997 and 1998, respectively.
The Oilfield Waste Division contributed $15.1 million, or 8.9%, of the pro
forma revenues for the nine months ended September 30, 1997 and $12.8 million,
or 7.5%, of the pro forma revenues for the nine months ended September 30, 1998.
The Oilfield Waste Division's pro forma revenues decreased $2.3 million, or
15.2%, due to a decline in drilling activity in the Gulf Coast region.
OPERATING EXPENSES. Pro forma operating expenses decreased $4.2 million,
or 3.7%, from $113.5 million for the nine months ended September 30, 1997 to
$109.3 million for the nine months ended September 30, 1998. As a percentage of
pro forma revenues, pro forma operating expenses decreased from 66.8% for the
1997 period to 63.9% for the 1998 period. This improvement was due primarily to
an increase in collection and processing revenues, which have higher margins
than by-product sales, in the 1998 period, as well as increased efficiencies
resulting from higher volumes and operational enhancements.
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DEPRECIATION AND AMORTIZATION. Pro forma depreciation and amortization
expenses increased $1.1 million, or 10.5%, from $10.1 million for the nine
months ended September 30, 1997 to $11.1 million for the nine months ended
September 30, 1998, primarily as a result of an increase in capital
expenditures. As a percentage of pro forma revenues, pro forma depreciation and
amortization expenses increased from 5.9% for the nine months ended September
30, 1997 to 6.5% for the nine months ended September 30, 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma selling, general
and administrative expenses decreased $415,000 or 1.6%, from $26.5 million for
the nine months ended September 30, 1997 to $26.1 million for the nine months
ended September 30, 1998. As a percentage of pro forma revenues, pro forma
selling, general and administrative expenses decreased from 15.6% for the nine
months ended September 30, 1997 to 15.3% for the nine months ended September 30,
1998.
INCOME TAXES. The pro forma provision for income taxes increased by $2.2
million, or 27.7%, from $8.0 million for the nine months ended September 30,
1997 to $10.2 million for the nine months ended September 30, 1998 as a result
of increased taxable income. The assumed effective tax rate for both periods was
41.0%.
PRO FORMA AS ADJUSTED RESULTS FOR THE YEAR ENDED DECEMBER 31, 1997
REVENUES. Pro forma revenues for 1997 were $229.7 million. The Wastewater
Division generated $210.0 million, or 91.4%, of such pro forma revenues.
Collection and processing fees contributed $162.3 million, or 77.3%, of the
Wastewater Division's 1997 pro forma revenues and by-product sales contributed
the remaining $47.7 million, or 22.7%, of the Wastewater Division's 1997 pro
forma revenues. Brokered sales of ethanol constituted $18.5 million of the
by-product sales of the Wastewater Division. The Oilfield Waste Division
generated $19.7 million, or 8.6%, of 1997 pro forma revenues.
OPERATING EXPENSES. Pro forma operating expenses for 1997 were $152.8
million, or 66.5% of pro forma revenues.
DEPRECIATION AND AMORTIZATION. Pro forma depreciation and amortization
expenses for 1997 were $14.3 million, which represented 6.2% of pro forma
revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma selling, general
and administrative expenses for 1997 were $37.5 million. As a percentage of pro
forma revenues, pro forma selling, general and administrative expenses were
16.3%.
INCOME TAXES. The pro forma provision for income taxes for 1997 was $10.3
million. The assumed effective tax rate for the period was 41.0%.
HISTORICAL RESULTS OF OPERATIONS
HISTORICAL RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUES. Revenues for the nine months ended September 30, 1998 increased
$50.6 million, or 185.1%, from $27.3 million for the nine months ended September
30, 1997 to $77.9 million for the nine months ended September 30, 1998. The
Wastewater Division contributed $12.2 million, or 44.7%, of revenues for the
nine months ended September 30, 1997 and $65.1 million, or 83.6%, of revenues
for the nine months ended September 30, 1998. Collection and processing fees
generated $3.2 million, or 26.0%, and $48.0 million, or 73.7%, of the Wastewater
Division's revenues for the nine months ended September 30, 1997 and 1998,
respectively. By-product sales generated the remaining $9.1 million, or 74.0%,
and $17.1 million, or 26.3%, of the Wastewater Division's revenues for the 1997
and 1998 periods, respectively. The Oilfield Waste Division contributed $15.1
million, or 55.3%, of revenues for the nine months ended September 30, 1997 and
$12.8 million, or 16.4%, of revenues for the nine months ended September 30,
1998.
The revenues of the Wastewater Division increased $52.9 million, or 433.6%,
from $12.2 million for the nine months ended September 30, 1997 to $65.1 million
for the nine months ended
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September 30, 1998. This increase was due primarily to acquisitions completed
during the fourth quarter of 1997 and the first nine months of 1998. The "same
store" revenues for collection and processing of waste increased due to
increased pricing, while revenues from the sale of fats and oils decreased due
to a reduction in commodities prices. The Oilfield Waste Division's revenues
decreased $2.3 million, or 15.4%, from $15.1 million for the nine months ended
September 30, 1997 to $12.8 million for the nine months ended September 30,
1998. This decrease resulted primarily from lower receipts of oilfield waste
from customers caused by a decline in drilling activity in the Gulf Coast
region.
OPERATING EXPENSES. Operating expenses increased $33.8 million, or 219.6%,
from $15.4 million for the nine months ended September 30, 1997 to $49.2 million
for the nine months ended September 30, 1998. As a percentage of revenues,
operating expenses increased from 56.4% for the nine months ended September 30,
1997 to 63.2% for the nine months ended September 30, 1998. This increase was
due principally to our transition from operating primarily as an oilfield waste
disposal company into an integrated liquid waste management company providing
collection, processing, recovery and disposal services.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $3.7 million, or 183.9%, from $2.0 million for the nine months ended
September 30, 1997 to $5.7 million for the nine months ended September 30, 1998.
As a percentage of revenues, depreciation and amortization expenses remained
constant at approximately 7.3%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $5.5 million, or 159.6%, from $3.5 million for
the nine months ended September 30, 1997 to $9.0 million for the nine months
ended September 30, 1998. As a percentage of revenues, selling, general and
administrative expenses decreased from 12.6% for the nine months ended September
30, 1997 to 11.5% for the nine months ended September 30, 1998. This improvement
resulted primarily from our ability to integrate new business acquisitions
without a proportionate increase in general and administrative expenses.
INTEREST AND OTHER EXPENSES. Net interest and other expenses increased
$578,000, or 38.6%, from $1.5 million for the nine months ended September 30,
1997 to $2.1 million for the nine months ended September 30, 1998. This increase
resulted primarily from interest expense incurred on borrowings used to fund the
purchase price for acquisitions completed in 1998.
INCOME TAXES. The provision for income taxes increased $3.1 million, or
176.9%, from $1.7 million for the nine months ended September 30, 1997 to $4.8
million for the nine months ended September 30, 1998 as a result of increased
taxable income. The effective tax rate for the nine months ended September 30,
1997 was 38.4%, compared to a 40.7% rate for the nine months ended September 30,
1998.
HISTORICAL RESULTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES. Revenues increased $23.9 million, or 167.1%, from $14.3 million
in 1996 to $38.2 million in 1997. The Wastewater Division contributed $13.5
million, or 94.4%, of 1996 revenues and $18.2 million, or 47.6%, of 1997
revenues. By-product sales generated $11.4 million, or 84.4%, of the Wastewater
Division's revenues in 1996 and $12.4 million, or 68.1%, in 1997. Collection and
processing fees generated $2.1 million, or 15.6%, of the Wastewater Division's
revenues in 1996 and $5.8 million, or 31.9%, in 1997. The Oilfield Waste
Division contributed $826,000, or 5.6%, of revenues in 1996 and $20.0 million,
or 52.4%, of revenues in 1997. We purchased the Oilfield Waste Division under
the purchase method of accounting in December 1996.
Revenues of the Wastewater Division increased $4.7 million, or 34.8%, from
$13.5 million in 1996 to $18.2 million in 1997. This increase was attributable
to an 180.1% increase in volume of waste processed and an 8.8% increase in
by-product sales. The Oilfield Waste Division's revenues increased $19.2 million
from $826,000 in 1996 to $20.0 million in 1997 as a result of the inclusion of
the Oilfield Waste Division for all of 1997 as compared to less than one month
in 1996.
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<PAGE>
OPERATING EXPENSES. Operating expenses increased $10.0 million, or 87.8%,
from $11.4 million in 1996 to $21.4 million in 1997, primarily due to the
inclusion of the Oilfield Waste Division for all of 1997 as compared to less
than one month in 1996. As a percentage of revenues, operating expenses
decreased from 79.6% for 1996 to 56.0% for 1997. This improvement reflects
higher operating margins derived by the Oilfield Waste Division as opposed to
the Wastewater Division.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $2.6 million, or 605.2%, from $424,000 in 1996 to $3.0 million in
1997. As a percentage of revenues, depreciation and amortization expenses
increased from 3.0% in 1996 to 7.8% in 1997. The increase in depreciation and
amortization expenses resulted primarily from the acquisition of the Oilfield
Waste Division.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $4.4 million, or 300.1%, from $1.4 million in
1996 to $5.8 million in 1997. The majority of this increase related to the
inclusion of the Oilfield Waste Division for all of 1997 as compared to less
than one month in 1996. Selling, general and administrative expenses increased
from 10.1% of 1996 revenues to 15.1% of 1997 revenues, primarily due to higher
personnel costs and professional fees associated with being a public company and
establishing our corporate offices in Houston in May 1997.
INTEREST AND OTHER EXPENSES. Net interest and other expenses increased
$1.5 million, or 474.4%, from $309,000 in 1996 to $1.8 million in 1997. Net
interest and other expenses increased primarily as a result of interest expense
related to debt incurred in acquiring the Oilfield Waste Division in 1996 and
other businesses in 1997.
INCOME TAXES. The provision for income taxes increased $2.2 million, or
847.5%, from $255,000 in 1996 to $2.4 million in 1997. This increase resulted
primarily from additional taxable income. The effective tax rate for 1996 was
34.2% of income and the effective tax rate for 1997 was 38.4% of income.
HISTORICAL RESULTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUES. All revenues in 1995 and 94.4% of revenues in 1996 were
generated by the Wastewater Division. Revenues increased $3.2 million, or 28.4%,
from $11.1 million in 1995 to $14.3 million in 1996. By-product sales
contributed $9.8 million, or 88.3%, of our revenues in 1995 and $11.4 million,
or 79.7%, of our revenues in 1996. Collection and processing fees received by
the Wastewater Division contributed $1.3 million, or 11.7%, of our revenues in
1995 and $2.1 million, or 14.7%, of our revenues in 1996. The Oilfield Waste
Division contributed $826,000, or 5.6%, of our revenues in 1996.
By-product sales increased by $1.6 million, or 16.3%, from $9.8 million in
1995 to $11.4 million in 1996. Collection and processing fees increased by
$750,000, or 56.3%, from $1.3 million in 1995 to $2.1 million in 1996. The
increase in revenues from the sale of by-products was due to an increase in
volumes and an increase in the average price per pound. The increase in the
volume of collection and processing fees resulted primarily from growth of the
Houston market. The increase in the average price per pound was primarily
attributable to revenues obtained in our acquisition of a collection business in
March 1996.
OPERATING EXPENSES. Operating expenses increased $1.6 million, or 16.3%,
from $9.8 million in 1995 to $11.4 million in 1996. As a percentage of revenues,
operating expenses decreased from 87.9% in 1995 to 79.6% in 1996. This
improvement was attributable to increased sales of by-products, lower per unit
processing costs, lower per unit costs of raw materials and increased revenues
from processing operations, offset in part by increased personnel expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $265,000, or 166.7%, from $159,000 in 1995 to $424,000 in 1996. As a
percentage of revenues, depreciation and amortization expenses increased from
1.4% in 1995 to 3.0% in 1996. This increase was attributable to acquisitions of
additional depreciable assets during 1996.
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<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $574,000, or 66.5%, from $863,000 in 1995 to
$1.4 million in 1996. As a percentage of revenues, selling, general and
administrative expenses increased from 7.8% in 1995 to 10.1% in
1996. The majority of the increase relates to the addition of the Oilfield Waste
Division at the end
of 1996.
INTEREST AND OTHER EXPENSES. Net interest and other expenses increased
$132,000, or 74.6%, from $177,000 in 1995 to $309,000 in 1996. Net interest and
other expenses increased primarily as a result of interest expense related to
the acquisition of the Oilfield Waste Division.
INCOME TAXES. The provision for income taxes increased by $206,000, or
420.4%, from $49,000 in 1995 to $255,000 in 1996. The effective tax rate for
1995 was 32.2% and the effective tax rate for 1996 was 34.2%.
LIQUIDITY AND CAPITAL RESOURCES
We had net working capital of $2.5 million at September 30, 1998, compared
to net working capital of $2.1 million at December 31, 1997.
Our capital requirements for our continuing operations consist of our
general working capital needs, scheduled principal payments on our debt
obligations and capital leases, and planned capital expenditures. At September
30, 1998, approximately $4.6 million of principal payments on debt obligations
were payable during the next twelve months. Capital expenditures for our
continuing operations during 1998 were $11.4 million. The majority of the
capital expenditures were for plant expansions, equipment and vehicle upgrades.
Capital expenditures for our continuing operations for 1999 are budgeted at
$10.8 million. Approximately $9.9 million of this amount is budgeted to be
invested in the Wastewater Division for plant expansions, equipment and vehicle
upgrades. The remaining amounts are budgeted to be invested in the Oilfield
Waste Division for equipment.
At September 30, 1998, we had established a $6.5 million reserve to provide
for the cost of future closures of facilities. The amount of this unfunded
reserve is based on our estimated total cost to close the facilities as
calculated in accordance with the applicable regulations. Regulatory agencies
require us to post financial assurance to assure that all waste will be treated
and the facilities closed appropriately. We have in place a total of $14.3
million of financial assurance in the form of letters of credit and bonds.
We have a $225.0 million credit facility with a group of banks under which
we may borrow to fund working capital requirements and acquisitions. The amount
of this credit facility was increased in February 1999 from $100.0 million to
$225.0 million. Amounts outstanding under the credit facility are secured by a
lien on all or substantially all of our assets. The credit facility prohibits
the payment of dividends and requires us to comply with certain financial
covenants. The credit facility also places certain restrictions on, among other
things, acquisitions and other business combination transactions which we may
consummate. We do not believe that these restrictions will have a material
adverse effect on our ability to fulfill our current acquisition program. The
debt outstanding under the credit facility may be accelerated by the lenders if,
among other things, a change in control of the Company occurs or Michael P.
Lawlor, W. Gregory Orr or Earl J. Blackwell ceases to serve as an executive
officer of the Company and is not replaced within 60 days by an individual
reasonably satisfactory to the lenders. After this offering and the application
of the net proceeds, we anticipate that the outstanding principal balance of the
credit facility will be approximately $13.0 million. Amounts currently
outstanding under the credit facility bear interest at approximately 7.3% per
year. See "Use of Proceeds." We also have a $10.0 million credit facility with
BankBoston, N.A. under which we may borrow to purchase equipment. As of the date
of this prospectus, no amounts are outstanding under this equipment credit
facility.
Our capital resources consist of cash reserves, cash generated from
operations and funds available under our $225.0 million credit facility and the
equipment credit facility. We expect that these resources will be sufficient to
fund continuing operations for at least the next twelve months. In
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<PAGE>
addition to capital required for our ongoing operations, we will require
additional capital to pursue our long-term acquisition program. We anticipate
that future acquisitions will be made using a combination of common stock and
cash, much of which is expected to be derived from borrowings under the $225.0
million credit facility. In addition, we may seek to raise additional equity
capital for all or a substantial part of the consideration to be paid for future
acquisitions or to reduce our debt.
In certain of our acquisitions, we agreed to pay additional consideration
to the owners of the acquired business if the future pre-tax earnings of the
acquired business exceed certain negotiated levels or other specified events
occur. To the extent that any contingent consideration is required to be paid in
connection with an acquisition, we anticipate that the cash flows of the
acquired business will be sufficient to pay the contingent consideration.
SEASONALITY
We expect that the operations of the Oilfield Waste Division will
experience certain seasonal patterns consistent with the oil and gas exploration
and production activity in the Gulf Coast. Generally, the volume of oilfield
waste delivered to the Oilfield Waste Division has been lowest in
the first quarter of each calendar year. Prices for oil and natural gas are
expected to continue to be volatile and affect demand for our oilfield waste
services. Certain of the Wastewater Division's processing facilities in the
Northeast and Midwest may be affected by adverse weather conditions.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, such
computer applications could fail or create erroneous results by or at
the Year 2000. We are currently identifying which of our information technology
and non-information technology systems will be affected by Year 2000 issues.
Our Year 2000 compliance program consists of three phases: identification
and assessment; remediation; and testing. For any given system, the phases occur
in sequential order, from identification and assessment of Year 2000 problems,
to remediation and, finally, to testing our solutions. However, as we acquire
additional businesses, each information technology and non-information
technology system of the acquired business must be independently identified and
assessed. As a result, all three phases of our Year 2000 compliance program may
occur simultaneously as they relate to different systems. Each phase may have a
varying timetable to completion, depending upon the system and the date when a
particular business was acquired by us.
We have completed the identification and assessment of most of our
information technology systems, and those systems address or have been modified
to address Year 2000 problems. We will continue to assess the information
technology systems of businesses that we have recently acquired and that we may
acquire in the future. We are in the identification and assessment phase with
respect to non-information technology systems of currently-owned businesses. We
anticipate completing all phases of our Year 2000 compliance program by June 30,
1999, with the possible exception of the remediation and testing phases for
certain of our non-information technology systems. We cannot assure you,
however, that recently acquired businesses will be Year 2000 compliant. However,
to the extent feasible, we review the Year 2000 status of acquisition candidates
before we complete an acquisition.
Our costs to date for our Year 2000 compliance program have not been
material. Although we have not completed our assessment of non-information
technology systems, we do not currently believe that the future costs associated
with our Year 2000 compliance program will be material.
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We are currently unable to determine our most reasonably likely worst case
Year 2000 scenario, because we have not identified and assessed all of our
non-information technology systems. Because most of our information technology
systems address or have been modified to address Year 2000 problems and because
most of our businesses do not employ a high degree of process or plant
automation, we do not anticipate that the Year 2000 will have a significant
impact on our operations. However, a failure to address all of our Year 2000
issues successfully could have a material adverse effect on our business,
results of operations and financial condition.
This is a Year 2000 readiness disclosure statement within the meaning of
the Year 2000 Information and Readiness Disclosure Act (P.L. 105-271).
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BUSINESS
GENERAL
We are a rapidly growing provider of liquid waste management services,
including collection, processing, recovery and disposal services. Our primary
focus of operations is industrial and commercial wastewater treatment, although
we also collect, process and dispose of oilfield waste. We operate 37 processing
facilities located in eleven states and serve over 40,000 customers. The
services that we provide to any particular customer vary depending on the type
of liquid waste generated, local regulations and the treatment capabilities of
local publicly-operated treatment works ("POTWs").
We provide liquid waste management services through a number of
subsidiaries that are organized into two divisions. The Wastewater Division
collects, processes and disposes of liquid waste (such as industrial wastewater,
grease and grit trap waste, bulk liquids and dated beverages, and certain
hazardous wastes) and recovers saleable by-products (such as fats, oils, feed
proteins, ethanol and solvents) from certain of the waste streams. Typically, we
process the liquid waste using a variety of physical, chemical, thermal and
biological techniques. Saleable by-products are recovered and sold, and any
remaining materials are sent to independent disposal sites. The Oilfield Waste
Division collects, processes and disposes of waste generated in oil and gas
exploration and production. The Wastewater Division generated $158.2 million, or
92.5%, of our pro forma revenues for the nine months ended September 30, 1998
and the Oilfield Waste Division generated the remaining $12.8 million, or 7.5%,
of such pro forma revenues.
INDUSTRY BACKGROUND
The wastewater treatment market is generally divided into two segments:
industrial and commercial wastewater treatment, which may include the treatment
of some hazardous wastes, and municipal wastewater treatment. Industrial and
commercial companies produce various types of wastewater (including hydrocarbon
contaminated water, landfill leachate, dated beverages and grease and grit trap
waste) that must be treated prior to disposal in POTWs or for which
municipalities charge higher rates. Similarly, oil and gas exploration and
production companies produce liquid waste that must be disposed of in accordance
with federal and state regulations. Municipalities utilize or contract with
third parties for the utilization of water treatment technology to treat
municipal wastewater.
According to The McIlvaine Company, the global water and wastewater
treatment market was approximately $335 billion in 1995. The McIlvaine Company
further estimated that, in 1995, the worldwide costs of treating municipal
wastewater were $90 billion and the worldwide costs of treating industrial
wastewater were $25 billion. We believe that the liquid waste management
industry is comprised of thousands of relatively small owner-operated
businesses, presenting significant opportunities for consolidation.
In the United States, the growth in demand for wastewater treatment
services has been driven by many factors, including:
o Municipalities refusing to accept certain industrial wastewaters
due to limited treatment capabilities and a lack of the resources
needed to expand or modernize their POTWs;
o Industrial and commercial businesses avoiding POTW surcharges by
using others to process and dispose of their wastewater;
o Industrial and commercial businesses outsourcing their wastewater
treatment needs;
o Continued industrial and commercial expansion; and
o Increasingly strict regulations governing the disposal of
wastewater, as well as more stringent enforcement of these
regulations.
REJECTION OF CERTAIN WASTEWATERS BY POTWS. In North America, governmental
regulation and enforcement have established strict standards for potable water
and the discharge of pollutants in wastewater. Municipalities have spent
billions of dollars building water purification and wastewater
27
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treatment facilities. However, many of these municipalities are facing
increasing budgetary constraints and damage to their wastewater treatment
facilities caused by grease and other liquid wastes and have begun refusing to
accept certain liquid waste streams, thereby increasing the demand for
wastewater treatment services provided by the private sector. For example, the
Dallas, Houston and San Antonio POTWs do not accept grease or grit trap waste.
In addition, in late 1997, the Houston POTWs ceased accepting septage generated
outside the Houston city limits.
ECONOMIC BENEFIT OF PRETREATING CERTAIN WASTEWATERS. For years, generators
of industrial wastewater and other liquid waste have discharged the waste
directly into POTWs. However, the difficulties encountered by POTWs in
collecting and treating certain wastewaters have caused many municipalities to
increase the rates charged for accepting these wastewaters. With respect to
certain wastewaters, it is more economical for the generator to deliver the
waste to liquid waste management service providers such as the Company than to
discharge the waste directly into the POTW. For example, it is currently more
economical for many soft drink manufacturers to deliver their dated beverages to
us for processing and disposal than to discharge the beverages directly into the
POTW.
OUTSOURCING BY INDUSTRIAL AND COMMERCIAL BUSINESSES. Industrial and
commercial businesses prefer to focus on their primary business activities and
to downsize and outsource secondary business activities in which they may not
have much expertise. By outsourcing their wastewater treatment needs, they can
free-up capital for investment in their primary products and business
activities, eliminate a significant portion of their overhead and transfer risk
to experts in the field.
ECONOMIC EXPANSION. Many industrial companies have significantly expanded
their manufacturing and processing facilities. This industrial expansion has
increased the amount of wastewater generated. In addition, continued commercial
expansion throughout North America has generated additional grease and grit trap
waste and other liquid waste that must be processed by the waste generators,
POTWs or liquid waste management service providers such as the Company.
INCREASINGLY STRICT REGULATIONS. Heightened public concern about water
quality has caused federal, state and local governments to adopt increasingly
strict regulations governing the processing and disposal of industrial
wastewater and other liquid wastes. For example, effective as of October 1993,
Subtitle D of RCRA banned the disposal of untreated bulk liquid waste in
landfills. In addition, effective in March 1997, the Texas Natural Resource
Conservation Commission implemented state-wide "full pump" regulations
requiring 100% evacuation of all grease and grit traps and proper disposal of
the full volume of each trap. Furthermore, in January 1999, the EPA proposed new
regulations which would establish further restrictions on the discharge of
pollutants into U.S. waters and into POTWs by existing and new facilities that
treat or recover any hazardous or nonhazardous industrial waste, wastewater or
used material from off-site. Louisiana, Texas and certain other oil and gas
producing states have enacted comprehensive laws and regulations governing the
proper management of oilfield waste. Under Louisiana and Texas regulations, if
oilfield waste cannot be processed for discharge or disposed of at the well
where it is generated, it must be transported to a licensed oilfield waste
processing or disposal facility. In addition, federal regulations also restrict,
and in some cases prohibit entirely, the discharge of oilfield waste into U.S.
waters.
STRATEGY
Our objective is to be the largest and most profitable liquid waste
management company in each of the markets in which we operate. We believe that
as we expand we are likely to benefit from numerous competitive advantages
relative to smaller operators, including servicing multiple customer locations,
treating a wide variety of liquid waste streams, achieving operating
efficiencies and increased economies of scale and adapting to changing
regulations. Our strategy for achieving this objective is to (1) expand through
acquisitions; (2) generate internal growth; (3) enhance existing and acquired
operations; and (4) operate our businesses on a decentralized basis. We intend
to implement this strategy as follows:
o ACQUISITIONS. We pursue acquisitions of liquid waste management
businesses in existing and new geographic markets. We also make
smaller "tuck-in" acquisitions in our existing markets
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in order to increase our facility and equipment utilization and expand
our market penetration and range of services. In considering new
markets, we generally seek to acquire a liquid waste processing
facility that has the customer base, technical skills and
infrastructure necessary to be a core business into which other liquid
waste operations can be consolidated. After we have acquired a
processing facility, we typically seek to increase the utilization of
the facility by securing captive waste streams, which includes
acquiring collection companies and entering into contracts to collect
or accept all of the various types of liquid waste generated by
customers. We also seek to acquire other liquid waste management
businesses that can be integrated into our existing operations or
utilized to provide additional liquid waste management services to the
same customer base.
o INTERNAL GROWTH. To generate internal growth, we have focused on
increasing sales penetration in our current and adjacent markets,
soliciting new commercial and industrial customers, expanding our
collection infrastructure, marketing upgraded services to existing
customers and, where appropriate, raising prices. We believe there are
a number of liquid waste generators that would prefer to have a single
source provider for the collection, processing and disposal of all of
their liquid waste streams, but are unable to do so because the liquid
waste management industry is highly fragmented. Accordingly, we have
positioned ourselves as a multi-city, single source provider of liquid
waste management services for national and regional generators of
liquid waste. In addition, we intend to expand the capacity and
processing capabilities of our existing liquid waste management
facilities, and to amend our permits for certain facilities in order
to receive additional liquid waste streams.
o OPERATIONAL ENHANCEMENTS. We intend to continue to improve our
operations through collection route densification and consolidation
and increased facility and equipment utilization. We also expect to
realize cost savings by consolidating certain administrative functions
at our corporate offices, such as cash management, human resources,
finance and insurance.
o DECENTRALIZED MANAGEMENT. We manage our various businesses on a
decentralized basis, with local management maintaining responsibility
for the day-to-day operations, profitability and growth of the
business, while our executive officers exercise strong strategic and
financial oversight. We believe that this structure will retain the
entrepreneurial spirit present in each of the acquired businesses and
allow us to capitalize on the considerable local and regional market
knowledge and customer relationships possessed by local management.
OPERATIONS AND SERVICES PROVIDED
Industrial and commercial businesses produce various types of wastewater
(including hydrocarbon contaminated water, landfill leachate, dated beverages,
grease and grit trap wastes and certain hazardous wastes) that must be disposed
of in accordance with federal, state and local regulations. Similarly, oil and
gas exploration and production companies produce liquid waste that must be
disposed of in accordance with federal and state regulations. We accept liquid
waste from generators and independent collection companies, process the liquid
waste to remove contaminants and then dispose of the liquid waste in accordance
with applicable regulations. In addition, in certain instances, our processing
operations generate saleable by-products. Our services permit generators of
liquid waste to focus on their primary business activities, while we perform the
secondary operations of processing and disposing of their waste.
WASTEWATER DIVISION
Our Wastewater Division contributed approximately 92.5% of our pro forma
revenues for the nine months ended September 30, 1998. This Division receives
fees to collect, process and dispose of liquid waste such as industrial
wastewater, grease trap and grit trap waste, bulk liquids and dated beverages,
and certain hazardous wastes. In addition, the Wastewater Division generates
revenues from the sale of by-products, including fats, oils, feed proteins,
industrial and fuel grade ethanol, solvents, aluminum, glass, plastic and
cardboard, recovered from waste streams. It operates a fleet of
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approximately 540 vehicles to collect waste directly from customers, receives
waste from independent transporters servicing thousands of additional generators
and also receives waste shipped directly by the generators via rail and truck.
Brief descriptions of the types of liquid waste most commonly managed by the
Wastewater Division are set forth below:
INDUSTRIAL WASTEWATERS. Industrial wastewaters such as hydrocarbon
contaminated water, landfill leachate and printing solvents are transported to
our facilities in vacuum trucks, trailers and other transportable containers.
Using a variety of physical, chemical, thermal and biological techniques, the
liquid waste is broken down into constituent components. Water extracted from
the liquid waste is pretreated and then discharged into the POTW and solid
materials are dried and disposed of in an independent solid waste landfill. In
some instances, such as printing solvents, the contaminated materials are
processed and returned to the generator for reuse.
GREASE AND GRIT TRAP WASTE. Grease trap waste from restaurants and other
food manufacturing and preparation facilities and grit trap waste from car
washes is collected by our vehicles or independent parties and transported to
our facilities. Grease and grit trap waste is processed using a variety of
physical, chemical, thermal and biological techniques. Water extracted from the
liquid waste is pretreated and then discharged into the POTW and solid materials
are dried and disposed of in an independent solid waste landfill. By-products
recovered from grease trap waste are sold for use in producing various grades of
fats, oils and feed proteins.
BULK LIQUIDS AND DATED BEVERAGES. We accept both liquid residuals and
dated packaged beverages from breweries, soft drink manufacturers and food
processors. Water extracted from the liquid waste is pretreated and then
discharged into the POTW. The remaining liquid waste is fermented and distilled
into both industrial and fuel grade ethanol, which is sold primarily to major
oil and chemical companies. Packaging of the dated beverages, whether aluminum,
glass, plastic or cardboard, is removed, separated and sold to recycling firms.
HAZARDOUS WASTES. Hazardous wastes such as household hazardous wastes,
plating solutions, acids, and flammable and reactive wastes are transported to
certain of our facilities in trucks and other transportable containers and by
rail. Wastewaters suitable for treatment under the Clean Water Act are directed
into an appropriate process such as chemical precipitation or filtration. Sludge
and solid hazardous wastes are directed to our chemical fixation facility to be
pre-treated using chemical oxidation or reduction followed by fixation. After
testing, solid and semi-solid residues are shipped to an independent Subtitle D
landfill and treated listed waste residues are sent to an audited and approved
independent Subtitle C landfill. Organic wastes that have recoverable heat or
solvent values are recycled using distillation techniques. Solvents are sold
back to the paint industry as thinners. Other organic wastes are blended into
fuels sold primarily to operators of cement or lime kiln facilities.
BIOSOLIDS. We accept and process liquid and dry cake biosolids, or sludge,
from municipal wastewater treatment facilities and private businesses and
process these biosolids into a product that is sold for use as a fertilizer and
landfill cover.
SEPTAGE. Septage is pumped from septic tanks by our vehicles or
independent parties and transported to our facilities. The septage is then
processed using a variety of physical, chemical, thermal and biological
techniques. Water extracted from the liquid waste is pretreated and then
discharged into the POTW and solid materials are dried and disposed of in an
independent solid waste landfill.
PETROLEUM FUELS. Contaminated and off-specification petroleum fuels and
used oil are transported to our facilities in vacuum trucks, trailers and other
transportable oil containers. Using mechanical and gravity separation
techniques, these materials are processed to produce a fuel sold primarily to
operators of industrial furnaces. Resulting wastewater is transported to another
of our facilities for processing and disposal. Solid materials and sludges are
sent to one of our oilfield waste processing facilities.
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<PAGE>
The Wastewater Division operates 25 liquid waste processing facilities. We
believe that the specialized equipment, licenses and permits necessary to
operate these liquid waste processing facilities create a significant barrier to
entry into this industry. The following table sets forth certain information
relating to each such facility, including the type of liquid wastes most
commonly managed:
<TABLE>
<CAPTION>
FACILITY LOCATION LIQUID WASTES MANAGED
<S> <C> <C>
Parallel CA. ........................ Rancho Cucamonga, California Bulk Liquids and Dated Beverages
Universal Waste...................... Tampa, Florida Household Hazardous Wastes
National Solvent..................... Atlanta, Georgia Industrial Wastewaters
Parallel KY. ........................ Louisville, Kentucky Bulk Liquids and Dated Beverages
Re-Claim LA. ........................ Shreveport, Louisiana Industrial Wastewaters
City Environmental................... Detroit, Michigan Hazardous Wastes; Industrial
Wastewaters
Northern A-1......................... Kalkaska, Michigan Industrial Wastewaters
Waste Stream......................... Weedsport, New York Biosolids
Environment Management............... Austin, Texas Grease and Grit Trap Waste
Mesa................................. Dallas, Texas Grease and Grit Trap Waste
Amigo North.......................... Giddings, Texas Petroleum Fuels
Reclamation Technology............... Haltom City, Texas Industrial Wastewaters; Grease and
Grit Trap Waste
American WasteWater.................. Houston, Texas Industrial Wastewaters; Grease and
Grit Trap Waste; Septage
E. Allison........................... Houston, Texas Grease and Grit Trap Waste
Re-Claim TX. ........................ Houston, Texas Industrial Wastewaters
South Texas (Mesa)................... Los Fresnos, Texas Grease and Grit Trap Waste
Waste Technologies................... San Antonio, Texas Grease and Grit Trap Waste
Imperial (Mesa)...................... San Antonio, Texas Grease and Grit Trap Waste
Amigo South.......................... San Antonio, Texas Petroleum Fuels
D&H Holding.......................... Hammond, Indiana Industrial Wastewaters; Grease and
Grit Trap Waste; Septage
Parallel FL. ........................ Bartow, Florida Bulk Liquids and Dated Beverages
Romic CA. ........................... East Palo Alto, California Hazardous Wastes; Industrial
Wastewaters
Romic AZ. ........................... Chandler, Arizona Hazardous Wastes; Industrial
Wastewaters
Gateway Terminal..................... Carteret, New Jersey Industrial Wastewaters
Bio-Vac.............................. Shreveport, Louisiana Grease and Grit Trap Waste
</TABLE>
OILFIELD WASTE DIVISION
The Oilfield Waste Division contributed approximately 7.5% of our pro forma
revenues for the nine months ended September 30, 1998. At our five oilfield
waste facilities located in Louisiana and Texas, the Oilfield Waste Division
treats and disposes of waste that is generated in the exploration for and
production of oil and natural gas. Oilfield waste consists primarily of
oil-based and water-based drilling fluids (which contain oil, grease, chlorides
and heavy metals), as well as cuttings, saltwater, workover and completion
fluids, production pit sludges and soil containing these materials. In addition,
at two Louisiana locations, the Oilfield Waste Division cleans tanks, barges and
other vessels used in the storage and transportation of oilfield waste.
Landfarming, the treatment process utilized at our four Louisiana oilfield
waste facilities, involves several distinct stages. Oilfield waste is brought to
our facilities in trucks and on barges and the delivered waste materials are
then tested. Materials which do not qualify as permitted oilfield waste under
applicable regulations are rejected. Accepted waste is then loaded into
treatment cells, which are flooded with fresh water and mixed to dissolve salts
and soluble materials. Saltwater is then pumped out through a collection system
and typically disposed of at a saltwater injection well on-site. This flooding
process is typically repeated several times. The remaining waste is then
processed to remove organic contamination through biological degradation. Total
treatment of a cell takes approximately nine to twelve months. In the final
stage, the remaining material is tested to ensure compliance with regulatory
requirements. Thereafter, the material is transported to on-site stockpile
areas.
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Under the terms of our new agreement with Newpark Resources, Inc., they are
entitled to deliver specified volumes of waste to certain of our Louisiana
landfarms until June 30, 2001. In return, Newpark has agreed to pay us at least
$30.0 million. Subject to certain conditions, Newpark may extend the term of the
new agreement for two additional one-year periods at an additional cost of
approximately $8.0 million per year. As long as Newpark complies with the
agreement, we are prohibited until June 30, 2001 from accepting from any
customer other than Newpark any oilfield waste generated in a marine environment
or transported in a marine vessel within the states of Louisiana, Texas,
Mississippi and Alabama and the Gulf of Mexico. If the term of the new agreement
is extended by Newpark, the term of the prohibition on our accepting this type
of waste from other customers will also be extended for a corresponding period
of time. See "Certain Transactions."
Because of our contractual arrangements with Newpark, we are focusing our
marketing efforts toward inland waste generators. We believe that by doing so we
will be able to increase the total amount of oilfield waste that is delivered to
the Oilfield Waste Division for processing and disposal.
The Oilfield Waste Division operates five oilfield waste processing
facilities and seven commercial saltwater injection wells. The following table
sets forth certain information relating to each processing facility.
AREA PERMITTED
FOR OILFIELD APPROXIMATE
WASTE SQUARE FOOTAGE
PROCESSING OF OFFICE
LOCATION AND DISPOSAL FACILITIES
Bateman Island, Louisiana............ 115 acres 5,000
Bourg, Louisiana..................... 140 acres 5,000
Elm Grove, Louisiana................. 152 acres 500
Mermentau, Louisiana................. 277 acres 10,000
Bustamonte, Texas.................... 120 acres 1,000
ACQUISITION PROGRAM
We have pursued an aggressive acquisition program, acquiring 41 liquid
waste management businesses from our inception in November 1996 through February
12, 1999. We believe that numerous additional acquisition candidates meeting our
acquisition criteria, including "tuck-in" opportunities, exist within our
existing markets and in new geographic markets.
We have disciplined pre-acquisition review procedures for acquisition
candidates, including legal, financial, engineering, operational and
environmental reviews. The environmental reviews include, where appropriate,
investigation of geologic, hydrogeologic and other site conditions, past and
current operations (including types of waste processed and disposed of), design
and construction records, permits, regulatory compliance history, regulatory
agency records and available soil sampling, groundwater and air monitoring
results. Our senior management is actively involved in identifying and
evaluating acquisition candidates.
In considering whether to proceed with an acquisition, we evaluate a number
of factors, including:
o The acquisition candidate's historical and projected financial
results;
o Any expected synergies with one or more of our existing
operations;
o The proposed purchase price and the expected impact on
our results of operations and our earnings per share;
o Whether the candidate will enhance our ability to
effect other acquisitions in the vicinity;
o The capabilities and experience of senior
management of the candidate;
o The candidate's customer service
reputation and relationships with the
local communities;
o The composition and size of the
candidate's customer base;
o The types of services provided
by the candidate; and
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<PAGE>
o Whether the candidate has definable and
controllable liabilities, including potential
environmental liabilities.
We also have a detailed process for integrating newly acquired businesses.
This process is designed to achieve operating compatibility with maximum speed
and efficiency, and with minimum disruption of ongoing business. Once a liquid
waste management business is acquired, we implement programs and policies
designed to reduce costs and improve operating efficiencies and overall
profitability. For example, we replace the acquired business' computer systems
with our own management reporting and control system. We typically seek to
retain the acquired business' qualified managers and key employees, while
consolidating certain overhead functions such as cash management, human
resources, finance and insurance through our corporate offices.
As consideration for future acquisitions, we intend to continue to use
various combinations of our common stock and cash. The consideration for each
future acquisition will vary on a case-by-case basis depending on our financial
interests, the financial interests of the owners of the business to be acquired,
and the historic operating results and future prospects of the business. After
this offering and the application of the proceeds, we anticipate having
approximately $212.0 million available under our credit facility. We also have
820,161 shares of common stock available for issuance under our acquisition
shelf registration statement. In addition, we intend to register an additional
4,200,000 shares of common stock under the Securities Act of 1933 for use in
connection with future acquisitions.
The consideration for the businesses we have acquired since our inception
consisted of cash, notes and shares of common stock. In addition, in some
transactions, we agreed to pay additional consideration to the owners of the
acquired business if the future pre-tax earnings of the acquired business exceed
certain negotiated levels or other specified events occur.
The following table provides a summary description of acquisitions that we
completed prior to February 12, 1999.
ACQUISITIONS BY WASTEWATER DIVISION:
<TABLE>
<CAPTION>
DATE
SELLER TYPE OF BUSINESS PRINCIPAL LOCATION ACQUIRED
<S> <C> <C> <C>
The Mesa Companies................... Collection, Processing and Recovery Dallas, Texas 06/97
American WasteWater Inc.............. Collection, Processing and Recovery Houston, Texas 06/97
A&B Enterprises, Inc................. Collection Dallas, Texas 10/97
Re-Claim Environmental, Inc.......... Collection, Processing and Recovery Houston, Texas 10/97
Re-Claim Environmental Louisiana
LLC................................ Collection, Processing and Recovery Shreveport, Louisiana 10/97
E. Allison Enterprise, Inc........... Processing Houston, Texas 10/97
Waste Technologies, Inc.............. Collection, Processing and Recovery San Antonio, Texas 12/97
Environment Management, Inc. (EMI)... Collection, Processing and Recovery Austin, Texas 01/98
Suburban Wastewater Services, Inc.... Collection Braintree, Massachusetts 01/98
Trapmaster, Inc...................... Collection San Antonio, Texas 03/98
Bug Master Exterminating Service,
Inc................................ Collection Austin, Texas 03/98
Betts Pump Service, Inc.............. Collection Kemp, Texas 04/98
Lindenborn Vacuum Services, Inc...... Collection McAllen, Texas 04/98
Parallel Products.................... Collection, Processing and Recovery Rancho Cucamonga, California 04/98
South Shore Pumping Corp............. Collection Plymouth, Massachusetts 04/98
Reclamation Technology Management,
Inc................................ Collection and Processing Haltom City, Texas 04/98
Amigo Diversified Services, Inc...... Collection, Processing and Recovery San Antonio, Texas 04/98
Waste Stream Environmental, Inc...... Collection, Processing and Recovery Weedsport, New York 04/98
The National Solvent Exchange
Corp............................... Processing and Recovery Atlanta, Georgia 04/98
Universal Waste and Transit.......... Collection and Processing Tampa, Florida 05/98
City Environmental, Inc.............. Collection and Processing Detroit, Michigan 05/98
Northern A-1 Sanitation Services,
Inc. ................................ Collection, Processing and Recovery Kalkaska, Michigan 05/98
Advanced Management Systems, Inc..... Collection and Processing San Leon, Texas 06/98
T&L Plumbing, Inc.................... Other Dallas, Texas 07/98
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
DATE
SELLER TYPE OF BUSINESS PRINCIPAL LOCATION ACQUIRED
<S> <C> <C> <C>
Bio-Vac, Inc......................... Collection and Processing Shreveport, Louisiana 07/98
Enterprise Mobile Waste Recovery,
Inc................................ Collection and Processing St. Louis, Missouri 07/98
Clean "B"............................ Collection Donna, Texas 08/98
Mr. Cesspool......................... Collection East Greenwich, Rhode Island 08/98
Blow Bros............................ Collection Old Orchard Beach, Maine 09/98
Allied Septic Corp., Inc............. Collection Jim Thorpe, Pennsylvania 09/98
First Source, Inc.................... Collection and Processing Denville, New Jersey 09/98
D&H Holding Co., Inc................. Collection and Processing Hammond, Indiana 10/98
Cactus Vacuum Truck Service, Inc..... Collection Grand Prairie, Texas 11/98
Houston Tank Cleaning Service,
Inc................................ Other Houston, Texas 12/98
Caldwell Environmental Unified
Services........................... Collection Acton, Massachusetts 12/98
A. Horman Sanitation................. Collection N. Attleboro, Massachusetts 01/99
Gateway Terminal Service
Corporation........................ Processing Carteret, New Jersey 01/99
Romic Environmental
Technologies Corporation........... Collection, Processing and Recovery East Palo Alto, California 01/99
All-Around Vacuum Service............ Collection Houston, Texas 01/99
ACQUISITIONS BY OILFIELD WASTE DIVISION:
DATE
SELLER TYPE OF BUSINESS PRINCIPAL LOCATION ACQUIRED
Campbell Wells....................... Processing and Disposal Lafayette, Louisiana 12/96
Newpark Environmental Services,
Inc................................ Other Morgan City, Louisiana 08/98
</TABLE>
COMPETITION
The liquid waste management industry is highly fragmented and very
competitive. Competition is primarily on the basis of proximity to collection
operations, collection and processing fees charged and quality of service. With
respect to certain waste streams (such as oilfield waste, bulk liquids and dated
beverages) we must compete with the generators of these waste streams, who
continually evaluate the decision whether to use internal disposal methods or
utilize a liquid waste management company such as us. We must also compete with
area landfills for certain waste streams. We compete with Newpark Resources,
Inc. and a number of smaller companies for oilfield waste produced on land in
the Gulf Coast region.
We believe that there are certain barriers to entry in the liquid waste
industry. These barriers include the need for specially equipped facilities;
licenses, permits and trained personnel necessary to operate these facilities;
and formalized procedures for customer acceptance.
REGULATORY BACKGROUND
Our business operations are affected both directly and indirectly by
governmental regulations, including various federal, state and local pollution
control and health and safety programs that are administered and enforced by
regulatory agencies. These programs are applicable or potentially applicable to
one or more of our existing operations. Although we intend to make capital
expenditures to expand our liquid waste processing capabilities, we believe that
we are not presently required to make material capital expenditures to remain in
compliance with federal, state and local laws and regulations relating to the
protection of the environment. See "Risk Factors -- Dependence Upon Oilfield
Waste Exemption Under RCRA and Other Environmental Regulations" and
"-- Failure To Comply with Governmental Regulations."
FEDERAL REGULATION
The primary U.S. federal statutes affecting our business are summarized
below:
THE CLEAN WATER ACT. We treat and discharge wastewaters at our liquid
waste facilities and at our oilfield waste landfarms. These activities are
subject to the requirements of the Clean Water Act and comparable state statutes
and federal and state enforcement of these regulations. The Clean Water Act
regulates the discharge of pollutants into waters of the United States. The
Clean Water Act
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<PAGE>
establishes a system of standards, permits and enforcement procedures for the
discharge of pollutants from industrial and municipal wastewater sources. The
law sets treatment standards for industries and wastewater treatment plants and
provides federal grants to assist municipalities in complying with the new
standards. In addition to requiring permits for industrial and municipal
discharges directly into the waters of the United States, the Clean Water Act
also requires pretreatment of industrial wastewater before discharge into
municipal systems. The Clean Water Act gives the EPA the authority to set
pretreatment limits for direct and indirect industrial discharges. In addition,
the Clean Water Act prohibits certain discharges of oil or hazardous substances
and authorizes the federal government to remove or arrange for removal of such
oil or hazardous substances. The Clean Water Act also requires the adoption of
the National Contingency Plan to cover removal of such materials. Under the
Clean Water Act, the owner or operator of a vessel or facility may be liable for
penalties and costs incurred by the federal government in responding to a
discharge of oil or hazardous substances.
The Clean Water Act also has a significant impact on the operations of the
Oilfield Waste Division's customers. EPA Region 6, which includes the Oilfield
Waste Division's current market, continues to issue new and amended National
Pollution Discharge Elimination System general permits further limiting or
restricting substantially all discharges of produced water from the Oil and Gas
Extraction Point Source Category into waters of the United States. The combined
effect of all of these permits closely approaches a "zero discharge" standard
affecting all waters except those of the Outer Continental Shelf. We and many
industry participants believe that these permits and the requirements of the
Clean Water Act may ultimately lead to a total prohibition of overboard
discharge in the Gulf of Mexico.
RCRA. RCRA is the principal federal statute governing hazardous and solid
waste generation, treatment, storage and disposal. RCRA and state hazardous
waste management programs govern the handling and disposal of "hazardous
waste." The EPA has issued regulations pursuant to RCRA, and states have
promulgated regulations under comparable state statutes, that govern hazardous
waste generators, transporters and owners and operators of hazardous waste
treatment, storage or disposal facilities. These regulations impose detailed
operating, inspection, training and emergency preparedness and response
standards and requirements for closure, financial responsibility, manifesting of
wastes, record-keeping and reporting, as well as treatment standards for any
hazardous wastes intended for land disposal. We do not accept RCRA-regulated
hazardous waste at any of our liquid waste processing facilities other than the
Detroit, Michigan, Tampa, Florida, East Palo Alto, California and Chandler,
Arizona facilities. Consequently, the majority of our activities are not subject
to the requirements adopted under Subtitle C of RCRA. Our facility in Detroit,
Michigan has never been granted a permit under RCRA and is continuing to operate
under interim status, as allowed by RCRA. In addition, our facility in East Palo
Alto, California facility is operating under a RCRA permit that expired in 1991,
but that allows for ongoing operations. With respect to both facilities, all
necessary applications, renewal applications and other documentation were timely
filed and applicable regulations allow the facilities to continue to operate.
Furthermore, our subsidiary, Romic Environmental Technologies Corporation, has
entered into an administrative consent order with the EPA relating to the
cleanup of soil and groundwater contamination at its facility in East Palo Alto,
California. See "-- Legal Proceedings."
The Oilfield Waste Division's facilities treat and dispose of oilfield
waste, which is exempt from classification as a RCRA-regulated waste. At various
times in the past, proposals have been made to rescind the exemption that
excludes oilfield waste from regulation under RCRA. The repeal or modification
of this exemption by administrative, legislative or judicial process would
require us to change our method of doing business and could have a material
adverse effect on our business, results of operations and financial condition.
There is no assurance that we would have the capital resources available to do
so, or that we would be able to adapt our operations.
RCRA also indirectly affects our operations by prohibiting the disposal of
certain liquid wastes in landfills. This prohibition increases demand for the
services provided by the Wastewater Division.
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<PAGE>
CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act, as amended in 1986 ("CERCLA"), provides for immediate response
and removal actions coordinated by the EPA for releases of hazardous substances
into the environment and authorizes the government, or private parties, to
respond to the release or threatened release of hazardous substances. The
government may also order persons responsible for the release to perform any
necessary cleanup. Liability extends to the present owners and operators of
waste disposal facilities from which a release occurs, persons who owned or
operated such facilities at the time the hazardous substances were released,
persons who arranged for disposal or treatment of hazardous substances and waste
transporters who selected such facilities for treatment or disposal of hazardous
substances. CERCLA has been interpreted to create strict, joint and several
liability for the cost of removal and remediation, other necessary response
costs and damages for injury to natural resources.
If our operations or facilities are responsible for the release of or
improper disposal of hazardous substances, we could incur CERCLA liability. We
may also incur CERCLA liability as a result of environmental contamination
caused by hazardous substances, the transportation, treatment or disposal of
which we arranged or which was arranged by the owners of a business that we have
acquired.
Other than the administrative consent orders and agreements entered into by
our Romic subsidiary with respect to three drum reconditioning or disposal sites
to which it delivered waste, we are not aware of any claims against us or any of
our subsidiaries that are based on CERCLA. See "--Legal Proceedings."
Nonetheless, the identification of any additional sites at which cleanup action
is required could subject us to liabilities which could have a material adverse
effect on our business, results of operations and financial condition.
THE CLEAN AIR ACT. The Clean Air Act provides for federal, state and local
regulation of emissions of air pollutants into the atmosphere. Any modification
or construction of a facility with regulated air emissions must be a permitted
or authorized activity. The Clean Air Act provides for administrative and
judicial enforcement against owners and operators of regulated facilities,
including substantial penalties. In 1990, the Clean Air Act was reauthorized and
amended, substantially increasing the scope and stringency of the Clean Air
Act's regulations. Compliance with the Clean Air Act is not expected to have a
material adverse effect on our business, results of operations or financial
condition.
STATE AND LOCAL REGULATIONS
Our liquid waste processing facilities are subject to direct regulation by
a variety of state and local authorities. Typically, we are required to obtain
processing, wastewater discharge and air quality permits from state and local
authorities to operate these facilities and to comply with applicable
regulations concerning, among other things, the generation and discharge of
odors and wastewater.
Order 29-B of the Louisiana Department of Natural Resources contains
extensive rules regarding the generation, processing, storage, transportation
and disposal of oilfield waste. Under Order 29-B, on-site disposal of oilfield
waste is limited and subject to stringent guidelines. If these guidelines cannot
be met, oilfield waste must be transported and disposed of off-site in
accordance with the provisions of Order 29-B. Moreover, under Order 29-B, most,
if not all, active waste pits (a typical on-site disposal method used by inland
generators of oilfield waste) must be closed or modified to meet regulatory
standards; however, full enforcement of this portion of Order 29-B has been
deferred. The Texas Railroad Commission has also adopted detailed requirements
for the management and disposal of oilfield waste. Permits issued by state
regulatory agencies are required for each oilfield waste treatment facility
operating within Louisiana and Texas. We must perform tests before acceptance of
any oilfield waste, as well as during and after treatment to ensure compliance
with all regulatory requirements. Short-term emergency rules recently adopted by
the Louisiana Department of Natural Resources have increased the pre-treatment
testing to be conducted on oilfield waste delivered to our Louisiana landfarms.
The closure of all of our landfarms is also regulated by state authorities.
In general, closure of a landfarm involves a multi-phase process whereby all
injection wells at the landfarm are plugged and
36
<PAGE>
abandoned, all surface equipment is removed from the site, the treatment cells
and perimeter containment levees are removed and the surface of the site is
contoured and vegetated. Additional regulatory requirements include monitoring
the surface runoff water, the soil pore water and the groundwater for a period
of five years. If, after five years, the water quality meets the requirements
specified in the state regulations, the site is certified as closed.
The states in which we operate have their own laws and regulations that may
be more strict than comparable federal laws and regulations governing hazardous
and nonhazardous waste disposal, water and air pollution, releases and cleanup
of hazardous substances and liabilities for such matters. Our facilities and
operations are likely to be subject to many, if not all, of these laws and
regulations. In addition, states and localities into which we may expand, by
acquisition or otherwise, may now or in the future have regulations with
positive or negative effects on us. It is possible that state or local
regulations could adversely affect our execution of our acquisition strategy.
RISK MANAGEMENT
Our business exposes us to substantial risks. For example, our services
routinely involve the handling, storage and disposal of nonhazardous regulated
materials and wastes and, in some cases, the handling of hazardous materials and
wastes for our customers who are the generators of the wastes. We could be held
liable for improper cleanup and disposal, which liability could be based upon
statute, negligence, strict liability, contract or otherwise. In addition, we
often are required to indemnify our customers or other third parties against
certain risks related to the services performed by us, including damages
resulting from environmental contamination.
We have implemented various procedures designed to ensure compliance with
applicable regulations and reduce the risk of damage or loss. These include
specified handling procedures and guidelines for regulated wastes, ongoing
training and monitoring of employees and maintenance of insurance coverage. We
carry a broad range of insurance coverage that we consider adequate for the
protection of our assets and operations. This coverage includes general
liability, comprehensive property damage, workers' compensation and other
coverage customary in our industry; however, this insurance is subject to
coverage limits and certain policies exclude coverage for damages resulting from
environmental contamination. Although there are currently numerous sources from
which liability insurance may be obtained, it may not continue to be available
to us on commercially reasonable terms or the possible types of liabilities that
may be incurred by us may not be covered by our insurance. In addition, our
insurance carriers may not meet their obligations under the policies or the
dollar amount of the liabilities may exceed our policy limits. A claim that is
not covered or only partially covered by insurance could have a material adverse
effect on our business, results of operations and financial condition.
PROPERTIES
Our corporate offices are located in Houston, Texas. The corporate offices
consist of approximately 12,115 square feet of office space occupied under a
lease which expires on June 1, 2002.
In addition to the facilities described above in " -- Operations and
Services Provided," we also own a facility in Lacassine, Louisiana consisting
of approximately 8,000 square feet of office and equipment storage space and
approximately 130 acres of undeveloped land that was previously used for
landfarming of oilfield waste and naturally occurring radioactive material
("NORM"). In January 1997, we ceased accepting NORM at the Lacassine facility
and began taking the steps necessary to close this facility in accordance with
Louisiana law. We also own a facility in Kansas City, Missouri that was
previously used for storage and bulking of various hazardous wastes and a
facility in Roseville, Michigan that was previously used for fuel blending and
solvent recycling. The Kansas City and Roseville facilities have not been
operational since 1992 and we have no plans to resume operations at either of
these facilities.
37
<PAGE>
The Wastewater Division owns other real estate, buildings and physical
properties that it uses in its liquid waste collection operations. The
Wastewater Division also leases certain of its collection and transportation
facilities and administrative offices.
All of our facilities satisfy our present needs; however, as part of our
internal growth strategy, we intend to expand the capacity and processing
capabilities of certain of our liquid waste processing facilities and increase
the number and types of permitted waste streams of such facilities. We believe
that the remaining capacity of each of the landfarms that we lease is sufficient
for at least 25 years; which, in each case, exceeds the remaining term
(including options) of the lease agreement for such facility. We also believe
that the remaining capacity at each of the landfarms that we own is sufficient
for at least 25 years.
LEGAL PROCEEDINGS
On August 7, 1998, we settled substantially all of the claims asserted
against us in the four lawsuits relating to our Bourg, Louisiana landfarm. Under
the terms of the settlement, we agreed to expand the buffer zone and build a
berm along the western boundary of our landfarm. The cost of these actions will
not be material to our operating results.
This settlement does not resolve certain claims asserted against us by
Acadian Shipyard, Inc., a local barge company, in the FRILOUX ET AL. V. CAMPBELL
WELLS CORPORATION case pending in the 17th Judicial District Court for the
Parish of Lafourche, Louisiana. In the FRILOUX case, we asserted various claims
for indemnity and/or contribution against Acadian. Thereafter, in July 1998,
Acadian filed various counterclaims against us including, without limitation,
claims for defamation of business reputation and conspiracy to damage Acadian's
business reputation. In addition, Acadian requested unspecified monetary damages
allegedly suffered as a result of alleged environmental contamination in
connection with the ongoing operations at the Bourg, Louisiana landfarm. We deny
that we have any liability to Acadian and intend to vigorously defend against
these claims. We do not believe that this action will have a material adverse
effect on our business, results of operations or financial condition.
Prior to its acquisition by the Company, Romic Environmental Technologies
Corporation had entered into an administrative consent order with the EPA
relating to the cleanup of soil and groundwater contamination at its facility in
East Palo Alto, California. A remedial investigation of the facility has been
completed by Romic and forwarded to the EPA. Romic is in the process of
preparing a corrective measures study for the facility and anticipates that this
study will be submitted to the EPA in March 1999. The EPA will then review the
corrective measures study and select a plan for final site remediation. Based
upon the information gathered from these studies, Romic's estimated costs for
this site are expected to be $3.3 million, paid over the next 30 years. These
estimated costs have been discounted for present value considerations at a rate
of 5.6% to establish a reserve of $2.2 million. However, due to the complex,
ongoing and evolving process of investigating and remediating the facility,
Romic's actual costs may exceed the amount reserved.
Prior to its acquisition by the Company, Romic had been notified by the EPA
and the California Department of Toxic Substances Control that it was a
potentially responsible party under applicable environmental legislation with
respect to the Bay Area Drum Superfund Site in San Francisco, California, the
Lorentz Barrel and Drum Superfund Site in San Jose, California and the Casmalia
Resources Hazardous Waste Management Facility located near Santa Barbara,
California, each of which was a drum reconditioning or disposal site previously
used by Romic. With respect to each of these sites, Romic and a number of other
potentially responsible parties have entered into administrative consent orders
and agreements allocating each party's respective share of the cost of
remediating the sites. Romic's share under these consent orders and agreements
is as follows: Bay Area -- 6.872%; Lorentz -- 5.62% and Casmalia
Resources -- 0.29%. Based upon the studies and remedial actions completed,
Romic's share of the estimated costs for these sites is expected to be $821,000,
paid over the next ten years. These estimated costs have been discounted for
present value considerations at a rate of 5.6% to establish a reserve of
$775,000. However, due to the complex, ongoing and evolving process of
investigating and remediating these sites, Romic's actual costs may exceed the
amount reserved.
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<PAGE>
With regard to the Casmalia Resources site, if adequate funding is not
obtained by the EPA from certain sources to fund additional remedial phases for
which Romic and other potentially responsible parties have not been released
from liability, Romic could incur additional costs of up to $400,000 which would
likely be disbursed over 30 years. No reserve has been established by Romic for
this loss contingency.
We are, from time to time, a party to litigation arising in the normal
course of our business, most of which involves claims for personal injury or
property damage incurred in connection with our operations. We are not currently
involved in any litigation that we believe will have a material adverse effect
on our business, results of operations or financial condition.
EMPLOYEES
At February 1, 1999, we employed approximately 1,200 persons full-time. We
are a party to only one collective bargaining agreement covering approximately
45 of our employees. We believe that our relationships with our employees are
satisfactory.
39
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning our directors
and executive officers.
NAME AGE POSITION
Michael P. Lawlor(a).......... 59 Chairman of the Board and Chief
Executive Officer
W. Gregory Orr(a)............. 43 Director, President and Chief Operating
Officer
Earl J. Blackwell............. 56 Chief Financial Officer, Senior Vice
President -- Finance and Secretary
Gary J. Van Rooyan............ 53 Vice President and General Counsel
Thomas B. Blanton(b).......... 52 Director
James F. McEneaney, 60 Director
Jr.(c)(d)(e)................
William A. Rothrock 46 Director
IV(b)(d)(e).................
Alfred Tyler 2nd(c)(d)(e)..... 56 Director
John N. Hatsopoulos(b)........ 64 Director
Roger A. Ramsey(a)............ 60 Director
- -----------------------------
(a) Term on Board expires in 2000.
(b) Term on Board expires in 1999.
(c) Term on Board expires in 2001.
(d) Member of Audit Committee.
(e) Member of Compensation Committee.
MICHAEL P. LAWLOR has served as a director of the Company since June 1997.
On August 25, 1997, Mr. Lawlor assumed the positions of Chairman of the Board
and Chief Executive Officer of the Company. From March 1996 to August 1997, Mr.
Lawlor was a private investor. Mr. Lawlor has over 25 years of experience in the
environmental services industry. From December 1992 to March 1996, Mr. Lawlor
was Chief Executive Officer and a director of ITEQ, Inc. f/k/a Air-Cure
Technologies, Inc., a manufacturer of air treatment and air moving and process
systems, equipment and components. From 1970 to 1992, Mr. Lawlor held various
positions with Browning-Ferris Industries, Inc., a national waste services
company. Mr. Lawlor started with Browning-Ferris in 1970, became a corporate
officer in 1978, and from 1970 to 1988 was responsible for all of
Browning-Ferris' landfill operations, during which time total landfill revenues
grew from $1 million to $500 million annually. Mr. Lawlor was the Chairman of
the Wildlife Habitat Enhancement Council, a nonprofit conservation organization,
from 1992 to 1996.
W. GREGORY ORR is a co-founder of the Company and served as Chairman of the
Board, Chief Executive Officer and President of the Company from November 1996
to August 1997. Mr. Orr currently serves as a director and the Chief Operating
Officer and President of the Company. From 1995 until December 1996, Mr. Orr was
the President and Chief Operating Officer of Campbell Wells L.P. and Campbell
Wells NORM, L.P., wholly-owned subsidiaries of Sanifill, Inc. From 1990 to 1991,
Mr. Orr was Regional Vice President of Sanifill's Atlantic Region, and from 1991
to 1995, Mr. Orr was a Vice President of Operations of Sanifill. From 1981 to
1989, Mr. Orr served in various capacities with Browning-Ferris, including
Divisional Vice President.
EARL J. BLACKWELL is a co-founder of the Company and has served as Chief
Financial Officer, Senior Vice President -- Finance and Secretary of the Company
from November 1996 to the present. From 1991 to December 1996, Mr. Blackwell was
a Divisional Chief Financial Officer for Sanifill and controller for Campbell
Wells, L.P. and Campbell Wells NORM, L.P. During this time, Mr. Blackwell was
responsible for organizing and managing the financial and administrative
functions of this division including the design, installation and management of
a financial reporting and management system interfacing with Sanifill's general
accounting system.
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<PAGE>
GARY J. VAN ROOYAN became Vice President and General Counsel of the Company
in September 1998. Mr. Van Rooyan has been engaged in the practice of law for
over 23 years, nearly 13 of which have been in the waste industry. From August
1996 until September 1998, Mr. Van Rooyan was Senior Corporate Counsel for
Browning-Ferris. From 1986 until August 1996, Mr. Van Rooyan held positions as
Regional General Counsel for various regions of Browning-Ferris. From 1981
through 1985, Mr. Van Rooyan served as Senior Counsel for the Dresser Atlas
Oilfield Services Group of Dresser Industries. From 1975 until 1981, Mr. Van
Rooyan was engaged in the private practice of law.
THOMAS B. BLANTON has been a director of the Company since June 1997. From
June 1997 to January 1999, Mr. Blanton also served as a Divisional Vice
President of the Company. From 1991 to June 1997, Mr. Blanton served as the sole
director and President of each of the Mesa Companies, three businesses acquired
by the Company in June 1997. Mr. Blanton has owned and operated fats and oils
businesses for over 30 years. Mr. Blanton's term on the Board of Directors
expires in 1999 and Mr. Blanton has advised us that he does not intend to accept
a nomination for another term on the Board.
JAMES F. MCENEANEY, JR. became a director of the Company in October 1997.
He is the retired President and Chief Operating Officer of Ryland Homes,
positions he held from 1980 to 1992. Mr. McEneaney also served as Executive Vice
President and a director of The Ryland Group, Inc. from 1981 to 1993. Mr.
McEneaney also was a founder of The Fortress Group, Inc., which was organized to
consolidate home builders in North America. He served as the company's Chief
Executive Officer from July 1995 through December 1995, and as a member of its
Board of Directors from 1995 until May 1997. Since August 1993, Mr. McEneaney
has served as the President of MacCan Associates, Inc., a management consulting
firm. Currently, Mr. McEneaney serves as Vice Chairman of the Board of Anne
Arundel Health Systems, Inc.
WILLIAM A. ROTHROCK IV became a director of the Company in June 1997. Since
1990, he has been Vice President -- Business Development for Sanifill and,
subsequently, Waste Management, Inc. From 1984 to 1990, Mr. Rothrock was
Divisional Vice President -- Landfill Marketing for Browning-Ferris.
ALFRED TYLER 2ND became a director of the Company in June 1997. Mr. Tyler
has over 20 years experience in the environmental services industry, most
recently as the President and Chief Executive Officer of Enviro-Gro
Technologies, a provider of sludge management services. In late 1992, Enviro-Gro
was sold to Wheelabrator Technologies and Mr. Tyler resigned his positions to
manage his other investments. From 1989 to the present, Mr. Tyler has been the
President and the sole stockholder of Weston Investments, Inc., a private
investment company. Mr. Tyler is also the President of Days Cove Reclamation
Company, a landfill operation and construction company, and a partner and
managing director of Bedford Capital Corporation, a New York consulting firm.
JOHN N. HATSOPOULOS became a director of the Company in December 1998. Mr.
Hatsopoulos is the Vice Chairman of the Board of Directors of Thermo Electron
Corporation. Mr. Hatsopoulos served as Thermo Electron's President from 1997
until 1999, and as its Chief Financial Officer and Executive Vice President from
1988 until 1997. Currently, Mr. Hatsopoulos is a member of the Board of
Directors of Thermedics Inc., Thermo Fibertek Inc., Thermo Instrument Systems
Inc., Thermo Power Corp., ThermoTrex Corp., Thermo Terratech Inc., Thermo Ecotek
Corp., Thermedics Detection and Metrika Systems Corp. In addition, he is a
member of the Board of Directors of the NASDAQ/AMEX Stock Exchange, Lois/USA
Inc. and Premier, Inc., a privately held organization of hospitals and health
systems.
ROGER A. RAMSEY became a director of the Company in January 1999. Mr.
Ramsey is the retired Chairman and Chief Executive Officer of Allied Waste
Industries, Inc., positions he held from 1990 through 1998. Mr. Ramsey is a
member of the Board of Directors of Allied Waste. In addition, Mr. Ramsey is a
member of the Texas Christian University Board of Trustees and a director of
several private corporations.
41
<PAGE>
CERTAIN TRANSACTIONS
In December 1996, we acquired five oilfield waste landfarms and landfills
from Campbell Wells, L.P., Campbell Wells NORM, L.P. and Sanifill, Inc., each of
which is now a wholly-owned subsidiary of Waste Management, Inc. In
consideration for these assets, we issued to Sanifill a $27.8 million promissory
note and a transferable 10-year warrant for the purchase of one million shares
of common stock at an exercise price of $2.00 per share. In December 1997, we
paid the Sanifill promissory note in full.
The Sanifill warrant grants its holder "piggyback" registration rights to
include shares of common stock purchased upon exercise of the Sanifill warrant
in any registration statement that we file under the Securities Act of 1933 with
respect to an offering of common stock for our own account or for the account of
any of our securities holders. Other than as described in "Principal and
Selling Stockholders," Sanifill has waived its right to have any shares
registered in connection with this offering.
In connection with the Campbell Wells acquisition described above, we also
acquired a long-term disposal agreement and certain related agreements with
Newpark Resources, Inc. During 1998, a dispute arose between the Company and
Newpark concerning Newpark's obligations under the disposal agreement. In
September 1998, we terminated the long-term disposal agreement and entered into
a new 33-month agreement. In the new agreement, Newpark agreed to pay us at
least $30.0 million. Newpark paid us $3.0 million in September 1998 and an
additional $5.0 million between October 1, 1998 and February 12, 1999. The
remaining amounts are required to be paid to us in monthly installments
continuing through June 2001. Under the terms of the new agreement, Newpark has
the right, but not the obligation, to deliver specified volumes of waste to
certain of our Louisiana landfarms for a period of three years without
additional cost. Subject to certain conditions, Newpark may extend the term of
the new agreement for two additional one-year terms at an additional cost of
approximately $8.0 million per year.
In addition, we also agreed that, until June 30, 2001, we would not (1)
accept from any customer other than Newpark any oilfield waste generated in a
marine environment or transported in a marine vessel, or (2) engage in the site
remediation and closure business, in each case within the states of Louisiana,
Texas, Mississippi and Alabama and the Gulf of Mexico. If the term of the new
agreement is extended by Newpark, the term of the prohibition on our accepting
this type of waste from other customers will also be extended for a
corresponding period of time.
As part of our agreement with Newpark, we also secured the right to
immediately enter into the business of cleaning tanks, barges and other vessels
and containers used in the storage and transportation of oilfield waste and
acquired certain assets used in this business in exchange for a total price of
$2.2 million. We are currently operating this business at two locations in
Louisiana. Prior to the settlement, we were contractually prohibited from
engaging in this cleaning business within the states of Louisiana, Texas,
Mississippi and Alabama and the Gulf of Mexico.
On December 31, 1998, we sold to a company owned by Thomas B. Blanton, a
director of the Company, substantially all of the assets used in the
distribution of various grades of fats, oils and feed proteins. These
by-products have been sold by the Company primarily to producers of livestock
feed and various chemicals located in Mexico. The purchase price for these
assets was approximately $1.7 million, of which approximately $1.1 million is
payable in March 1999. The remainder of the purchase price is payable in monthly
installments continuing through February 1, 2004. In connection with this sale,
we also agreed, for a period of one year, to sell to Mr. Blanton's company all
fats, oils and feed proteins that we recover from certain waste streams and that
conform to certain specifications. Mr. Blanton's company may extend this supply
agreement for four additional one-year terms. We believe that the terms of this
transaction are as favorable to us as could have been negotiated with an
unaffiliated party.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of February 12, 1999, as adjusted to reflect
the sale of the shares offered hereby, by (1) each of our directors, (2) each of
our executive officers, (3) all directors and executive officers as a group, and
(4) each selling stockholder. Unless otherwise indicated, all persons listed
have an address c/o our principal executive offices and have sole voting and
investment power with respect to their shares of common stock, except to the
extent authority is shared by spouses under applicable law.
<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
PRIOR TO THIS AFTER THIS
OFFERING OFFERING(A)
--------------------- SHARES ---------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
<S> <C> <C> <C> <C> <C>
Michael P. Lawlor(b)................. 250,100 1.9% -- 250,100 1.5%
W. Gregory Orr(c)(d)................. 621,000 4.8 -- 621,000 3.7
Earl J. Blackwell(d)(e).............. 355,000 2.7 -- 355,000 2.1
Gary J. Van Rooyan................... 10 * -- 10 *
Thomas B. Blanton.................... 675,260 5.2 125,000 550,260 3.3
William A. Rothrock IV(f)............ 113,750 * -- 113,750 *
Alfred Tyler 2nd(g).................. 20,000 * -- 20,000 *
James F. McEneaney, Jr.(h)........... 20,000 * -- 20,000 *
John N. Hatsopoulos(i)............... 15,000 * -- 15,000 *
Roger A. Ramsey(j)................... 10,400 * -- 10,400 *
Sanifill, Inc.(k)(d)................. 1,000,000 7.2 -- 1,000,000 5.6
All executive officers and directors
as a group (10 persons)(l)......... 2,080,520 15.8 125,000 1,955,520 11.5
</TABLE>
- -----------------------------
* Less than one percent.
(a) Adjusted to reflect the sale of shares of common stock offered hereby,
assuming the underwriters' over-allotment option is not exercised.
(b) Includes 100,000 shares which Mr. Lawlor has the right to acquire pursuant
to the terms of a stock option granted by the Company to him.
(c) Includes 250,000 shares held by The Wiley Gregory & Genene M. Orr Family
LLC, a limited liability company, over which Mr. Orr, as the manager, has
sole voting and investment power, 15,000 shares held by Mr. Orr's wife,
Genene Orr, 15,000 shares held by Mr. Orr's wife as custodian for two of
Mr. Orr's children, and 7,500 shares held individually by one of Mr. Orr's
children. Mr. Orr disclaims beneficial ownership of all shares held
individually by his children.
(d) The underwriters have an option to purchase 125,000 shares from Mr. Orr,
50,000 shares from Mr. Blackwell and 250,000 shares from Sanifill, Inc. to
cover over-allotments, if any.
(e) Includes 180,000 shares held by The Earl J. and Christine J. Blackwell
Family LLC, a limited liability company, over which Mr. Blackwell, as the
manager, has sole voting and investment power and 100,000 shares held in an
individual retirement account for the benefit of Mr. Blackwell.
(f) Includes 41,250 shares which Mr. Rothrock has the right to acquire pursuant
to the terms of certain stock options granted by the Company to him.
Excludes 62,500 shares issuable pursuant to a stock option granted to Mr.
Rothrock, which vests upon the successful completion of certain corporate
development business activities.
(g) Includes 20,000 shares which Mr. Tyler has the right to acquire pursuant to
the terms of certain stock options granted by the Company to him.
(h) Includes 19,000 shares which Mr. McEneaney has the right to acquire
pursuant to the terms of certain stock options granted by the Company to
him.
(i) Includes 15,000 shares which Mr. Hatsopoulos has the right to acquire
pursuant to the terms of certain stock options granted by the Company to
him.
(j) Includes 10,000 shares which Mr. Ramsey has the right to acquire pursuant
to the terms of a stock option granted by the Company to him.
(k) Represents shares which Sanifill has the right to acquire pursuant to the
terms of a warrant granted by the Company to Sanifill. Sanifill's address
is 1001 Fannin Street, Suite 4000, Houston, Texas 77002.
(l) Excludes 62,500 shares subject to the corporate development option granted
to Mr. Rothrock.
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UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement,
dated , 1999, the underwriters named below, who are
represented by Donaldson, Lufkin & Jenrette Securities Corporation and Deutsche
Bank Securities Inc., have severally agreed to purchase from us and the selling
stockholder the number of shares set forth opposite their names below:
NUMBER OF
UNDERWRITERS: SHARES
Donaldson, Lufkin & Jenrette
Securities Corporation..........
Deutsche Bank Securities Inc. .....
----------
Total........................... 4,000,000
==========
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of certain legal matters by their counsel and
to certain other conditions. The underwriters are obligated to purchase and
accept delivery of all of the shares (other than those covered by the
over-allotment option described below) if they purchase any of the shares.
The underwriters propose to initially offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to certain dealers at the public offering
price less a concession not in excess of $ per share. The underwriters
may allow, and such dealers may re-allow, a concession not in excess of
$ per share on sales to certain other dealers. After the initial
offering of the shares to the public, the representatives may change the public
offering price and such concessions.
The following table shows the underwriting fees to be paid to the
underwriters by the Company and the selling stockholders in connection with this
offering. The fees to be paid by the Company and the selling stockholders are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock from the Company and the selling
stockholders.
PAID BY SELLING
PAID BY COMPANY STOCKHOLDERS
----------------------- ---------------------------
NO EXERCISE FULL NO EXERCISE FULL
Per share.............. $ $ $ $
Total.................. $ $ $ $
We will pay the offering expenses, estimated to be $600,000.
The Company and certain selling stockholders, have granted to the
underwriters an option, exercisable for 30 days from the date of the
underwriting agreement, to purchase up to 600,000 additional shares (175,000
shares from the Company and 425,000 shares from the selling stockholders) at the
public offering price less the underwriting fees. The underwriters may exercise
this option solely to cover over-allotments, if any, made in connection with
this offering. To the extent that the underwriters exercise this option, each
underwriter will become obligated, subject to certain conditions, to purchase a
number of additional shares approximately proportionate to such underwriters'
initial purchase commitment.
The Company and the selling stockholders have agreed to indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make in respect of any of those liabilities.
The Company, each of the selling stockholders and the executive officers
and directors of the Company, and certain stockholders of the Company have
agreed, subject to certain exceptions, not to (1) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any shares of common stock or
any securities convertible into or exercisable or exchangeable for common stock,
or (2) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common stock
(regardless
44
<PAGE>
of whether any of the transactions described in clause (1) or (2) is to be
settled by the delivery of common stock, or such other securities, in cash or
otherwise) for a period of 90 days after the date of this prospectus without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation. In
addition, during this period, we have also agreed not to file any registration
statement with respect to, and each of our executive officers, directors and
certain stockholders has agreed not to make any demand for, or exercise any
right with respect to, the registration of any shares of common stock or any
securities convertible into or exercisable or exchangeable for common stock
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. The agreements described in the preceding sentence do not apply,
however, with respect to the shares covered by the shelf registration statement
that we filed in September 1997. In addition, we are permitted and intend to
register an additional 4,200,000 shares of our common stock under the Securities
Act of 1933 for use in connection with future acquisitions.
Donaldson, Lufkin & Jenrette Securities Corporation served as lead manager
and Deutsche Bank Securities Inc. served as a co-manager of our June 1998 public
offering for which they received customary fees and expenses. The
representatives may, from time to time, engage in transactions with and perform
services for us in the ordinary course of their business.
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares included in this offering may not be offered or sold,
directly or indirectly, nor may this prospectus or any other offering material
or advertisement in connection with the offer and sale of any such shares be
distributed or published in any jurisdiction except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdiction. Persons who receive this prospectus are advised to inform
themselves about and to observe any restrictions relating to the offering of the
common stock and the distribution of this prospectus. This prospectus is not an
offer to sell or a solicitation of an offer to buy any shares of common stock
included in this offering in any jurisdiction where that would not be permitted
or legal.
In connection with this offering, certain underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. In addition, the underwriters may bid for
and purchase shares of common stock on the open market to cover syndicate short
positions or stabilize the price of the common stock. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in any of these
activities and may end any of these activities at any time.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission ("SEC") allows us to "incorporate
by reference" the information we file with them, which means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we sell
all of the common stock included in this offering.
o Annual Report on Form 10-K for the year ended December 31, 1997;
o Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
o Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, as amended on August 28, 1998;
o Quarterly Report on Form 10-Q for the quarter ended September 30,
1998;
45
<PAGE>
o The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on August 11, 1997
pursuant to Section 12 of the Securities Exchange Act of 1934;
o Current Report on Form 8-K filed with the SEC on April 30, 1998;
o Current Report on Form 8-K filed with the SEC on May 6, 1998, as
amended on June 2, 1998;
o Current Report on Form 8-K filed with the SEC on May 22, 1998, as
amended on June 2, 1998;
o Current Report on Form 8-K filed with the SEC on September 25,
1998; and
o Current Report on Form 8-K filed with the SEC on January 29,
1999, as amended on February 16, 1999.
You may request a copy of any of these filings, at no cost, by writing or
telephoning us at the following address:
Mr. Gary J. Van Rooyan
Vice President and General Counsel
U S Liquids Inc.
411 N. Sam Houston Parkway East, Suite 400
Houston, Texas 77060
Tel: (281) 272-4500
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. Our SEC filings are also available on the
SEC's web site at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933 with respect to the shares of common stock offered
hereby. As permitted by the SEC, this prospectus, which constitutes a part of
the registration statement, does not contain all the information included in the
registration statement. Such additional information may be obtained from the
locations described above. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete. You
should refer to the contract or other document for all the details.
LEGAL MATTERS
Our counsel, Hartzog Conger & Cason, Oklahoma City, Oklahoma, will give an
opinion that the shares of common stock covered by this prospectus are valid. In
connection with the offering, McDermott, Will & Emery, Chicago, Illinois, will
pass upon certain legal matters for the underwriters.
EXPERTS
The audited financial statements included elsewhere or incorporated by
reference in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and have been included or incorporated by reference herein in reliance
upon the authority of said firm as experts in giving these reports.
46
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
U S LIQUIDS INC. PRO FORMA
Introduction to Unaudited Pro Forma
Financial Statements.............. F-2
Pro Forma Balance Sheet
(unaudited)....................... F-3
Notes to Pro Forma Balance Sheet
(unaudited)....................... F-4
Pro Forma Statements of Operations
(unaudited)....................... F-5
Notes to Pro Forma Statements of
Operations (unaudited)............ F-8
F-1
<PAGE>
U S LIQUIDS INC.
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements present the balance
sheet and statement of operations data from the consolidated financial
statements of U S Liquids Inc. (U S Liquids or the Company) combined with the
historical financial data of companies acquired by the Company from its initial
public offering through February 12, 1999 (the "Acquired Companies") as
follows: (i) the unaudited pro forma balance sheet includes the historical
consolidated balance sheet data of U S Liquids at September 30, 1998 combined
with those of the Acquired Companies acquired after September 30, 1998 as if
each had been acquired on September 30, 1998 and (ii) the unaudited pro forma
statements of operations for the year ended December 31, 1997 and for the nine
months ended September 30, 1997 and 1998 include the historical consolidated
statements of operations of U S Liquids for the respective periods combined with
those of all Acquired Companies, as if each had been acquired on January 1,
1997. Additionally, the effects of the Company's initial public offering of
1,725,000 shares, its public offering of 3,450,000 shares in June 1998 and its
current public offering of 3,875,000 shares (the "Offering") and the
application of the net proceeds from these offerings are included in the
unaudited pro forma financial statements as if they had each occurred on January
1, 1997. The statement of operations data present depreciation and amortization
expenses separately from operating expenses and selling, general and
administrative expenses. Depreciation and amortization expenses are included in
the operating expense and selling, general and administrative expense captions
set forth in the audited financial statements that are filed separately and
incorporated by reference in this prospectus.
The pro forma financial statements include certain adjustments to the
historical financial statements of the Acquired Companies, including adjustments
to depreciation and amortization expenses to reflect purchase price allocations,
adjustments to interest expense to reflect debt issued in connection with the
acquisitions, and certain reductions of salaries and benefits payable to the
previous owners of the Acquired Companies. With respect to these reductions in
salaries and benefits payable to previous owners, the Company has preliminarily
analyzed the savings that it expects to be realized. To the extent the former
owners of the Acquired Companies have agreed prospectively to reductions in
salary, bonuses and benefits, these reductions have been reflected in the pro
forma statements of operations. With respect to other expected potential cost
savings, U S Liquids has not and cannot quantify these savings and, accordingly,
they have not been included in the pro forma financial information of the
Company.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The pro forma financial statements do not purport to
represent what the Company's financial position or results of operations would
actually have been if such transactions in fact had occurred on those dates or
project the Company's financial position or results of operations for any future
period. Since the Company and the Acquired Companies were not under common
control or management for all periods, the pro forma financial results may not
be comparable to, or indicative of, future performance. The unaudited pro forma
financial statements should be read in conjunction with the other financial
statements and notes thereto included elsewhere or incorporated by reference in
this prospectus, as well as information included under the headings "Selected
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Risk Factors" included elsewhere herein.
F-2
<PAGE>
U S LIQUIDS INC.
PRO FORMA BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------------------------------------------------------------------------
HISTORICAL ACQUIRED PRO FORMA OFFERING PRO FORMA
CONSOLIDATED COMPANIES ADJUSTMENTS(A) PRO FORMA ADJUSTMENTS AS ADJUSTED
------------ --------- --------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 4,827 $ 768 $ $ 5,595 $ 84,989 (b) $ 5,595
(84,989)(c)
Accounts receivable, net of
allowance....................... 28,502 7,616 36,118 36,118
Inventories........................ 1,190 550 (49) 1,691 1,691
Prepaid expenses and other current
assets.......................... 4,276 1,932 (375) 5,833 5,833
------------ --------- --------------- --------- ------------ ------------
Total current assets....... 38,795 10,866 (424) 49,237 -- 49,237
PROPERTY, PLANT AND EQUIPMENT, net... 78,275 17,968 (1,077) 95,166 95,166
INTANGIBLE ASSETS, net............... 102,256 -- 47,443 149,699 149,699
OTHER ASSETS, net.................... 1,991 1,236 3,227 3,227
------------ --------- --------------- --------- ------------ ------------
Total assets............... $221,317 $30,070 $ 45,942 $ 297,329 $ -- $297,329
============ ========= =============== ========= ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term
obligations..................... $ 4,564 $ 2,515 $ (1,185) $ 5,894 $ $ 5,894
Accounts payable................... 11,079 2,959 14,038 14,038
Accrued liabilities................ 15,399 2,709 18 18,126 18,126
Current portion of contract reserve
and deferred revenue............ 5,298 -- 5,298 5,298
------------ --------- --------------- --------- ------------ ------------
Total current
liabilities................ 36,340 8,183 (1,167) 43,356 -- 43,356
LONG-TERM OBLIGATIONS, net of current
maturities......................... 43,910 3,782 43,976 91,668 (84,989)(c) 6,679
CELL PROCESSING RESERVE.............. 5,765 -- 5,765 5,765
CLOSURE AND REMEDIATION RESERVES..... 6,494 3,887 10,381 10,381
CONTRACT RESERVE..................... 8,248 -- 5,155 13,403 13,403
DEFERRED INCOME TAXES................ 1,695 -- 500 2,195 2,195
------------ --------- --------------- --------- ------------ ------------
Total liabilities.......... 102,452 15,852 48,464 166,768 (84,989) 81,779
------------ --------- --------------- --------- ------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock....................... 123 21 (16) 128 39(b) 167
Additional paid-in capital......... 108,043 -- 11,691 119,734 84,950(b) 204,684
Retained earnings.................. 10,699 11,090 (11,090) 10,699 10,699
Other owners' equity............... -- 3,107 (3,107) -- --
------------ --------- --------------- --------- ------------ ------------
Total stockholders'
equity..................... 118,865 14,218 (2,522) 130,561 84,989 215,550
------------ --------- --------------- --------- ------------ ------------
Total liabilities and
stockholders' equity.... $221,317 $30,070 $ 45,942 $ 297,329 $ -- $297,329
============ ========= =============== ========= ============ ============
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-3
<PAGE>
U S LIQUIDS INC.
NOTES TO PRO FORMA BALANCE SHEET (UNAUDITED)
(a) These adjustments reflect the acquisition of those Acquired Companies
that were acquired subsequent to September 30, 1998 through February
12, 1999, including approximately 526,579 shares issued. These
adjustments also reflect preliminary purchase price allocations with
respect to these Acquired Companies, including allocating the deferred
income tax liability attributable to the temporary differences between
the financial reporting and income tax bases on assets and liabilities
previously held as S Corporations.
(b) Reflects the proceeds from the issuance of 3,875,000 shares of common
stock, net of estimated offering costs. Offering costs primarily
consist of underwriting discounts and commissions, accounting fees,
legal fees and printing expenses.
(c) Reflects the repayment of certain debt obligations with proceeds from
this offering.
F-4
<PAGE>
U S LIQUIDS INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------------------------------------
HISTORICAL ACQUIRED PRO FORMA OFFERING PRO FORMA
CONSOLIDATED COMPANIES ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------------- ----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES............................. $38,159 $ 191,559 $ $229,718 $ $229,718
OPERATING EXPENSES................... 21,353 132,941 (1,521)(a) 152,773 152,773
DEPRECIATION AND
AMORTIZATION....................... 2,990 9,108 2,213(b) 14,311 14,311
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 5,350 32,458 (356)(a) 37,452 37,452
POOLING COSTS........................ 400 -- 400 400
------------- ----------- ------------ ---------- ------------ ------------
INCOME FROM OPERATIONS............... 8,066 17,052 (336) 24,782 -- 24,782
INTEREST (INCOME) EXPENSE,
net................................ 1,734 1,863 2,881(c) 6,478 (6,374)(e) 104
OTHER (INCOME) EXPENSE, net.......... 41 (427) (386) (386)
------------- ----------- ------------ ---------- ------------ ------------
INCOME BEFORE PROVISION FOR INCOME
TAXES.............................. 6,291 15,616 (3,217) 18,690 6,374 25,064
PROVISION FOR INCOME
TAXES.............................. 2,416 161 5,086(d) 7,663 2,613(d) 10,276
------------- ----------- ------------ ---------- ------------ ------------
NET INCOME........................... $ 3,875 $ 15,455 $ (8,303) $ 11,027 $ 3,761 $ 14,788
============= =========== ============ ========== ============ ============
BASIC EARNINGS PER COMMON SHARE...... $ 0.89
============
DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE............ $ 0.82
============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................ 16,640(f)
============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING...... 17,961(f)(g)
============
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-5
<PAGE>
U S LIQUIDS INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------------------------------
HISTORICAL ACQUIRED PRO FORMA OFFERING PRO FORMA
CONSOLIDATED COMPANIES ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------------ ----------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................................ $ 27,313 $ 142,581 $ $ 169,894 $ $169,894
OPERATING EXPENSES...................... 15,404 99,187 (1,097)(a) 113,494 113,494
DEPRECIATION AND
AMORTIZATION.......................... 2,007 6,352 1,731(b) 10,090 10,090
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 3,454 23,357 (267)(a) 26,544 26,544
POOLING COSTS........................... 400 -- 400 400
------------ ----------- ------------ --------- ------------ ------------
INCOME FROM OPERATIONS.. 6,048 13,685 (367) 19,366 -- 19,366
INTEREST (INCOME) EXPENSE,
net................................... 1,367 1,502 1,950(c) 4,819 (4,781) (e) 38
OTHER (INCOME) EXPENSE,
net................................... 130 (302) (172) (172)
------------ ----------- ------------ --------- ------------ ------------
INCOME BEFORE PROVISION FOR INCOME
TAXES................................. 4,551 12,485 (2,317) 14,719 4,781 19,500
PROVISION FOR INCOME TAXES.............. 1,746 78 4,210(d) 6,034 1,961(d) 7,995
------------ ----------- ------------ --------- ------------ ------------
NET INCOME.............................. $ 2,805 $ 12,407 $ (6,527) $ 8,685 $ 2,820 $ 11,505
============ =========== ============ ========= ============ ============
BASIC EARNINGS PER COMMON SHARE......... $ 0.69
============
DILUTED EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE...................... $ 0.64
============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................... 16,638(f)
============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING......... 17,964(f)(g)
============
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-6
<PAGE>
U S LIQUIDS INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------------------------------------------------------
HISTORICAL ACQUIRED PRO FORMA OFFERING PRO FORMA
CONSOLIDATED COMPANIES ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------------ ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES............................. $ 77,860 $93,108 $ $ 170,968 $ $170,968
OPERATING EXPENSES................... 49,228 60,888 (856)(a) 109,260 109,260
DEPRECIATION AND
AMORTIZATION....................... 5,698 4,726 723(b) 11,147 11,147
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES........................... 8,968 17,335 (174)(a) 26,129 26,129
------------ ----------- ------------ --------- ----------- ------------
INCOME FROM OPERATIONS............... 13,966 10,159 307 24,432 -- 24,432
INTEREST (INCOME) EXPENSE, net....... 2,310 1,326 973(c) 4,609 (4,462)(e) 147
OTHER (INCOME) EXPENSE, net.......... (235) (387) (622) (622)
------------ ----------- ------------ --------- ----------- ------------
INCOME BEFORE PROVISION FOR INCOME
TAXES.............................. 11,891 9,220 (666) 20,445 4,462 24,907
PROVISION FOR INCOME TAXES........... 4,835 771 2,777(d) 8,383 1,829(d) 10,212
------------ ----------- ------------ --------- ----------- ------------
NET INCOME........................... $ 7,056 $ 8,449 $ (3,443) $ 12,062 $ 2,633 $ 14,695
============ =========== ============ ========= =========== ============
BASIC EARNINGS PER COMMON SHARE...... $ 0.88
============
DILUTED EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE............ $ 0.81
============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................ 16,707(f)
============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING...... 18,080(f)(g)
============
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-7
<PAGE>
U S LIQUIDS INC.
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
(a) Adjusts compensation expense to the level the previous owners of the
Acquired Companies have agreed to receive as employees of the Company
subsequent to their respective acquisitions. In addition, for certain
of the Acquired Companies, salaries and related expenses previously
recorded as selling, general and administrative expenses have been
reclassified as operating expenses consistent with the Company's
accounting policies.
(b) Adjusts depreciation and amortization expenses to reflect purchase
price allocations with respect to the Acquired Companies.
(c) Records interest expense on the debt incurred to effect the
acquisition of the Acquired Companies, net of a reduction in interest
expense on debt repaid in connection with the acquisitions, our
initial public offering and our public offering in June 1998.
(d) Reflects the incremental provision for federal income taxes on the
Acquired Companies previously taxed as S corporations or limited
liability companies as well as federal and state income taxes
relating to the pro forma statement of operations and offering
adjustments.
(e) Reflects the reduction in interest expense attributed to obligations
retired with proceeds from the Offering.
(f) Includes (1) 5,937,435 shares, 5,496,736 shares and 9,622,553 shares
outstanding for the year ended December 31, 1997, and for the nine
months ended September 30, 1997 and 1998, respectively, (2) 3,875,000
shares to be issued in connection with the Offering and (3) 6,827,864
shares, 7,265,964 shares and 3,209,872 shares for the year ended
December 31, 1997, and for the nine months ended September 30, 1997
and 1998, respectively, issued in connection with the acquisition of
the Acquired Companies, our initial public offering and our June 1998
public offering, as if each had occurred on January 1, 1997.
(g) Includes 1,321,010 shares, 1,325,827 shares and 1,372,185 shares for
the year ended December 31, 1997, and for the nine months ended
September 30, 1997 and 1998, respectively, representing the effect of
outstanding warrants and options to purchase common stock, using the
treasury stock method. Excludes 125,000 shares issuable pursuant to
options, the vesting of which is contingent upon the successful
completion of certain corporate development activities.
F-8
<PAGE>
[Inside Back Cover]
[PHOTO OF DISTILLATION COLUMNS AT
ROMIC ENVIRONMENTAL FACILITY]
[PHOTO OF PARALLEL, CALIFORNIA FACILITY]
[PHOTO OF GREASE TRAP PUMPER TRUCK IN OPERATION]
<PAGE>
================================================================================
, 1999
U S LIQUIDS
LOGO
4,000,000 SHARES OF COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DONALDSON, LUFKIN & JENRETTE
DEUTSCHE BANK SECURITIES
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the Company
have not changed since the date hereof.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses expected to be incurred in
connection with the offering described in this Registration Statement. All of
such amounts (except the SEC registration fee and the American Stock Exchange
listing fee) are estimated.
AMOUNT
--------
SEC registration fee................. $ 29,656
NASD filing fee...................... $ 11,195
American Stock Exchange listing
fee.................................. $ 17,500
Printing expenses.................... $150,000
Legal fees and expenses.............. $125,000
Accounting fees and expenses......... $200,000
Miscellaneous........................ $ 66,649
--------
TOTAL........................... $600,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation contains a provision which
limits, to the fullest extent permitted by Delaware law, the liability of a
director to the Company or its stockholders from monetary damages for a breach
of such director's fiduciary duty as a director. Delaware law presently permits
such limitation of a director's liability except where a director (i) breaches
his or her duty of loyalty to the Company or its stockholders, (ii) fails to act
in good faith or engages in intentional misconduct or a knowing violation of
law, (iii) authorizes payment of an unlawful dividend or stock repurchase, or
(iv) obtains an improper personal benefit.
The Company's Certificate of Incorporation also provides that directors and
officers shall be indemnified against liabilities arising from their service as
directors or officers to the fullest extent permitted by law, which generally
requires that the individual act in good faith and in a manner he or she
reasonably believes to be in or not opposed to the Company's best interests. The
Company has obtained directors and officers liability insurance to limit its
exposure under these provisions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<S> <C> <C>
+1.1 -- Form of Underwriting Agreement
4.1 -- Form of Certificate Evidencing Ownership of common stock of U S Liquids Inc. (Exhibit 4.1
of the U S Liquids Inc. Registration Statement on Form S-1 (File No. 333-30065), effective
August 19, 1997, is hereby incorporated by reference).
+4.2 -- Second Amended and Restated Credit Agreement, dated February 3, 1999, among U S Liquids
Inc., various financial institutions and Bank of America National Trust and Savings
Association, as Agent.
+5.1 -- Opinion of Hartzog Conger & Cason.
+10.4 -- Payment Agreement, dated December 31, 1998, among U S Liquids Inc., Newpark Resources,
Inc. and Newpark Environmental Services, Inc.
+10.5 -- Option Agreement, dated December 31, 1998, among U S Liquids Inc., Newpark Resources,
Inc., and Newpark Environmental Services, Inc.
+10.74 -- Purchase and Sale of Assets Agreement, dated December 31, 1998, among U S Liquids of
Texas, Inc., Mesa Processing, Inc. and Thomas B. Blanton.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
+10.75 -- Supply Agreement, dated December 31, 1998, between U S Liquids of Texas, Inc. and Mesa
Processing, Inc.
+23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Hartzog Conger & Cason (contained in Exhibit 5.1)
24.1 -- Power of attorney (included on signature page).
+27.1 -- Financial Data Schedule.
</TABLE>
- -----------------------------
+ Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of
the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, U S LIQUIDS
INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF HOUSTON, STATE OF TEXAS, ON
FEBRUARY 15, 1999.
U S Liquids Inc.
By: /s/ MICHAEL P. LAWLOR
MICHAEL P. LAWLOR
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
each of Gary J. Van Rooyan and Earl J. Blackwell with full power to act without
the other, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (until revoked in writing) to sign any and all amendments
(including post-effective amendments) to this Registration Statement, to file
the same, together with all exhibits thereto and other documents in connection
therewith, with the SEC, to sign any and all applications, registration
statements, notices and other documents necessary or advisable to comply with
the applicable state securities laws, and to file the same, together with all
other documents in connection therewith, with the appropriate state securities
authorities, granting unto said attorneys-in-fact and agents or any of them or
their or his substitutes or substitute, with full power and authority to perform
and do each and every act and thing necessary and advisable as fully to all
intents and purposes as he might or could perform and do in person, thereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue thereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE INDICATED CAPACITIES ON FEBRUARY 15, 1999.
SIGNATURE TITLE
----------------- ------------
/s/ MICHAEL P. LAWLOR Chief Executive Officer and Director
MICHAEL P. LAWLOR
/s/ W. GREGORY ORR Chief Operating Officer, President
W. GREGORY ORR and Director
/s/ EARL J. BLACKWELL Chief Financial Officer and
EARL J. BLACKWELL Senior Vice President -- Finance
/s/ WILLIAM A. ROTHROCK IV Director
WILLIAM A. ROTHROCK IV
/s/THOMAS B. BLANTON Director
THOMAS B. BLANTON
/s/ ALFRED TYLER 2nd Director
ALFRED TYLER 2ND
/s/ JAMES F. McENEANEY, JR. Director
JAMES F. MCENEANEY, JR.
/s/ JOHN N. HATSOPOULOS Director
JOHN N. HATSOPOULOS
/s/ ROGER A. RAMSEY Director
ROGER A. RAMSEY
II-3
EXHIBIT 1.1
4,000,000 Shares
U S Liquids Inc.
Common Stock
UNDERWRITING AGREEMENT
__________ __, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEUTSCHE BANK SECURITIES INC.
As representatives of the several Underwriters
named in Schedule I hereto c/o
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
U S Liquids Inc., a Delaware corporation (the "COMPANY"), proposes to issue
and sell to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"), and certain of the stockholders of the Company named in
Schedule II hereto (the "SELLING STOCKHOLDERS") proposes to sell to the several
Underwriters, an aggregate of 4,000,000 shares of the Common Stock, $.01 par
value of the Company (the "FIRM SHARES") of which 3,875,000 shares are to be
issued and sold by the Company and 125,000 are to be sold by the Selling
Stockholders, each Selling Stockholder selling the amount set forth opposite
such Selling Stockholder's name in Schedule II hereto. The Company also proposes
to issue and sell to the several Underwriters, and certain of the Selling
Stockholders severally propose to sell to the several Underwriters, not more
than an aggregate
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additional 600,000 shares of Common Stock, par value $.01 per share of the
Company (the "ADDITIONAL SHARES") if requested by the Underwriters as provided
in Section 2 hereof. If all of the Additional Shares are sold to the
Underwriters, 175,000 shares are to be issued and sold by the Company and
425,000 are to be sold by certain of the Selling Stockholders, each Selling
Stockholder selling the amount set forth opposite such Selling Stockholder's
name in Schedule II hereto. The Firm Shares and the Additional Shares are
hereinafter referred to collectively as the "SHARES". The shares of common stock
of the Company to be outstanding after giving effect to the sales contemplated
hereby are hereinafter referred to as the "COMMON STOCK". The Company and the
Selling Stockholders are hereinafter sometimes referred to collectively as the
"SELLERS".
SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "COMMISSION") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"ACT"), a registration statement on Form S-3 including a prospectus, relating to
the Shares. The registration statement, as amended at the time it became
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the "REGISTRATION STATEMENT"; and the
prospectus in the form first used to confirm sales of Shares is hereinafter
referred to as the "PROSPECTUS". If the Company has filed or is required
pursuant to the terms hereof to file a registration statement pursuant to Rule
462(b) under the Act registering additional shares of Common Stock (a "RULE
462(B) REGISTRATION STATEMENT"), then, unless otherwise specified, any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462(b) Registration Statement.
SECTION 2. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, (i) the Company agrees to issue and sell
3,875,000 Firm Shares, (ii) each Selling Stockholder agrees, severally and not
jointly, to sell the number of Firm Shares set forth opposite such Selling
Stockholder's name in Schedule II hereto, and (iii) each Underwriter agrees,
severally and not jointly, to purchase from each Seller at a price per Share of
$______________ (the "PURCHASE PRICE") the number of Firm Shares (subject to
such adjustments to eliminate fractional shares as you may determine) that bears
the same proportion to the total number of Firm Shares to be sold by such Seller
as the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell and the Selling Stockholders agree to sell the number of Additional
Shares set forth opposite such Selling Stockholder's name in Schedule II hereto
and the Underwriters shall have the right to purchase, severally and not
jointly, up to 600,000 Additional Shares from the Company and the Selling
Stockholders at the Purchase Price. Additional Shares may be purchased solely
for the purpose of covering over-allotments made in connection with the offering
of the Firm Shares. The Underwriters may exercise their right to purchase
Additional Shares in whole or in part from time to time by giving written notice
thereof to the Company within 30 days after the date of this Agreement. In the
event that the Underwriters purchase less than all of the Additional Shares, the
Underwriters shall purchase and
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the Sellers shall sell such Additional Shares in the following sequence: (i) the
Additional Shares being offered by Waste Management, Inc.; (ii) the Additional
Shares being offered by the Company, and (iii) the Additional Shares being
offered by W. Gregory Orr and Earl J. Blackwell. You shall give any such notice
on behalf of the Underwriters and such notice shall specify the aggregate number
of Additional Shares to be purchased pursuant to such exercise and the date for
payment and delivery thereof, which date shall be a business day (i) no earlier
than two business days after such notice has been given (and, in any event, no
earlier than the Closing Date (as hereinafter defined)) and (ii) no later than
ten business days after such notice has been given. If any Additional Shares are
to be purchased, each Underwriter, severally and not jointly, agrees to purchase
from the Company the number of Additional Shares (subject to such adjustments to
eliminate fractional shares as you may determine) which bears the same
proportion to the total number of Additional Shares to be purchased from the
Company as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I bears to the total number of Firm Shares.
Each Seller hereby agrees not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 90 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option plans, (ii) the Company may
issue shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof, (iii) the Company may
issue shares of Common Stock required or permitted to be issued pursuant to the
terms of any earn-out provisions contained in any agreement entered into by the
Company or any of its subsidiaries in connection with any of the Acquisitions
(as that term is defined in the Prospectus), and (iv) the Company may issue up
to _________ shares of Common Stock as consideration for future acquisitions
(the "ACQUISITION SHARES"), provided that the persons to whom these Acquisition
Shares are issued agree to the same transfer restrictions set forth in this
Section 2 above. The Company also agrees not to file any registration statement
with respect to any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 90 days after the
date of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. Notwithstanding the preceding sentence, the
Company may amend the shelf. In addition, the Company may register an additional
4,200,000 shares of Common Stock for use by the Company in acquisitions or other
business combinations. In addition, each Selling Stockholder agrees that, for a
period of 90 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, it will not make
any demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock. The Company shall, prior to or concurrently with
the execution of this Agreement, deliver an agreement executed by (i) each of
the directors and officers of the Company and (ii) each stockholder listed on
Annex I hereto to the effect that such person will not, during the period
commencing on the date such person signs such
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agreement and ending 90 days after the date of the Prospectus, without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation, (A)
engage in any of the transactions described in the first sentence of this
paragraph or (B) make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock.
SECTION 3. TERMS OF PUBLIC OFFERING. The Sellers are advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus. If, after the public offering
of the Shares by the Underwriters commences and during such period, the
Underwriters propose to vary the terms of offering thereof by reason of changes
in general market conditions or otherwise, you will advise the Company in
writing of the proposed variation and if, in the opinion either of counsel for
the Company or counsel for the Underwriters, such proposed variation requires
that the Prospectus be supplemented or amended, the Company will forthwith
prepare and file with the Commission a supplement to the Prospectus or an
amended Prospectus setting forth such variation.
SECTION 4. DELIVERY AND PAYMENT. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Shares shall be delivered by or on behalf of the Sellers, with any transfer
taxes thereon duly paid by the respective Sellers, to Donaldson, Lufkin &
Jenrette Securities Corporation through the facilities of The Depository Trust
Company ("DTC"), for the respective accounts of the several Underwriters,
against payment to the Sellers of the Purchase Price therefor by wire transfer
of Federal or other funds immediately available in New York City. The
certificates representing the Shares shall be made available for inspection not
later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date (as defined below), as the
case may be, at the office of DTC or its designated custodian (the "DESIGNATED
OFFICE"). The time and date of delivery and payment for the Firm Shares shall be
9:00 A.M., New York City time, on _________ __, 1999 or such other time on the
same or such other date as Donaldson, Lufkin & Jenrette Securities Corporation
and the Company shall agree in writing. The time and date of delivery for the
Firm Shares are hereinafter referred to as the "CLOSING DATE". The time and date
of delivery and payment for any Additional Shares to be purchased by the
Underwriters and certain Selling Stockholders shall be 9:00 A.M., New York City
time, on the date specified in the applicable exercise notice given by you
pursuant to Section 2 or such other time on the same or such other date as
Donaldson, Lufkin & Jenrette Securities Corporation and the Company shall agree
in writing. The time and date of delivery for the Additional Shares are
hereinafter referred to as an "OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 9 of this Agreement
shall be delivered at the offices of McDermott, Will & Emery, 227 West Monroe
Street, Suite 4400, Chicago, Illinois 60606 and the Shares shall be delivered at
the Designated Office, all on the Closing Date or such Option Closing Date, as
the case may be.
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SECTION 5. AGREEMENTS OF THE COMPANY. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to
the Registration Statement or amendments or supplements to the Prospectus
or for additional information, (ii) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of the suspension of qualification of the Shares for offering or sale in
any jurisdiction, or the initiation of any proceeding for such purposes,
(iii) when any amendment to the Registration Statement becomes effective,
(iv) if the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, when the Rule 462(b)
Registration Statement has become effective and (v) on the happening of any
event during the period referred to in Section 5(d) below which makes any
statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the
Company will use its best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time.
(b) To furnish to you five signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including
all exhibits, and to furnish to you and each Underwriter designated by you
such number of conformed copies of the Registration Statement as so filed
and of each amendment to it, without exhibits, as you may reasonably
request.
(c) To prepare the Prospectus, the form and substance of which shall
be satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the
Act; during the period specified in Section 5(d) below, not to file any
further amendment to the Registration Statement and not to make any
amendment or supplement to the Prospectus of which you shall not previously
have been advised or to which you shall reasonably object after being so
advised; and, during such period, to prepare and file with the Commission,
promptly upon your reasonable request, any amendment to the Registration
Statement or amendment or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the Shares by
you, and to use its best efforts to cause any such amendment to the
Registration Statement to become promptly effective.
(d) As soon as practicable after the date of this Agreement and from
time to time thereafter for such period as in the opinion of counsel for
the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish in New York
City to each Underwriter and any dealer as many copies of the Prospectus
(and of any amendment or supplement to the Prospectus) as such Underwriter
or dealer may reasonably request.
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(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable
law, forthwith to prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus so that the statements in the
Prospectus, as so amended or supplemented, will not in the light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such registration or
qualification in effect so long as required for distribution of the Shares
and to file such consents to service of process or other documents as may
be necessary in order to effect such registration or qualification;
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith to qualify as a foreign corporation in any jurisdiction in which
it is not now so qualified or to take any action that would subject it to
general consent to service of process or taxation other than as to matters
and transactions relating to the Prospectus, the Registration Statement,
any preliminary prospectus or the offering or sale of the Shares, in any
jurisdiction in which it is not now so subject.
(g) To make generally available to its stockholders as soon as
practicable an earnings statement covering a period of at least 12 months
beginning after the effective date of the Registration Statement that shall
satisfy the provisions of Section 11(a) of the Act, and to advise you in
writing when such statement has been so made available.
(h) During the period of three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished
to or filed with the Commission or any national securities exchange on
which any class of securities of the Company is listed and such other
publicly available information concerning the Company and its subsidiaries
as you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the Sellers' obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel, the Company's accountants and any Selling Stockholder's
counsel (in addition to the Company's counsel) in connection with the
registration and delivery of the Shares under the Act and all other fees
and expenses in connection with the preparation, printing, filing and
distribution of the Registration Statement (including financial statements
and exhibits), any preliminary
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prospectus, the Prospectus and all amendments and supplements to any of the
foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs
and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii)
all costs of printing or producing this Agreement and any other agreements
or documents in connection with the offering, purchase, sale or delivery of
the Shares, (iv) all expenses in connection with the registration or
qualification of the Shares for offer and sale under the securities or Blue
Sky laws of the several states and all costs of printing or producing any
Preliminary and Supplemental Blue Sky Memoranda in connection therewith
(including the filing fees and fees and disbursements of counsel for the
Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and disbursements of
counsel for the Underwriters in connection with the review and clearance of
the offering of the Shares by the National Association of Securities
Dealers, Inc., (vi) all costs and expenses incident to the listing of the
Shares on AMEX, (vii) the cost of printing certificates representing the
Shares, (viii) the costs and charges of any transfer agent, registrar
and/or depositary, and (ix) all other costs and expenses incident to the
performance of the obligations of the Company and the Selling Stockholders
hereunder for which provision is not otherwise made in this Section. The
provisions of this Section shall not supersede or otherwise affect any
agreement that the Company and the Selling Stockholders may otherwise have
for allocation of such expenses among themselves.
(j) To use its best efforts to list, subject to notice of issuance,
the Shares on the AMEX and to maintain the listing of the Shares on the
AMEX for a period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date or any Option Closing Date, as the case may be,
and to satisfy all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so
covered, in compliance with Rule 462(b) by 10:00 P.M., New York City time,
on the date of this Agreement and to pay to the Commission the filing fee
for such Rule 462(b) Registration Statement at the time of the filing
thereof or to give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement;
and no stop order suspending the effectiveness of the Registration
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Statement is in effect, and no proceedings for such purpose are pending
before or threatened by the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness
of this Agreement), when it became effective, did not contain and, as
amended, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) the
Registration Statement (other than any Rule 462(b) Registration Statement
to be filed by the Company after the effectiveness of this Agreement) and
the Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Act, (iii) if the Company is
required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, such Rule 462(b) Registration Statement
and any amendments thereto, when they become effective (A) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and (B) will comply in all material respects with the Act
and (iv) the Prospectus does not contain and, as amended or supplemented,
if applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph
do not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to any Underwriter furnished
to the Company in writing by such Underwriter through you expressly for use
therein.
(c) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in any preliminary prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(d) Each of the Company and its subsidiaries has been duly
incorporated or organized, is validly existing as a corporation, limited
partnership or limited liability company, as the case may be, in good
standing under the laws of its jurisdiction of incorporation or
organization and has the power and authority to carry on its business as
described in the Prospectus and to own, lease and operate its properties,
and each is duly qualified and is in good standing as a foreign
corporation, limited partnership or limited liability company, as the case
may be, authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a
whole.
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(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or
issued by the Company or any of its subsidiaries relating to or entitling
any person to purchase or otherwise to acquire any shares of the capital
stock of the Company or any of its subsidiaries, except as otherwise
disclosed in the Registration Statement or in the earn-out provisions of
the definitive agreements relating to the Acquisitions (as defined in the
Registration Statement), which agreements are incorporated by reference as
exhibits to the Registration Statement.
(f) All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) have been
duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights; and the Shares have been
duly authorized and, when issued and delivered to the Underwriters against
payment therefor as provided by this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights.
(g) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation of
its respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which
the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or their respective property is bound.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and
the consummation of the transactions contemplated hereby will not (i)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various
states), (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company or
any of its subsidiaries or any indenture, loan agreement, mortgage, lease
or other agreement or instrument that is material to the Company and its
subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or their respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any
court or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property or (iv)
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result in the suspension, termination or revocation of any Authorization
(as defined below) of the Company or any of its subsidiaries or any other
impairment of the rights of the holder of any such Authorization.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is or could be a
party or to which any of their respective property is or could be subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described; nor are there any statutes,
regulations, contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement that are not so described or filed as
required.
(l) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"), any provisions of the Employee Retirement Income Security Act of
1974, as amended, or any provisions of the Foreign Corrupt Practices Act,
or the rules and regulations promulgated thereunder, except for such
violations which, singly or in the aggregate, would not have a material
adverse effect on the business, prospects, financial condition or results
of operation of the Company and its subsidiaries, taken as a whole.
(m) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "AUTHORIZATION") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct
its business, except where the failure to have any such Authorization or to
make any such filing or notice would not, singly or in the aggregate, have
a material adverse effect on the business, prospects, financial condition
or results of operations of the Company and its subsidiaries, taken as a
whole. Each such Authorization is valid and in full force and effect and
each of the Company and its subsidiaries is in compliance with all the
terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of
any notice from any authority or governing body) which allows or, after
notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse
of time or both, would result in any other impairment of the rights of the
holder of any such Authorization; and, except as described in the
Registration Statement, such Authorizations contain no restrictions that
are materially burdensome to the Company or any of its subsidiaries; except
where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
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(n) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any Authorization, any related constraints on
operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(o) This Agreement has been duly authorized, executed and delivered by
the Company.
(p) Arthur Andersen LLP are independent public accountants with
respect to the Company and its subsidiaries as required by the Act.
(q) The consolidated financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto),
together with related schedules and notes, present fairly the consolidated
financial position, results of operations and changes in financial position
of the Company and its subsidiaries on the basis stated therein at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; the
supporting schedules, if any, included in the Registration Statement
present fairly in accordance with generally accepted accounting principles
the information required to be stated therein; and the other financial and
statistical information and data set forth in the Registration Statement
and the Prospectus (and any amendment or supplement thereto) are, in all
material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
(r) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(s) Except as disclosed in the Registration Statement, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company. There are no contracts, agreements or understandings between the
Company and any person requiring the Company to include any securities of
the Company with the Shares registered pursuant to the Registration
Statement.
(t) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the
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condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries, taken as a whole, (ii)
there has not been any material adverse change or any development involving
a prospective material adverse change in the capital stock or in the
long-term debt of the Company or any of its subsidiaries and (iii) neither
the Company nor any of its subsidiaries has incurred any material liability
or obligation, direct or contingent.
(u) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder represents and warrants to each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and on
the Closing Date will have, good and clear title to such Shares, free of
all restrictions on transfer, liens, encumbrances, security interests,
equities and claims whatsoever.
(b) The Shares to be sold by such Selling Stockholder have been duly
authorized and are validly issued, fully paid and non-assessable.
(c) Such Selling Stockholder has, and on the Closing date will have,
full legal right, power and authority, and all authorization and approval
required by law, to enter into this Agreement, the Custody Agreement signed
by such Selling Stockholder and ________, as Custodian, relating to the
deposit of the Shares to be sold by such Selling Stockholder (the "CUSTODY
AGREEMENT") and the Power of Attorney of such Selling Stockholder
appointing certain individuals as such Selling Stockholder's
attorneys-in-fact (the "ATTORNEYS") to the extent set forth therein,
relating to the transactions contemplated hereby and by the Registration
Statement and the Custody Agreement (the "POWER OF ATTORNEY") and to sell,
assign, transfer and deliver the Shares to be sold by such Selling
Stockholder in the manner provided herein and therein.
(d) This Agreement has been duly authorized, executed and delivered by
or on behalf of such Selling Stockholder.
(e) The Custody Agreement of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a
valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms.
(f) The Power of Attorney of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a
valid and binding instrument of such Selling Stockholder, enforceable in
accordance with its terms, and, pursuant to such Power of Attorney, or any
one of them, to execute and deliver on such Selling
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Stockholder's behalf this Agreement and any other document that they, or
any one of them, may deem necessary or desirable in connection with the
transactions contemplated hereby and thereby and to deliver the Shares to
be sold by such Selling Stockholder pursuant to this Agreement.
(g) Upon delivery of and payment for the Shares to be sold by such
Selling Stockholder pursuant to this Agreement, good and clear title to
such Shares will pass to the Underwriters, free of restrictions on
transfer, liens, encumbrances, security interests, equities and claims
whatsoever.
(h) The execution, delivery and performance of this Agreement and the
Custody Agreement and Power of Attorney of such Selling Stockholder by or
on behalf of such Selling Stockholder, the compliance by such Selling
Stockholder with all the provisions hereof and thereof and the consummation
of the transactions contemplated hereby and thereby will not (i) require
any consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may be
required under the securities or Blue Sky laws of the various states), (ii)
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the organizational documents of such Selling
Stockholder, if such Selling Stockholder is not an individual, or any
indenture, loan agreement, mortgage, lease or other agreement or instrument
to which such Selling Stockholder is a party or by which such Selling
Stockholder or any property of such Selling Stockholder is bound or (iii)
violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency
having jurisdiction over such Selling Stockholder or any property of such
Selling Stockholder.
(i) The information in the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relates to such
Selling Stockholder does not, and will not on the Closing Date, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(j) At any time during the period described in Section 5(d), if there
is any change in the information referred to in Section 7(i), such Selling
Stockholder will immediately notify you of such change.
(k) Each certificate signed by or on behalf of such Selling
Stockholder and delivered to the Underwriters or counsel for the
Underwriters shall be deemed to be a representation and warranty by such
Selling Stockholder to the Underwriters as to the matters covered thereby.
SECTION 8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, its directors, its officers and each person, if any, who
controls any Underwriter within the
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meaning of Section 15 of the Act or Section 20 of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), from and against any and all
losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action, that could
give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment thereto),
the Prospectus (or any amendment or supplement thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished in writing to the Company by such
Underwriter through you expressly for use therein; PROVIDED, HOWEVER, that
the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter who failed to
deliver a Prospectus (as then amended or supplemented, provided by the
Company to the several Underwriters in the requisite quantity and on a
timely basis to permit proper delivery on or prior to the Closing Date) to
the person asserting any losses, claims, damages and liabilities and
judgments caused by any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured in such Prospectus and such Prospectus
was required by law to be delivered at or prior to the written confirmation
of sale to such person.
(b) The Selling Stockholders severally agree to indemnify and hold
harmless each Underwriter, its directors, its officers and each person, if
any, who controls any Underwriter, within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation,
any legal or other expenses incurred in connection with investigating or
defending any matter, including any action, that could give rise to any
such losses, claims, damages, liabilities or judgments) caused by any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement (or any amendment thereto), the Prospectus
(or any amendment or supplement thereto) or any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities
or judgments are caused by any untrue statement or omission or alleged
untrue statement or omission based upon information relating to any
Underwriter furnished in writing to the Company by such Underwriter through
you expressly for use therein; provided however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not
inure to the benefit of any Underwriter who failed to deliver a Prospectus
(as then amended or supplemented, provided by the Company to the several
Underwriters in the requisite quantity and on a timely basis to permit
proper delivery on or prior to the Closing Date) to the person assessing
any losses, claims, damages and liabilities and judgments caused by any
untrue statement or alleged untrue statement of a material fact contained
in any
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<PAGE>
preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such material misstatement
or omission or alleged material misstatement or omission was cured in such
Prospectus and such Prospectus was required by law to be delivered at or
prior to the written confirmation of sale to such person.
Notwithstanding the foregoing, (i) the aggregate liability of any
Selling Stockholder pursuant to this Section 8(b) shall be limited to an
amount equal to the total proceeds (before deducting underwriting discounts
and commissions and expenses) received by such Selling Stockholder from the
Underwriters for the sale of the Shares sold by such Selling Stockholder
hereunder; and (ii) the liability of Waste Management Inc. shall be limited
to losses, claims, damages, liabilities or judgments caused by any untrue
statement or omission or alleged untrue statement or omission based upon
information furnished by Waste Management, Inc. to the Company.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, each Selling Stockholder and each person, if any, who controls such
Selling Stockholder within the meaning of Section 15 of the Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from
the Sellers to such Underwriter but only with reference to information
relating to such Underwriter furnished in writing to the Company by such
Underwriter through you expressly for use in the Registration Statement (or
any amendment thereto), the Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus.
(d) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a), 8(b) and
8(c) (the "indemnified party"), the indemnified party shall promptly notify
the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party shall assume the defense of
such action, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all fees and expenses of such
counsel, as incurred (except that in the case of any action in respect of
which indemnity may be sought pursuant to both Sections 8(a), 8(b), and
8(c) the Underwriter shall not be required to assume the defense of such
action pursuant to this Section 8(d), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of such
Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action
or employ counsel reasonably satisfactory to the indemnified party or (iii)
the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be
one or more legal defenses available to it
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which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified
party). In any such case, the indemnifying party shall not, in connection
with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for (i) the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel)
for Underwriters, their officers and directors and all persons, if any, who
control the Company within the meaning of either such section and (iii) the
fees and expenses of more than one separate firm of attorneys (in addition
to any local counsel) for all Selling Stockholders and all persons, if any,
who control any Selling Stockholder within the meaning of either such
Section and all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriters, their
officers and directors and such control persons of any Underwriters, such
firm shall be designated in writing by Donaldson, Lufkin & Jenrette
Securities Corporation. In the case of any such separate firm for the
Company and such directors, officers and control persons of the Company,
such firm shall be designated in writing by the Company. In the case of any
such separate firm for the Selling Stockholders and such control persons of
any Selling Stockholders, such firm shall be designated in writing by the
Attorneys. The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written
consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel
(in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the
indemnifying party shall have failed to comply with such reimbursement
request. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement or compromise of, or consent
to the entry of judgment with respect to, any pending or threatened action
in respect of which the indemnified party is or could have been a party and
indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act, by or on behalf of the indemnified
party.
(e) To the extent the indemnification provided for in this Section 8
is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as
a result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Sellers on the one hand and the Underwriters on the other hand from
the offering of the Shares or (ii) if the allocation provided by clause
8(e)(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(e)(i) above but also the relative fault of the Sellers on the one hand
and the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, claims,
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damages, liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Sellers on the one
hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (after
deducting underwriting discounts and commissions, but before deducting
expenses) received by the Company, and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the
public of the Shares, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Sellers on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders,
on the one hand, or the Underwriters, on the other hand, and the parties
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(e) were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
incurred by such indemnified party in connection with investigating or
defending any matter, including any action, that could have given rise to
such losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 8(e) are several in proportion to the
respective number of Shares purchased by each of the Underwriters hereunder
and not joint.
(f) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(g) Each Selling Stockholder hereby designates _________, as its
authorized agent, upon which process may be served in any action which may
be instituted in any state or federal court in the state of New York by any
Underwriter, any director or officer of any Underwriter or any person
controlling any Underwriter asserting a claim for indemnification or
contribution under or pursuant to this Section 8, and each Selling
Stockholder will accept the jurisdiction of such court in such action, and
waives, to the fullest extent permitted by applicable law, any defense
based upon lack of personal
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jurisdiction or venue. A copy of any such process shall be sent or given to
such Selling Stockholder, at the address for notices specified in Section
12 hereof.
SECTION 9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase the Firm Shares under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same
force and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York
City time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by Michael P. Lawlor and W. Gregory Orr, in their
capacities as the Chief Executive Officer and President of the Company,
confirming the matters set forth in Sections 6(t), 9(a) and 9(b) and that
the Company has complied with all of the agreements and satisfied all of
the conditions herein contained and required to be complied with or
satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), (i) there shall not have occurred any change or any development
involving a prospective change in the condition, financial or otherwise, or
the earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there shall not have been any change
or any development involving a prospective change in the capital stock or
in the long-term debt of the Company or any of its subsidiaries and (iii)
neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any
such case described in clause 9(d)(i), 9(d)(ii) or 9(d)(iii), in your
judgment, is material and adverse and, in your judgment, makes it
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(e) All the representations and warranties of each Selling Stockholder
contained in this Agreement shall be true and correct on the Closing Date
with the same force and effect as if made on and as of the Closing Date and
you shall have received on the Closing Date a certificate dated the Closing
Date from each Selling Stockholder to such effect and to the effect that
such Selling Stockholder has complied with all of the agreements and
satisfied all of the conditions herein contained and required to be
complied with or satisfied by such Selling Stockholder on or prior to the
Closing Date.
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(f) You shall have received on the Closing Date an opinion (reasonably
satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Hartzog Conger & Cason, counsel for the Company and the Selling
Stockholders, to the effect that:
(i) each of the Company and its subsidiaries has been duly
incorporated or organized, is validly existing as a corporation,
limited partnership or limited liability company, as the case may be,
in good standing under the laws of its jurisdiction of incorporation
or organization and has the corporate power and authority to carry on
its business as described in the Registration Statement and to own,
lease and operate its properties;
(ii) each of the Company and its subsidiaries is duly qualified
and is in good standing as a foreign corporation, limited partnership
or limited liability company, as the case may be, authorized to do
business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a
whole;
(iii) all the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by
this Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive
or similar rights;
(v) all of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable, and are owned by the Company,
directly or indirectly through one or more subsidiaries, free and
clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company and by or on behalf of each Selling
Stockholder;
(vii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(viii) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to the best of such counsel's
knowledge after due inquiry, pending before or contemplated by the
Commission;
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<PAGE>
(ix) the statements under the captions "Business", "Certain
Transactions," and "Description of Securities" and "Underwriting" in
the Prospectus and Items 14 and 15 of Part II of the Registration
Statement, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters,
documents and proceedings;
(x) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of
such counsel's knowledge after due inquiry, neither the Company nor
any of its subsidiaries is in default in the performance of any
obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company and its subsidiaries, taken
as a whole, to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or their respective
property is bound;
(xi) the execution, delivery and performance of this Agreement by
the Company, the compliance by the Company with all the provisions
hereof and the consummation of the transactions contemplated hereby
will not (A) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or
agency (except such as may be required under the securities or Blue
Sky laws of the various states), (B) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
charter or by-laws of the Company or any of its subsidiaries or any
indenture, loan agreement, mortgage, lease or other agreement or
instrument known to such counsel that is material to the Company and
its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, (C) violate or
conflict with any applicable law or any rule or regulation or, to the
best knowledge of counsel, judgment, order or decree of any court or
any governmental body or agency having jurisdiction over the Company,
any of its subsidiaries or their respective property or (D) to the
best knowledge of such counsel, result in the suspension, termination
or revocation of any Authorization of the Company or any of its
subsidiaries or any other impairment of the rights of the holder of
any such Authorization;
(xii) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened to which the Company
or any of its subsidiaries is or could be a party or to which any of
their respective property is or could be subject that are required to
be described in the Registration Statement or the Prospectus and are
not so described, or of any statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required;
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(xiii) to the best knowledge of such counsel, each of the Company
and its subsidiaries has such Authorizations of, and has made all
filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except
where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole; each such Authorization is valid and
in full force and effect and each of the Company and its subsidiaries
is in compliance with all the terms and conditions thereof and with
the rules and regulations of the authorities and governing bodies
having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of
any such Authorization or results or, after notice or lapse of time or
both, would result in any other impairment of the rights of the holder
of any such Authorization; and, except as described in the
Registration Statement, such Authorizations contain no restrictions
that are materially burdensome to the Company or any of its
subsidiaries; except where such failure to be valid and in full force
and effect or to be in compliance, the occurrence of any such event or
the presence of any such restriction would not, singly or in the
aggregate, have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole;
(xiv) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended;
(xv) to the best of such counsel's knowledge after due inquiry,
except as disclosed in the Registration Statement, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company. To the best of counsel's knowledge after due inquiry,
there are no contracts, agreements or understandings between the
Company and any person requiring the Company to include any securities
of the Company with the Shares registered pursuant to the Registration
Statement; and
(xvi) (A) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements
and other financial data included therein as to which no opinion need
be expressed) comply in all material respects as to form with the Act,
(B) such counsel has no reason to believe that at the time the
Registration Statement became effective or on the date of
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this Agreement, the Registration Statement and the prospectus included
therein (except for the financial statements and other financial data
as to which such counsel need not express any belief) contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (C) such counsel has no reason to believe
that the Prospectus, as amended or supplemented, if applicable (except
for the financial statements and other financial data, as aforesaid)
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(xvii) each Selling Stockholder is the lawful owner of the Shares
to be sold by such Selling Stockholder pursuant to this Agreement and
has good and clear title to such Shares, free of all restrictions on
transfer, liens, encumbrances, security interests, equities and claims
whatsoever;
(xviii) each Selling Stockholder has full legal right, power and
authority, and all authorization and approval required by law, to
enter into this Agreement and the Custody Agreement and the Power of
Attorney of such Selling Stockholder and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder in the
manner provided herein and therein;
(xix) the Custody Agreement of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder
and is a valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms;
(xx) the Power of Attorney of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder
and is a valid and binding instrument of such Selling Stockholder,
enforceable in accordance with its terms, and, pursuant to such Power
of Attorney, such Selling Stockholder has, among other things,
authorized the Attorneys, or any one of them, to execute and deliver
on such Selling Stockholder's behalf this Agreement and any other
document they, or any one of them, may deem necessary or desirable in
connection with the transactions contemplated hereby and thereby and
to deliver the Shares to be sold by such Selling Stockholder pursuant
to this Agreement;
(xxi) upon delivery of and payment for the Shares to be sold by
each Selling Stockholder pursuant to this Agreement, good and clear
title to such Shares will pass to the Underwriters, free of all
restrictions on transfer, liens, encumbrances, security interests,
equities and claims whatsoever; and
(xxii) the execution, delivery and performance of this Agreement
and the Custody Agreement and Power of Attorney of each Selling
Stockholder by such
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Selling Stockholder, the compliance by such Selling Stockholder with
all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (A) require any
consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may be
required under the securities or Blue Sky laws of the various states)
, (B) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the organizational documents of
such Selling Stockholder, if such Selling Stockholder is not an
individual, or any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which such Selling Stockholder is a party
or by which any property of such Selling Stockholder is bound or (C)
violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or
agency having jurisdiction over such Selling Stockholder or any
property of such Selling Stockholder.
The opinion of Hartzog Conger & Cason described in Section 9(f) above shall
be rendered to you at the request of the Company and the Selling Stockholders
and shall so state therein.
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of McDermott, Will & Emery, counsel for the Underwriters, as
to the matters referred to in Sections 9(f)(iv), 9(f)(vi), 9(f)(ix) (but
only with respect to the statements under the caption "Description of
Securities" and "Underwriting") and 9(f)(xvi).
In giving such opinions with respect to the matters covered by Section
9(f)(xvi), Hartzog Conger & Cason and McDermott, Will & Emery may state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments
or supplements thereto and review and discussion of the contents thereof,
but are without independent check or verification except as specified.
(h) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Arthur
Andersen LLP, independent public accountants, containing information and
statements of the type ordinarily included in accountants' "comfort
letters" to Underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectus.
(i) The Company shall have delivered to you the agreements specified
in Section 2 hereof which agreements shall be in full force and effect on
the Closing Date.
The Shares shall have been duly listed, subject to notice of issuance,
on the AMEX.
The Company and the Selling Stockholders shall not have failed on or
prior to the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by the
Company or the Selling Stockholders on or prior to the Closing Date.
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You shall have received on the Closing Date, a certificate of each
Selling Stockholder who in not a U.S. Person (as defined under applicable
U.S. federal tax legislation) to the effect that such Selling Stockholder
is not a U.S. Person, which certificate may be in the form of a properly
completed and executed United States Treasury Department Form W-8 (or
applicable form or statement specified by Treasury Department regulations
in lieu thereof).
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable
Option Closing Date of such documents as you may reasonably request with
respect to the good standing of the Company, the due authorization and
issuance of such Additional Shares and other matters related to the
issuance of such Additional Shares.
SECTION 10.EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Sellers if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to
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<PAGE>
purchase on such date; PROVIDED that in no event shall the number of Firm Shares
or Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you
and the Company and the Selling Stockholders for purchase of such Firm Shares
are not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter and the Company.
In any such case which does not result in termination of this Agreement, either
you or the Company shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected. If, on an Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased on such date, the non-defaulting Underwriters shall have the option to
(i) terminate their obligation hereunder to purchase such Additional Shares or
(ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase on such date
in the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
any such Underwriter under this Agreement.
SECTION 11. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes payable in
connection with the transfer of the Shares to be sold by such Selling
Stockholder to the Underwriters.
(b) To do and perform all things to be done and performed by such
Selling Stockholder under this Agreement prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Shares to be sold
by such Selling Stockholder pursuant to this Agreement.
SECTION 12. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to U S Liquids
Inc., 411 N. Sam Houston Parkway East, Suite 400, Houston, Texas 77060-3545 and
(ii) if to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, or in any case to such other address as the person to be
notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and the
several Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Shares, regardless of (i) any investigation, or statement as
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to the results thereof, made by or on behalf of any Underwriter, the officers or
directors of any Underwriter, any person controlling any Underwriter, the
Company, the officers or directors of the Company or any person controlling the
Company, any Selling Stockholder or any person controlling such Selling
Stockholder, (ii) acceptance of the Shares and payment for them hereunder and
(iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of any
Seller as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Sellers agree, jointly and severally, to
reimburse the several Underwriters for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Sellers agree,
jointly and severally, to reimburse the several Underwriters, their directors
and officers and any persons controlling any of the Underwriters for any and all
fees and expenses (including, without limitation, the fees and disbursements of
counsel) incurred by them in connection with enforcing their rights hereunder
(including, without limitation, pursuant to Section 8 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Selling
Stockholders, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to herein, the Company's directors and the
Company's officers who sign the Registration Statement and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
SECTION 13. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to sell and deliver the Shares required to be delivered as and
when specified in this Agreement shall be subject to the condition that, at the
Closing Date or (with respect to the Additional Shares) the Option Closing Date,
no stop order suspending the effectiveness of the Registration Statement shall
be in effect and no proceedings therefor shall be pending or threatened by the
Commission.
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This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument. Please confirm that the foregoing
correctly sets forth the agreement between the Company, the Selling Stockholders
and the several Underwriters.
Very truly yours,
U S LIQUIDS INC.
By: __________________________________
Title:
SELLING STOCKHOLDERS
By: WASTE MANAGEMENT, INC.
By: _____________________________
Title: __________________________
_________________________________
Thomas B. Blanton
_________________________________
W. Gregory Orr
_________________________________
Earl J. Blackwell
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEUTSCHE BANK SECURITIES INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:__________________________
Title:
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SCHEDULE I
_________________________ ___________________________
Underwriters Number of Firm Shares to be
Purchased
Donaldson, Lufkin & Jenrette Securities
Corporation
Deutsche Bank Securities Inc.
_____________________
Total
<PAGE>
Schedule II
NUMBER OF
NUMBER OF FIRM ADDITIONAL SHARES
SELLING SHAREHOLDERS SHARES TO BE SOLD TO BE SOLD
- -------------------- ----------------- -----------------
Thomas B. Blanton 125,000 0
Waste Management, Inc. 0 250,000
W. Gregory Orr 0 125,000
Earl J. Blackwell 0 50,000
Total _________________ _________________
<PAGE>
Annex I
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EXHIBIT 4.2
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of February 3, 1999
among
U S LIQUIDS INC.,
VARIOUS FINANCIAL INSTITUTIONS
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Arranged by NATIONSBANC MONTGOMERY SECURITIES LLC
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS.......................................................1
1.1 Definitions......................................................1
1.2 Other Interpretive Provisions...................................12
1.3 Reallocation of Percentages and Revolving Loans..................13
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION AND
LETTER OF CREDIT PROCEDURES; SWING LINE LOANS...................14
2.1 Commitments.....................................................14
2.1.1 Revolving Loan Commitment................................14
2.1.2 L/C Commitment...........................................14
2.2 Revolving Loan Procedures........................................14
2.2.1 Various Types of Revolving Loans.........................14
2.2.2 Borrowing Procedures.....................................15
2.2.3 Procedures for Conversion of Type of Revolving
Loan......................................................15
2.3 Letter of Credit Procedures.....................................16
2.3.1 L/C Applications.........................................16
2.3.2 Participation in Letters of Credit.......................16
2.3.3 Reimbursement Obligations................................17
2.3.4 Limitation on Obligations of Issuing Banks...............17
2.3.5 Funding by Banks to Issuing Banks........................17
2.4 Swing Line Loans.................................................18
2.4.1 Swing Line Loans.........................................18
2.4.2 Swing Line Loan Procedures...............................18
2.4.3 Refunding of, or Funding of Participations in,
Swing Line Loans..........................................19
2.4.4 Repayment of Participations..............................19
2.4.5 Participation Obligations Unconditional..................20
2.5 Commitments Several..............................................20
2.6 Certain Conditions...............................................20
SECTION 3 NOTES EVIDENCING LOANS...........................................20
3.1 Notes............................................................20
3.2 Recordkeeping....................................................21
SECTION 4 INTEREST.........................................................21
4.1 Interest Rates...................................................21
4.2 Interest Payment Dates...........................................22
4.3 Interest Periods.................................................22
4.4 Setting and Notice of Eurodollar Rates...........................23
4.5 Computation of Interest..........................................23
SECTION 5 FEES.............................................................23
5.1 Non-Use Fee.....................................................23
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5.2 Letter of Credit Fees...........................................23
5.3 Arrangement and Agent's Fees....................................24
SECTION 6 REDUCTION AND TERMINATION OF THE COMMITMENTS;
PREPAYMENTS.....................................................24
6.1 Reduction or Termination of the Commitments.....................24
6.2 Prepayments.....................................................24
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES..................25
7.1 Making of Payments..............................................25
7.2 Application of Certain Payments.................................25
7.3 Due Date Extension..............................................25
7.4 Setoff..........................................................25
7.5 Proration of Payments...........................................25
7.6 Taxes...........................................................26
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR
LOANS.................................................................27
8.1 Increased Costs.................................................27
8.2 Basis for Determining Interest Rate Inadequate or
Unfair..........................................................29
8.3 Changes in Law Rendering Eurodollar Loans Unlawful...............29
8.4 Funding Losses...................................................30
8.5 Right of Banks to Fund through Other Offices.....................30
8.6 Discretion of Banks as to Manner of Funding......................30
8.7 Mitigation of Circumstances; Replacement of Affected
Bank............................................................30
8.8 Conclusiveness of Statements; Survival of
Provisions......................................................31
SECTION 9 WARRANTIES.......................................................31
9.1 Organization, etc................................................31
9.2 Authorization; No Conflict.......................................32
9.3 Validity and Binding Nature......................................32
9.4 Financial Condition..............................................32
9.5 No Material Adverse Change.......................................33
9.6 Litigation and Contingent Liabilities...........................33
9.7 Ownership of Properties; Liens..................................33
9.8 Subsidiaries....................................................33
9.9 Pension and Welfare Plans.......................................33
9.10 Investment Company Act..........................................34
9.11 Public Utility Holding Company Act..............................34
9.12 Regulation U....................................................34
9.13 Taxes...........................................................34
9.14 Solvency, etc...................................................35
9.15 Environmental Matters...........................................35
9.16 Year 2000 Problem...............................................36
9.17 Information.....................................................37
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SECTION 10 COVENANTS.......................................................37
10.1 Reports, Certificates and Other Information.....................37
10.1.1 Audit Report............................................37
10.1.2 Quarterly Reports.......................................38
10.1.3 Compliance Certificates.................................38
10.1.4 Reports to SEC and to Shareholders......................38
10.1.5 Notice of Default, Litigation and ERISA
Matters...................................................39
10.1.6 Subsidiaries............................................40
10.1.7 Management Reports......................................40
10.1.8 Projections.............................................40
10.1.9 Other Information.......................................40
10.2 Books, Records and Inspections..................................40
10.3 Insurance.......................................................40
10.4 Compliance with Laws; Payment of Taxes and
Liabilities.....................................................41
10.5 Maintenance of Existence, etc...................................41
10.6 Financial Covenants.............................................41
10.6.1 Minimum Net Worth.......................................41
10.6.2 Minimum Interest Coverage...............................41
10.6.3 Funded Debt to EBITDA Ratio.............................42
10.6.4 Capital Expenditures....................................42
10.7 Limitations on Debt.............................................42
10.8 Liens...........................................................43
10.9 Operating Leases................................................44
10.10 Restricted Payments............................................44
10.11 Mergers, Consolidations, Sales.................................44
10.12 Modification of Organizational Documents.......................45
10.13 Use of Proceeds................................................45
10.14 Further Assurances.............................................45
10.15 Transactions with Affiliates...................................46
10.16 Employee Benefit Plans.........................................46
10.17 Environmental Matters..........................................46
10.18 Unconditional Purchase Obligations.............................47
10.19 Inconsistent Agreements........................................47
10.20 Business Activities............................................47
10.21 Advances and Other Investments.................................47
10.22 Restriction of Amendments to Asset Purchase
Agreement.......................................................48
10.23 Property at Ethanol Plant Site.................................49
10.24 Parallel Products of Florida...................................49
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.......................49
11.1 Effectiveness....................................................49
11.1.1 Notes...................................................49
11.1.2 Resolutions.............................................49
11.1.3 Consents, etc...........................................49
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11.1.4 Incumbency and Signature Certificates...................50
11.1.5 Guaranty................................................50
11.1.6 Security Agreement......................................50
11.1.7 Pledge Agreements.......................................50
11.1.8 Confirmation............................................50
11.1.9 Opinion of Counsel for the Company and the
Guarantors................................................50
11.1.10 Other..................................................50
11.2 Conditions......................................................50
11.2.1 Compliance with Warranties, No Default,
etc......................................................50
11.2.2 Confirmatory Certificate................................51
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT..............................52
12.1 Events of Default...............................................52
12.1.1 Non-Payment of the Loans, etc...........................52
12.1.2 Non-Payment of Other Debt...............................52
12.1.3 Other Material Obligations..............................52
12.1.4 Bankruptcy, Insolvency, etc.............................52
12.1.5 Non-Compliance with Provisions of This
Agreement.................................................53
12.1.6 Warranties..............................................53
12.1.7 Pension Plans...........................................53
12.1.8 Judgments...............................................53
12.1.9 Invalidity of Guaranty, etc.............................54
12.1.10 Invalidity of Collateral Documents, etc................54
12.1.11 Change in Control......................................54
12.2 Effect of Event of Default......................................54
SECTION 13 THE AGENT.......................................................55
13.1 Appointment and Authorization...................................55
13.2 Delegation of Duties............................................56
13.3 Liability of Agent..............................................56
13.4 Reliance by Agent...............................................57
13.5 Notice of Default...............................................57
13.6 Credit Decision.................................................57
13.7 Indemnification.................................................58
13.8 Agent in Individual Capacity....................................59
13.9 Successor Agent.................................................59
13.10 Withholding Tax................................................60
13.11 Collateral Matters.............................................62
13.12 Co-Agents......................................................62
SECTION 14 GENERAL.........................................................63
14.1 Waiver; Amendments..............................................63
14.2 Confirmations...................................................63
14.3 Notices.........................................................64
14.4 Computations....................................................64
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14.5 Regulation U....................................................64
14.6 Costs, Expenses and Taxes.......................................64
14.7 Subsidiary References...........................................65
14.8 Captions........................................................65
14.9 Assignments; Participations.....................................65
14.9.1 Assignments.............................................65
14.9.2 Participations..........................................67
14.10 Governing Law..................................................67
14.11 Counterparts...................................................68
14.12 Successors and Assigns.........................................68
14.13 Indemnification by the Company.................................68
14.14 Forum Selection and Consent to Jurisdiction....................69
14.15 Waiver of Jury Trial...........................................69
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SCHEDULE 1.1 Pricing Schedule
SCHEDULE 2.1 Banks and Percentages
SCHEDULE 9.6(a) Litigation and Contingent Liabilities
SCHEDULE 9.6(b) Contingent Payments
SCHEDULE 9.8 Subsidiaries
SCHEDULE 9.15 Environmental Matters
SCHEDULE 10.7 Existing Debt
SCHEDULE 10.8 Existing Liens
SCHEDULE 12.1.11 Key Executives
SCHEDULE 14.3 Addresses for Notices
EXHIBIT A Form of Note
(Section 3.1)
EXHIBIT B Form of Compliance Certificate
(Section 10.1.3)
EXHIBIT C Copy of Guaranty
(Section 1)
EXHIBIT D Copy of Security Agreement
(Section 1)
EXHIBIT E Copy of Company Pledge Agreement
(Section 1)
EXHIBIT F-1 Copy of Subsidiary Pledge Agreement
(Section 11.1.7)
EXHIBIT F-2 Form of Subsidiary Pledge Agreement
(Section 11.1.7)
EXHIBIT G Form of Assignment Agreement
(Section 14.9)
EXHIBIT H Form of Confirmation
(Section 11.1.8)
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 3,
1999 (this "AGREEMENT"), is entered into among U S LIQUIDS INC., a Delaware
corporation (the "COMPANY"), the financial institutions that are or may from
time to time become parties hereto (together with their respective successors
and assigns, the "BANKS"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (in its individual capacity, "BOFA"), as agent for the Banks.
WHEREAS, the Company, various financial institutions and the Agent have
entered into an Amended and Restated Credit Agreement, dated as of April 10,
1998 (the "EXISTING AGREEMENT");
WHEREAS, the parties hereto have agreed to amend and restate the Existing
Agreement so as to, among other things, (a) increase the amount of the revolving
credit facility to $225,000,000, (b) amend certain covenants and various other
provisions of the Existing Agreement and (c) add additional financial
institutions to the lender group; and
WHEREAS, the parties hereto intend that this Agreement and the documents
executed in connection herewith not effect a novation of the obligations of the
Company under the Existing Agreement, but merely a restatement and, where
applicable, an amendment of the terms governing such obligations;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Existing Agreement is amended and restated in its entirety by
this Agreement, and the parties hereto agree as follows:
SECTION 1 DEFINITIONS.
1.1 DEFINITIONS. When used herein the following terms shall have the
following meanings:
AFFECTED BANK means any Bank that has given notice to the Company (which
has not been rescinded) of (i) any obligation by the Company to pay any amount
pursuant to SECTION 7.6 or 8.1 or (ii) the occurrence of any circumstances of
the nature described in SECTION 8.2 or 8.3.
AFFILIATE of any Person means (i) any other Person which, directly or
indirectly, controls or is controlled by or is under
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common control with such Person and (ii) any officer or director of such Person.
AGENT means BofA in its capacity as agent for the Banks hereunder and any
successor thereto in such capacity.
AGENT-RELATED PERSONS means BofA and any successor agent arising under
SECTION 13.9, together with their respective Affiliates (including, in the case
of BofA, the Arranger), and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
AGREEMENT - see the PREAMBLE.
ARRANGER means Nationsbanc Montgomery Securities LLC.
ASSIGNMENT AGREEMENT - see SECTION 14.9.1.
BANK - see the PREAMBLE. References to the "Banks" shall include the
Issuing Bank and the Swing Line Bank; for purposes of clarification only, to the
extent that BofA (or any successor Issuing Bank or Swing Line Bank) may have any
rights or obligations in addition to those of the other Banks due to its status
as Issuing Bank or Swing Line Bank, its status as such will be specifically
referenced.
BASE RATE means at any time the greater of (a) the Federal Funds Rate plus
0.5% and (b) the Reference Rate.
BOFA - see the PREAMBLE.
BUSINESS DAY means any day on which BofA is open for commercial banking
business in Chicago, New York and San Francisco and, in the case of a Business
Day which relates to a Eurodollar Loan, on which dealings are carried on in the
interbank eurodollar market.
CAPITAL EXPENDITURES means all expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of the Company, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets to the extent financed (i)
from insurance proceeds (or other similar recoveries) paid on account of the
loss of or damage to the assets being replaced or restored or (ii) with awards
of compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.
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CAPITAL LEASE means, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property by such
Person that, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of such Person.
CASH EQUIVALENT INVESTMENT means, at any time, (a) any evidence of Debt,
maturing not more than one year after such time, issued or guaranteed by the
United States Government or any agency thereof, (b) commercial paper, maturing
not more than one year from the date of issue, or corporate demand notes, in
each case (unless issued by a Bank or its holding company) rated at least A-l by
Standard & Poor's Ratings Group or P-l by Moody's Investors Service, Inc., (c)
any certificate of deposit (or time deposits represented by such certificates of
deposit) or bankers acceptance, maturing not more than one year after such time,
or overnight Federal Funds transactions that are issued or sold by a commercial
banking institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000, (d) any repurchase agreement entered into with any Bank (or other
commercial banking institution of the stature referred to in CLAUSE (C)) which
(i) is secured by a fully perfected security interest in any obligation of the
type described in any of CLAUSES (A) through (C) and (ii) has a market value at
the time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such Bank (or other commercial banking institution)
thereunder and (e) investments in short-term asset management accounts offered
by any Bank for the purpose of investing in loans to any corporation (other than
the Company or an Affiliate of the Company), state or municipality, in each case
organized under the laws of any state of the United States or of the District of
Columbia.
CERCLA - see SECTION 9.15.
CODE means the Internal Revenue Code of 1986.
COLLATERAL DOCUMENTS means the Company Pledge Agreement, each Subsidiary
Pledge Agreement, the Security Agreement and any other agreement pursuant to
which the Company or any Guarantor grants collateral to the Agent for the
benefit of the Banks.
COMMITMENT AMOUNT means $225,000,000 as reduced from time to time pursuant
to SECTION 6.1.
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COMMITMENT means, as to any Bank, such Bank's commitment to make Loans,
and to issue or participate in Letters of Credit, under this Agreement.
COMPANY - see the PREAMBLE.
COMPANY PLEDGE AGREEMENT means the pledge agreement dated as of December
17, 1997 between the Company and the Agent, a copy of which is attached hereto
as EXHIBIT E.
COMPUTATION PERIOD means each period of four consecutive Fiscal Quarters
ending on the last day of a Fiscal Quarter.
CONSOLIDATED NET INCOME means, with respect to the Company and its
Subsidiaries for any period, the net income (or loss) of the Company and its
Subsidiaries for such period, EXCLUDING any extraordinary gains during such
period.
CONTINGENT PAYMENT means any payment that has been (or is required to be)
made by the Company or any Subsidiary in connection with the achievement of any
particular business goal (excluding (i) employee compensation and bonuses in the
ordinary course of business and (ii) periodic, variable payments based upon
performance-related criteria, such as revenues or earnings).
A Contingent Payment shall be deemed to be "outstanding" from the time
that the Company or any Subsidiary enters into the agreement containing the
obligation to make such Contingent Payment until such time as either such
Contingent Payment has been made in full or it has become certain that such
Contingent Payment will never have to be made. If the amount of any Contingent
Payment is not determinable or is variable based on factors which are not yet
determinable, then the amount of such Contingent Payment shall be deemed to be
the maximum amount which, under any and all reasonably foreseeable
circumstances, the Company or the applicable Subsidiary would reasonably be
expected to be required to pay in respect thereof.
CONTROLLED GROUP means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Company, are treated
as a single employer under Section 414 of the Code or Section 4001 of ERISA.
DEBT of any Person means, without duplication, (a) all indebtedness of
such Person for borrowed money, whether or not evidenced by bonds, debentures,
notes or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases
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which have been or should be recorded as liabilities on a balance sheet of such
Person, (c) all obligations of such Person to pay the deferred purchase price of
property or services (including Contingent Payments but excluding trade accounts
payable in the ordinary course of business), (d) all indebtedness secured by a
Lien on the property of such Person, whether or not such indebtedness shall have
been assumed by such Person (it being understood that if such Person has not
assumed or otherwise become personally liable for any such indebtedness, the
amount of the Debt of such Person in connection therewith shall be limited to
the lesser of the face amount of such indebtedness or the fair market value of
all property of such Person securing such indebtedness), (e) all obligations,
contingent or otherwise, with respect to the face amount of all letters of
credit (whether or not drawn) and banker's acceptances issued for the account of
such Person (including the Letters of Credit), (f) net liabilities of such
Person under all Hedging Obligations and (g) all Suretyship Liabilities of such
Person.
DISPOSAL - see the definition of "RELEASE".
DOLLAR and the sign "$" mean lawful money of the United States of America.
EBITDA means, for any period, Consolidated Net Income for such period
PLUS, to the extent deducted in determining such Consolidated Net Income,
Interest Expense, income tax expense, depreciation and amortization for such
period, all calculated on a PRO FORMA basis in accordance with Article 11 of
Regulation S-X of the SEC.
EFFECTIVE DATE - see SECTION 11.1.
ENVIRONMENTAL CLAIMS means all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
ENVIRONMENTAL LAWS means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authority, in each case
relating to environmental matters.
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ERISA means the Employee Retirement Income Security Act of 1974.
References to sections of ERISA also refer to any successor sections.
EUROCURRENCY RESERVE PERCENTAGE means, with respect to any Eurodollar Loan
for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor), for determining the aggregate maximum
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other then applicable regulation of such Board of Governors
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as presently defined in Regulation D.
EURODOLLAR LOAN means any Revolving Loan which bears interest at a rate
determined by reference to the Eurodollar Rate (Reserve Adjusted).
EURODOLLAR MARGIN - see SCHEDULE 1.1.
EURODOLLAR OFFICE means with respect to any Bank the office or offices of
such Bank which shall be making or maintaining the Eurodollar Loans of such Bank
hereunder or such other office or offices through which such Bank determines its
Eurodollar Rate. A Eurodollar Office of any Bank may be, at the option of such
Bank, either a domestic or foreign office.
EURODOLLAR RATE means, with respect to any Eurodollar Loan for any
Interest Period, the rate per annum at which Dollar deposits in immediately
available funds are offered to the Eurodollar Office of BofA two Business Days
prior to the beginning of such Interest Period by major banks in the interbank
eurodollar market as at or about 10:00 A.M., Chicago time, for delivery on the
first day of such Interest Period, for the number of days comprised therein and
in an amount equal or comparable to the amount of the Eurodollar Loan of BofA
for such Interest Period.
EURODOLLAR RATE (RESERVE ADJUSTED) means, with respect to any Eurodollar
Loan for any Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined pursuant to the following formula:
Eurodollar Rate = EURODOLLAR RATE
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
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EVENT OF DEFAULT means any of the events described in SECTION 12.1.
EXISTING AGREEMENT - see the Recitals.
FEDERAL FUNDS RATE means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor
publication, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
FINANCIAL LETTER OF CREDIT means any Letter of Credit determined by the
applicable Issuing Bank to be a "financial guaranty-type Standby Letter of
Credit" as defined in footnote 13 to Appendix A to the Risk Based Capital
Guidelines issued by the Comptroller of the Currency (or in any successor
regulation, guideline or ruling by any applicable banking regulatory authority).
FISCAL QUARTER means a fiscal quarter of a Fiscal Year.
FISCAL YEAR means the fiscal year of the Company and its Subsidiaries,
which period shall be the 12-month period ending on December 31 of each year.
References to a Fiscal Year with a number corresponding to any calendar year
(e.g., "Fiscal Year 1998") refer to the Fiscal Year ending on December 31 of
such calendar year.
FLOATING RATE LOAN means any Loan which bears interest at or by reference
to the Base Rate.
FLOATING RATE MARGIN - see SCHEDULE 1.1.
FUNDED DEBT means all Debt of the Company and its Subsidiaries, excluding
(i) contingent obligations in respect of undrawn letters of credit and
Suretyship Liabilities (except, in each case, to the extent constituting
Suretyship Liabilities in respect of Debt of a Person other than the Company or
any Subsidiary), (ii) Hedging Obligations, (iii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to
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other Subsidiaries and (iv) to the extent they constitute debt, contingent
payments owed in connection with the acquisition of City Environmental, Inc.
listed as the first item on SCHEDULE 9.6(B).
FUNDED DEBT TO EBITDA RATIO means, as of the last day of any Fiscal
Quarter, the ratio of (i) Funded Debt as of the last day of such Fiscal Quarter
to (ii) EBITDA for the Computation Period ending on the last day of such Fiscal
Quarter.
GAAP means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
GROUP - see SECTION 2.2.1.
GUARANTOR means, on any day, each Subsidiary that has executed a
counterpart of the Guaranty on or prior to that day (or is required to execute a
counterpart of the Guaranty on that date).
GUARANTY means the Guaranty dated as of December 17, 1997 executed by
various Subsidiaries of the Company, a copy of which is attached hereto as
EXHIBIT C.
HAZARDOUS SUBSTANCES - see SECTION 9.15.
HEDGING OBLIGATIONS means, with respect to any Person, all liabilities of
such Person under interest rate, currency and commodity swap agreements, cap
agreements and collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates, currency
exchange rates or commodity prices.
INTEREST COVERAGE RATIO means the ratio of (a) Consolidated Net Income
before deducting Interest Expense and income tax expense for any Computation
Period to (b) Interest Expense for such Computation Period.
INTEREST EXPENSE means for any period the consolidated interest expense of
the Company and its Subsidiaries for such period (including all imputed interest
on Capital Leases and
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before giving effect to any capitalization of interest but excluding
amortization of deferred financing costs).
INTEREST PERIOD - see SECTION 4.3.
INVESTMENT means, relative to any Person, (a) any loan or advance made by
such Person to any other Person (excluding any commission, travel or similar
advances made to directors, officers and employees of the Company or any of its
Subsidiaries), (b) any Suretyship Liability of such Person, (c) any ownership or
similar interest held by such Person in any other Person and (d) deposits and
the like relating to prospective acquisitions of businesses.
ISSUING BANK means BofA in its capacity as an issuer of Letters of Credit
hereunder and any other Bank which, with the written consent of the Company and
the Agent, is the issuer of one or more Letters of Credit hereunder.
L/C APPLICATION means, with respect to any request for the issuance of a
Letter of Credit, a letter of credit application in the form being used by the
applicable Issuing Bank at the time of such request for the type of letter of
credit requested.
LETTER OF CREDIT - see SECTION 2.1.2.
LIEN means, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
LOAN DOCUMENTS means this Agreement, the Notes, the Guaranty, the L/C
Applications and the Collateral Documents.
LOANS means Revolving Loans and Swing Line Loans.
MARGIN STOCK means any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System.
MATERIAL ADVERSE EFFECT means (a) a material adverse change in, or a
material adverse effect upon, the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole, or (b) a material adverse effect upon any substantial portion of the
collateral under the Collateral Documents or upon the legality, validity,
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binding effect or enforceability against the Company or any Guarantor of any
Loan Document.
MULTIEMPLOYER PENSION PLAN means a multiemployer plan, as such term is
defined in Section 4001(a)(3) of ERISA, and to which the Company or any member
of the Controlled Group may have any liability.
NET WORTH means the Company's consolidated stockholders' equity (including
preferred stock accounts).
NON-FINANCIAL LETTER OF CREDIT means any Letter of Credit other than a
Financial Letter of Credit.
NOTE - see SECTION 3.1.
OPERATING LEASE means any lease of (or other agreement conveying the right
to use) any real or personal property by the Company or any Subsidiary, as
lessee, other than any Capital Lease.
PBGC means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
PENSION PLAN means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
Pension Plan), and to which the Company or any member of the Controlled Group
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
PERCENTAGE means, with respect to any Bank, the percentage specified
opposite such Bank's name on SCHEDULE 2.1 hereto, reduced (or increased) by
subsequent assignments pursuant to SECTION 14.9.1.
PERSON means any natural person, corporation, partnership, trust, limited
liability company, association, governmental authority or unit, or any other
entity, whether acting in an individual, fiduciary or other capacity.
RCRA - see SECTION 9.15.
RELEASE has the meaning specified in CERCLA and the term "DISPOSAL" (or
"DISPOSED") has the meaning specified in RCRA;
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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, that to the extent that
the laws of a state wherein any affected property lies establish a meaning for
"RELEASE" or "DISPOSAL" which is broader than is specified in either CERCLA or
RCRA, such broader meaning shall apply.
REFERENCE RATE means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate" is a rate set by BofA
based upon various factors, including BofA's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate.) Any change in the reference rate announced by BofA shall take effect at
the opening of business on the day specified in the public announcement of such
change.
REQUIRED BANKS means Banks having Percentages aggregating 66-2/3% or more;
PROVIDED that if and so long as any Bank fails to fund its participation in any
Swing Line Loan when required by SECTION 2.4.3, such Bank's Percentage shall be
deemed for purposes of this definition to be reduced by the percentage which the
defaulted amount constitutes of such Bank's Percentage, and the Percentage of
the Swing Line Bank shall be deemed for purposes of this definition to be
increased by such percentage; and PROVIDED, FURTHER, that at any time there are
less than three Banks, "REQUIRED BANKS" shall mean all Banks.
REVOLVING LOAN - see SECTION 2.1.1.
SEC means the Securities and Exchange Commission.
SECURITY AGREEMENT means the Security Agreement among the Company, the
various Subsidiaries of the Company and the Agent, a copy of which is attached
hereto as EXHIBIT D.
SENIOR DEBT means all Debt of the Company and its Subsidiaries other than
Subordinated Debt.
STATED AMOUNT means, with respect to any Letter of Credit at any date of
determination, the maximum aggregate amount available for drawing thereunder at
any time during the then ensuing term of such Letter of Credit under any and all
circumstances, plus the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit.
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SUBORDINATED DEBT means any unsecured indebtedness of the Company which
(x) is owed to Persons other than officers, employees, directors or Affiliates
of the Company, (y) has no amortization prior to July 31, 2002 and (z) has
subordination terms, covenants, pricing and other terms applicable to such
indebtedness which have been approved in writing by the Required Banks.
SUBSIDIARY means, with respect to any Person, a corporation of which such
Person and/or its other Subsidiaries own, directly or indirectly, such number of
outstanding shares as have more than 50% of the ordinary voting power for the
election of directors. Unless the context otherwise requires, each reference to
Subsidiaries herein shall be a reference to Subsidiaries of the Company.
SUBSIDIARY PLEDGE AGREEMENT means the Subsidiary Pledge Agreement, dated
as of December 17, 1997 between Mesa Processing, Inc. and the Agent, a copy of
which is attached as EXHIBIT F-1 hereto, and each other pledge agreement
substantially in the form of EXHIBIT F-2 issued by any Subsidiary, whether
pursuant to SECTION 11.1.7 or SECTION 10.14.
SURETYSHIP LIABILITY means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation in respect of any Suretyship Liability shall (subject to any
limitation set forth therein) be deemed to be the principal amount of the debt,
obligation or other liability supported thereby.
SWING LINE BANK means BofA in its capacity as swing line lender hereunder,
together with any replacement swing line lender arising under SECTION 13.9.
SWING LINE LOAN - see SECTION 2.4.1.
TERMINATION DATE means the earlier to occur of (a) February 1, 2002, or
such later date to which the Termination Date may be extended at the request of
the Company and with the consent of
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each Bank or (b) such other date on which the Commitments shall terminate
pursuant to SECTION 6 or 12.
TOTAL OUTSTANDINGS means at any time the sum of (a) the aggregate
principal amount of all outstanding Loans (including Swing Line Loans) plus (b)
the Stated Amount of all Letters of Credit.
TYPE OF REVOLVING LOAN OR BORROWING - see SECTION 2.2.1. The types of
Revolving Loans or borrowings under this Agreement are as follows: Floating Rate
Loans or borrowings and Eurodollar Loans or borrowings.
UNMATURED EVENT OF DEFAULT means any event that, if it continues uncured,
will, with lapse of time or notice or both, constitute an Event of Default.
WELFARE PLAN means a "welfare plan", as such term is defined in Section
3(1) of ERISA.
1.2 OTHER INTERPRETIVE PROVISIONS. (a) The meanings of
defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b) SECTION, SCHEDULE and EXHIBIT references are to this Agreement
unless otherwise specified.
(c) (i) The term "including" is not limiting and means "including
without limitation."
(ii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding", and
the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting such statute
or regulation.
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(e) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(f) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company,
the Banks and the other parties thereto and are the products of all parties.
Accordingly, they shall not be construed against the Agent or the Banks merely
because of the Agent's or Banks' involvement in their preparation.
1.3. REALLOCATION OF PERCENTAGES AND REVOLVING LOANS.
(a) The Company and each Bank agree that, effective on the Effective Date,
(i) this Agreement shall amend and restate in its entirety the Existing
Agreement and (ii) the Percentages of the Banks shall be reallocated in
accordance with the terms hereof.
(b) To facilitate the reallocation described in CLAUSE (A), on the
Effective Date, (i) all loans under the Existing Agreement shall be deemed to be
Revolving Loans hereunder, (ii) each Bank which is a party to the Existing
Agreement (an "Existing Bank") shall transfer to the Agent an amount equal to
the excess, if any, of such Bank's Percentage of all outstanding Revolving Loans
hereunder (including any Revolving Loans requested by the Company on the
Effective Date) over the amount of all of such Bank's loans under the Existing
Agreement, (iii) each Bank which is not a party to the Existing Agreement shall
transfer to the Agent an amount equal to such Bank's Percentage of all
outstanding Revolving Loans hereunder (including any Revolving Loans requested
by the Company on the Effective Date), (iv) the Agent shall apply the funds
received from the Banks pursuant to CLAUSES (II) and (III), FIRST, on behalf of
the Banks (pro rata according to the amount of the loans each is required to
purchase to achieve the reallocation described in CLAUSE (A)), to purchase from
each Existing Bank which is not a party hereto the loans of such Existing Bank
under the Existing Agreement (and, if applicable to purchase from any Existing
Bank which is a party hereto but which has loans under the Existing Agreement in
excess of such Bank's Percentage of all then-outstanding Revolving Loans
hereunder (including any Revolving Loans requested by the Company on the
Effective Date), a portion of such loans equal to such excess), SECOND, to pay
to each Existing Bank all interest, fees and other amounts (including amounts
payable pursuant to Section 8.4 of the Existing Agreement, assuming for such
purpose that the
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loans under the Existing Agreement were prepaid rather than reallocated on the
Effective Date) owed to such Existing Bank under the Existing Agreement (whether
or not otherwise then due) and, THIRD, as the Company shall direct, (v) the
Company shall select new Interest Periods to apply to all Revolving Loans
hereunder (or, to the extent the Company fails to do so, such Revolving Loans
shall be Floating Rate Loans).
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING, CONVERSION AND LETTER
OF CREDIT PROCEDURES; SWING LINE LOANS.
2.1 COMMITMENTS. On and subject to the terms and conditions of this
Agreement, each of the Banks, severally and for itself alone, agrees to make
loans to, and to issue or participate in the issuance of letters of credit for
the account of, the Company as follows:
2.1.1 REVOLVING LOAN COMMITMENT. Each Bank will make loans on a revolving
basis ("REVOLVING LOANS") from time to time before the Termination Date in such
Bank's Percentage of such aggregate amounts as the Company may from time to time
request from all Banks; PROVIDED that the Total Outstandings will not at any
time exceed the Commitment Amount.
2.1.2 L/C COMMITMENT. (a) The Issuing Banks will issue standby letters of
credit, in each case containing such terms and conditions as are permitted by
this Agreement and are reasonably satisfactory to the applicable Issuing Bank
(each, a "LETTER OF CREDIT"), at the request of and for the account of the
Company or any Subsidiary from time to time before the Termination Date and (b)
as more fully set forth in SECTION 2.3.5, each Bank agrees to purchase a
participation in each such Letter of Credit; PROVIDED that the aggregate Stated
Amount of all Letters of Credit shall not at any time exceed the lesser of (i)
$15,000,000 and (ii) the excess, if any, of the Commitment Amount over the
aggregate principal amount of all outstanding Loans (including Swing Line
Loans).
2.2 REVOLVING LOAN PROCEDURES.
2.2.1 VARIOUS TYPES OF REVOLVING LOANS. Each Revolving Loan shall be
either a Floating Rate Loan or a Eurodollar Loan (each a "TYPE" of Revolving
Loan), as the Company shall specify in the related notice of borrowing or
conversion pursuant to SECTION 2.2.2 or 2.2.3. Eurodollar Loans having the same
Interest Period are sometimes called a "GROUP" or collectively "GROUPS".
Floating Rate Loans and Eurodollar Loans may be outstanding at the same time,
PROVIDED that (i) not more than ten
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different Groups of Eurodollar Loans shall be outstanding at any one time and
(ii) the aggregate principal amount of each Group of Eurodollar Loans shall at
all times be at least $1,000,000 and an integral multiple of $1,000,000. All
borrowings, conversions and repayments of Revolving Loans shall be effected so
that each Bank will have a pro rata share (according to its Percentage) of all
types and Groups of Revolving Loans.
2.2.2 BORROWING PROCEDURES. The Company shall give written notice or
telephonic notice (followed immediately by written confirmation thereof) to the
Agent of each proposed borrowing not later than (a) in the case of a Floating
Rate borrowing, 11:00 A.M., Chicago time, on the proposed date of such
borrowing, and (b) in the case of a Eurodollar borrowing, 9:00 A.M., Chicago
time, at least two Business Days prior to the proposed date of such borrowing.
Each such notice shall be effective upon receipt by the Agent, shall be
irrevocable, and shall specify the date, amount and type of borrowing and, in
the case of a Eurodollar borrowing, the initial Interest Period therefor.
Promptly upon receipt of such notice, the Agent shall advise each Bank thereof.
Not later than 1:00 p.m., Chicago time, on the date of a proposed borrowing,
each Bank shall provide the Agent at the office specified by the Agent with
immediately available funds covering such Bank's Percentage of such borrowing
and, so long as the Agent has not received written notice that the conditions
precedent set forth in SECTION 11 with respect to such borrowing have not been
satisfied (and does not have knowledge of any default in the payment of any
principal, interest or fees to be paid to the Agent for the account of the
Banks), the Agent shall pay over the requested amount to the Company on the
requested borrowing date. Each borrowing shall be on a Business Day. Each
Floating Rate borrowing shall be in an aggregate amount of at least $1,000,000
and an integral multiple of $250,000.
2.2.3 PROCEDURES FOR CONVERSION OF TYPE OF REVOLVING LOAN. Subject to the
provisions of SECTION 2.2.1, the Company may convert all or any part of any
outstanding Revolving Loan into a Revolving Loan of a different type by giving
written notice or telephonic notice (followed immediately by written
confirmation thereof) to the Agent not later than (a) in the case of conversion
into a Floating Rate Loan, 11:00 A.M., Chicago time, on the proposed date of
such conversion, and (b) in the case of a conversion into a Eurodollar Loan,
9:00 A.M., Chicago time, at least two Business Days prior to the proposed date
of such conversion. Each such notice shall be effective upon receipt by the
Agent, shall be irrevocable, and shall specify the date and amount of such
conversion, the Revolving Loans to be so converted, the type of Revolving Loans
to be converted into and,
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in the case of a conversion into Eurodollar Loans, the initial Interest Period
therefor. Promptly upon receipt of such notice, the Agent shall advise each Bank
thereof. Subject to SECTION 2.6, such Revolving Loans shall be so converted on
the requested date of conversion. Each conversion shall be on a Business Day.
Each conversion of a Eurodollar Loan on a day other than the last day of an
Interest Period therefor shall be subject to the provisions of SECTION 8.4.
2.3 LETTER OF CREDIT PROCEDURES.
2.3.1 L/C APPLICATIONS. The Company shall give notice to the Agent and the
applicable Issuing Bank of the proposed issuance of each Letter of Credit on a
Business Day which is at least three Business Days (or such lesser number of
days as the Agent and such Issuing Bank shall agree in any particular instance)
prior to the proposed date of issuance of such Letter of Credit. Each such
notice shall be accompanied by an L/C Application, duly executed by the Company
(together with any Subsidiary for the account of which the related Letter of
Credit is to be issued) and in all respects satisfactory to the Agent and the
applicable Issuing Bank, together with such other documentation as the Agent or
such Issuing Bank may request in support thereof, it being understood that each
L/C Application shall specify, among other things, the date on which the
proposed Letter of Credit is to be issued, the expiration date of such Letter of
Credit (which shall not be later than the Termination Date) and whether such
Letter of Credit is to be transferable in whole or in part. So long as the
applicable Issuing Bank has not received written notice that the conditions
precedent set forth in SECTION 11 with respect to the issuance of such Letter of
Credit have not been satisfied, such Issuing Bank shall issue such Letter of
Credit on the requested issuance date. Each Issuing Bank shall promptly advise
the Agent of the issuance of each Letter of Credit by such Issuing Bank and of
any amendment thereto, extension thereof or event or circumstance changing the
amount available for drawing thereunder.
2.3.2 PARTICIPATION IN LETTERS OF CREDIT. Concurrently with the issuance
of each Letter of Credit, the applicable Issuing Bank shall be deemed to have
sold and transferred to each other Bank, and each other Bank shall be deemed
irrevocably and unconditionally to have purchased and received from such Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such other Bank's Percentage, in such Letter of Credit and the
Company's reimbursement obligations with respect thereto. For the purposes of
this Agreement, the unparticipated portion of each Letter of Credit shall be
deemed
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to be the applicable Issuing Bank's "participation" therein. Each Issuing
Bank hereby agrees, upon request of the Agent or any Bank, to deliver to such
Bank a list of all outstanding Letters of Credit issued by such Issuing Bank,
together with such information related thereto as such Bank may reasonably
request.
2.3.3 REIMBURSEMENT OBLIGATIONS. The Company hereby unconditionally and
irrevocably agrees to reimburse the applicable Issuing Bank for each payment or
disbursement made by such Issuing Bank under any Letter of Credit honoring any
demand for payment made by the beneficiary thereunder, in each case on the date
that such payment or disbursement is made. Any amount not reimbursed on the date
of such payment or disbursement shall bear interest from the date of such
payment or disbursement to the date that such Issuing Bank is reimbursed by the
Company therefor, payable on demand, at a rate per annum equal to the Base Rate
from time to time in effect PLUS the Floating Rate Margin from time to time in
effect PLUS, beginning on the fourth Business Day after receipt of notice from
the Issuing Bank of such payment or disbursement, 2%. The applicable Issuing
Bank shall notify the Company and the Agent whenever any demand for payment is
made under any Letter of Credit by the beneficiary thereunder; PROVIDED,
HOWEVER, that the failure of such Issuing Bank to so notify the Company shall
not affect the rights of such Issuing Bank or the Banks in any manner
whatsoever.
2.3.4 LIMITATION ON OBLIGATIONS OF ISSUING BANKS. In determining whether
to pay under any Letter of Credit, no Issuing Bank shall have any obligation to
the Company or any Bank other than to confirm that any documents required to be
delivered under such Letter of Credit appear to have been delivered and appear
to comply on their face with the requirements of such Letter of Credit. Any
action taken or omitted to be taken by an Issuing Bank under or in connection
with any Letter of Credit, if taken or omitted in the absence of gross
negligence and willful misconduct, shall not impose upon such Issuing Bank any
liability to the Company or any Bank and shall not reduce or impair the
Company's reimbursement obligations set forth in SECTION 2.3.3 or the
obligations of the Banks pursuant to SECTION 2.3.5.
2.3.5 FUNDING BY BANKS TO ISSUING BANKS. If an Issuing Bank makes any
payment or disbursement under any Letter of Credit and the Company has not
reimbursed such Issuing Bank in full for such payment or disbursement by 11:00
A.M., Chicago time, on the date of such payment or disbursement, or if any
reimbursement received by such Issuing Bank from the Company is or must be
returned or rescinded upon or during any bankruptcy or reorganization of the
Company or otherwise, each other Bank shall
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be obligated to pay to the Agent for the account of such Issuing Bank, in full
or partial payment of the purchase price of its participation in such Letter of
Credit, its pro rata share (according to its Percentage) of such payment or
disbursement (but no such payment shall diminish the obligations of the Company
under SECTION 2.3.3), and upon notice from the applicable Issuing Bank, the
Agent shall promptly notify each other Bank thereof. Each other Bank irrevocably
and unconditionally agrees to so pay to the Agent in immediately available funds
for the applicable Issuing Bank's account the amount of such other Bank's
Percentage of such payment or disbursement. If and to the extent any Bank shall
not have made such amount available to the Agent by 2:00 P.M., Chicago time, on
the Business Day on which such Bank receives notice from the Agent of such
payment or disbursement (it being understood that any such notice received after
noon, Chicago time, on any Business Day shall be deemed to have been received on
the next following Business Day), such Bank agrees to pay interest on such
amount to the Agent for the applicable Issuing Bank's account forthwith on
demand for each day from the date such amount was to have been delivered to the
Agent to the date such amount is paid, at a rate per annum equal to (a) for the
first three days after demand, the Federal Funds Rate from time to time in
effect and (b) thereafter, the Base Rate from time to time in effect. Any Bank's
failure to make available to the Agent its Percentage of any such payment or
disbursement shall not relieve any other Bank of its obligation hereunder to
make available to the Agent such other Bank's Percentage of such payment, but no
Bank shall be responsible for the failure of any other Bank to make available to
the Agent such other Bank's Percentage of any such payment or disbursement.
2.4 SWING LINE LOANS.
2.4.1 SWING LINE LOANS. Subject to the terms and conditions of this
Agreement, the Swing Line Bank may from time to time, in its discretion, make
loans to the Company (collectively the "SWING LINE LOANS" and individually each
a "SWING LINE LOAN") in accordance with this SECTION 2.4 in an aggregate amount
not at any time exceeding $15,000,000; PROVIDED that the Total Outstandings
shall not at any time exceed the Commitment Amount. Amounts borrowed under this
SECTION 2.4 may be borrowed, repaid and (subject to the agreement of the Swing
Line Bank) reborrowed until the Termination Date.
2.4.2 SWING LINE LOAN PROCEDURES. The Company shall give written or
telephonic notice to the Agent (which shall promptly inform the Swing Line Bank)
of each proposed Swing Line Loan not later than 12:00 noon, Chicago time, on the
proposed date of such
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Swing Line Loan. Each such notice shall be effective upon receipt by the Agent
and shall specify the date and amount of such Swing Line Loan, which shall be
not less than $100,000 or a higher integral multiple thereof. So long as the
Swing Line Bank has not received written notice that the conditions precedent
set forth in SECTION 11 with respect to the making of such Swing Line Loan have
not been satisfied, the Swing Line Bank may make the requested Swing Line Loan.
If the Swing Line Bank agrees to make the requested Swing Line Loan, the Swing
Line Bank shall pay over the requested amount to the Company on the requested
borrowing date. Concurrently with the making of any Swing Line Loan, the Swing
Line Bank shall be deemed to have sold and transferred, and each other Bank
shall be deemed to have purchased and received from the Swing Line Bank, an
undivided interest and participation to the extent of such other Bank's
Percentage in such Swing Line Loan (but such participation shall remain unfunded
until required to be funded pursuant to SECTION 2.4.3).
2.4.3 REFUNDING OF, OR FUNDING OF PARTICIPATIONS IN, SWING LINE LOANS. The
Swing Line Bank may at any time, in its sole discretion, on behalf of the
Company (which hereby irrevocably authorizes the Swing Line Bank to act on its
behalf) deliver a notice to the Agent requesting that each Bank (including the
Swing Line Bank in its individual capacity) make a Revolving Loan (which shall
be a Floating Rate Loan) in such Bank's Percentage of the aggregate amount of
Swing Line Loans outstanding on such date for the purpose of repaying all Swing
Line Loans (and, upon receipt of the proceeds of such Revolving Loans, the Agent
shall apply such proceeds to repay Swing Line Loans); PROVIDED that if the
conditions precedent to a borrowing of Revolving Loans are not then satisfied or
for any other reason the Banks may not then make Revolving Loans, then instead
of making Revolving Loans each Bank (other than the Swing Line Bank) shall
become immediately obligated to fund its participation in all outstanding Swing
Line Loans and shall pay to the Agent for the account of the Swing Line Bank an
amount equal to such Bank's Percentage of such Swing Line Loans. If and to the
extent any Bank shall not have made such amount available to the Agent by 2:00
P.M., Chicago time, on the Business Day on which such Bank receives notice from
the Agent of its obligation to fund its participation in Swing Line Loans (it
being understood that any such notice received after 12:00 noon, Chicago time,
on any Business Day shall be deemed to have been received on the next following
Business Day), such Bank agrees to pay interest on such amount to the Agent for
the Swing Line Bank's account forthwith on demand for each day from the date
such amount was to have been delivered to the Agent to the date such amount is
paid, at a rate per annum equal to (a) for the first three days after demand,
the Federal Funds Rate from
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time to time in effect and (b) thereafter, the Base Rate from time to time in
effect. Any Bank's failure to make available to the Agent its Percentage of the
amount of all outstanding Swing Line Loans shall not relieve any other Bank of
its obligation hereunder to make available to the Agent such other Bank's
Percentage of such amount, but no Bank shall be responsible for the failure of
any other Bank to make available to the Agent such other Bank's Percentage of
any such amount.
2.4.4 REPAYMENT OF PARTICIPATIONS. Upon (and only upon) receipt by the
Agent for the account of the Swing Line Bank of immediately available funds from
or on behalf of the Company (a) in reimbursement of any Swing Line Loan with
respect to which a Bank has paid the Agent for the account of the Swing Line
Bank the amount of such Bank's participation therein or (b) in payment of any
interest on a Swing Line Loan, the Agent will pay to such Bank its pro rata
share (according to its Percentage) thereof (and the Swing Line Bank shall
receive the amount otherwise payable to any Bank which did not so pay the Agent
the amount of such Bank's participation in such Swing Line Loan).
2.4.5 PARTICIPATION OBLIGATIONS UNCONDITIONAL. (a) Each Bank's obligation
to make available to the Agent for the account of the Swing Line Bank the amount
of its participation interest in all Swing Line Loans as provided in SECTION
2.4.3 shall be absolute and unconditional and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right which such Bank may have against the Swing Line Bank or any other
Person, (ii) the occurrence or continuance of an Event of Default or Unmatured
Event of Default, (iii) any adverse change in the condition (financial or
otherwise) of the Company or any Subsidiary thereof, (iv) any termination of the
Commitments or (v) any other circumstance, happening or event whatsoever.
(b) Notwithstanding the provisions of CLAUSE (A) above, no Bank shall be
required to purchase a participation interest in any Swing Line Loan if, prior
to the making by the Swing Line Bank of such Swing Line Loan, the Swing Line
Bank received written notice specifying that one or more of the conditions
precedent to the making of such Swing Line Loan were not satisfied and, in fact,
such conditions precedent were not satisfied at the time of the making of such
Swing Line Loan.
2.5 COMMITMENTS SEVERAL. The failure of any Bank to make a requested Loan
on any date shall not relieve any other Bank of its obligation (if any) to make
a Loan on such date, but no Bank
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shall be responsible for the failure of any other Bank to make any Loan to be
made by such other Bank.
2.6 CERTAIN CONDITIONS. Notwithstanding any other provision of this
Agreement, no Bank shall have an obligation to make any Loan, or to permit the
continuation of or any conversion into any Eurodollar Loan, and no Issuing Bank
shall have any obligation to issue any Letter of Credit, if an Event of Default
or Unmatured Event of Default exists.
SECTION 3 NOTES EVIDENCING LOANS.
3.1 NOTES. The Loans of each Bank shall be evidenced by a promissory note
(each a "NOTE") substantially in the form set forth in EXHIBIT A, with
appropriate insertions, payable to the order of such Bank in a face principal
amount equal to such Bank's Percentage of the Commitment Amount (or, in the case
of the Swing Line Bank, an amount equal to the maximum principal amount of all
Revolving Loans and Swing Line Loans which the Swing Line Bank may at any time
have outstanding hereunder).
3.2 RECORDKEEPING. Each Bank shall record in its records, or at its option
on the schedule attached to its Note, the date and amount of each Loan made by
such Bank, each repayment or conversion thereof and, in the case of each
Eurodollar Loan, the dates on which each Interest Period for such Loan shall
begin and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Note. The failure to so record any such amount or any error in so recording any
such amount shall not, however, limit or otherwise affect the obligations of the
Company hereunder or under any Note to repay the principal amount of the Loans
evidenced by such Note together with all interest accruing thereon.
SECTION 4 INTEREST.
4.1 INTEREST RATES. The Company promises to pay interest on the unpaid
principal amount of each Loan for the period commencing on the date of such Loan
until such Loan is paid in full as follows:
(a) at all times while such Loan is a Floating Rate Loan, at a rate
per annum equal to the sum of the Base Rate from time to time in effect
plus the Floating Rate Margin from time to time in effect;
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(b) at all times while such Loan is a Eurodollar Loan, at a rate per
annum equal to the sum of the Eurodollar Rate (Reserve Adjusted)
applicable to each Interest Period for such Loan plus the Eurodollar
Margin from time to time in effect; and
(c) at all times while such Loan is a Swing Line Loan, at a rate per
annum separately agreed to by the Company and the Swing Line Bank from
time to time (provided that if at any time the Banks are obligated to fund
participations in Swing Line Loans pursuant to SECTION 2.4.3, all of such
Swing Line Loans shall bear interest, from the date the obligation to fund
such participations first arises to the date such Swing Line Loans are
paid in full, at a rate per annum equal to the sum of the Base Rate from
time to time in effect plus the Floating Rate Margin from time to time in
effect);
PROVIDED, HOWEVER, that at any time an Event of Default exists, the interest
rate applicable to each Loan shall be increased by 2%.
4.2 INTEREST PAYMENT DATES. Accrued interest on each Floating Rate Loan
and Swing Line Loan shall be payable in arrears on the last Business Day of each
calendar quarter and at maturity. Accrued interest on each Eurodollar Loan shall
be payable on the last day of each Interest Period relating to such Loan (and,
in the case of a Eurodollar Loan with a six-month Interest Period, on the
three-month anniversary of the first day of such Interest Period) and at
maturity. After maturity, accrued interest on all Loans shall be payable on
demand.
4.3 INTEREST PERIODS. Each "Interest Period" for a Eurodollar Loan shall
commence on the date such Eurodollar Loan is made or converted from a Floating
Rate Loan, or on the expiration of the immediately preceding Interest Period for
such Eurodollar Loan, and shall end on the date which is one, two, three or six
months thereafter, as the Company may specify:
(a) in the case of an Interest Period which commences on the date a
Eurodollar Loan is made or converted from a Floating Rate Loan, in the
related notice of borrowing or conversion pursuant to SECTION 2.2.2 or
2.2.3, or
(b) in the case of a succeeding Interest Period with respect to any
Eurodollar Loan, by written notice or telephonic notice (followed
immediately by written confirmation thereof) to the Agent not later than
9:00 A.M.,
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Chicago time, at least two Business Days prior to the first day of such
succeeding Interest Period, it being understood that (i) each such notice
shall be effective upon receipt by the Agent and (ii) if the Company fails
to give such notice, such Loan shall automatically become a Floating Rate
Loan at the end of its then-current Interest Period.
Each Interest Period that begins on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month shall end on the
last Business Day of the appropriate subsequent calendar month. Each Interest
Period which would otherwise end on a day which is not a Business Day shall end
on the immediately succeeding Business Day (unless such immediately succeeding
Business Day is the first Business Day of a calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day). The
Company may not select any Interest Period for a Eurodollar Loan (a) which would
end after the scheduled Termination Date or (b) which would result in the
aggregate principal amount of all Eurodollar Loans having Interest Periods
ending after a date on which the Commitment Amount is scheduled to be reduced
pursuant to SECTION 6.1.2, PLUS the Stated Amount of all Letters of Credit
having expiration dates after the date of such scheduled reduction, being in
excess of the Commitment Amount which is scheduled to be in effect after giving
effect to such scheduled reduction.
4.4 SETTING AND NOTICE OF EURODOLLAR RATES. The applicable Eurodollar Rate
for each Interest Period shall be determined by the Agent, and notice thereof
shall be given by the Agent promptly to the Company and each Bank. Each
determination of the applicable Eurodollar Rate by the Agent shall be conclusive
and binding upon the parties hereto, in the absence of demonstrable error. The
Agent shall, upon written request of the Company or any Bank, deliver to the
Company or such Bank a statement showing the computations used by the Agent in
determining any applicable Eurodollar Rate hereunder.
4.5 COMPUTATION OF INTEREST. All determinations of interest for Floating
Rate Loans and Swing Line Loans when the Base Rate is determined by the
Reference Rate shall be made on the basis of a year of 365 or 366 days, as the
case may be, and the actual number of days elapsed. All other computations of
interest shall be computed for the actual number of days elapsed on the basis of
a year of 360 days. The applicable interest rate for each Floating Rate Loan
shall change simultaneously with each change in the Base Rate.
SECTION 5 FEES.
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5.1 NON-USE FEE. The Company agrees to pay to the Agent for the account of
each Bank a non-use fee, for the period from the Effective Date to the
Termination Date, at the rate per annum in effect from time to time pursuant to
SCHEDULE 1.1 of the daily average of the unused amount of such Bank's Percentage
of the Commitment Amount. For purposes of calculating usage under this Section,
the Commitment Amount shall be deemed used to the extent of the aggregate
principal amount of all outstanding Revolving Loans plus the undrawn amount of
all Letters of Credit. Such non-use fee shall be payable in arrears on the last
Business Day of each calendar quarter and on the Termination Date for any period
then ending for which such non-use fee shall not have theretofore been paid. The
non-use fee shall be computed for the actual number of days elapsed on the basis
of a year of 360 days.
5.2 LETTER OF CREDIT FEES. (a) The Company agrees to pay to the Agent for
the account of the Banks pro rata according to their respective Percentages a
letter of credit fee for each Letter of Credit in an amount equal to the rate
per annum in effect from time to time pursuant to SCHEDULE 1.1 of the undrawn
amount of such Letter of Credit (computed for the actual number of days elapsed
on the basis of a year of 360 days); PROVIDED that the rate applicable to each
Letter of Credit shall be increased by 2% at any time that an Event of Default
exists. Such letter of credit fee shall be payable in arrears on the last
Business Day of each calendar quarter and on the Termination Date for the period
from the date of the issuance of each Letter of Credit to the date such payment
is due or, if earlier, the date on which such Letter of Credit expired or was
terminated.
(b) In addition, with respect to each Letter of Credit, the Company agrees
to pay to the applicable Issuing Bank, for its own account, (i) such fees and
expenses as such Issuing Bank customarily requires in connection with the
issuance, negotiation, processing and/or administration of letters of credit in
similar situations and (ii) a letter of credit fee in the amount separately
agreed to by the Company and such Issuing Bank.
5.3 ARRANGEMENT AND AGENT'S FEES. The Company agrees to pay to the
Arranger and the Agent such arrangement and agent's fees as are mutually agreed
to from time to time by the Company and the Agent.
SECTION 6 REDUCTION AND TERMINATION OF THE COMMITMENTS;
PREPAYMENTS.
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6.1 REDUCTION OR TERMINATION OF THE COMMITMENTS. The Company may from time
to time on at least five Business Days' prior written notice received by the
Agent (which shall promptly advise each Bank thereof) permanently reduce the
Commitment Amount to an amount not less than the Total Outstandings. Any such
reduction (a) shall be in an amount not less than $5,000,000 or a higher
integral multiple of $1,000,000 and (b) shall reduce the Commitments pro rata
among the Banks according to their respective Percentages. The Company may at
any time on like notice terminate the Commitments upon payment in full of all
Loans and all other obligations of the Company hereunder and cash
collateralization in full, pursuant to documentation in form and substance
reasonably satisfactory to the Banks, of all obligations arising with respect to
the Letters of Credit or on such other.
6.2 PREPAYMENTS. The Company may from time to time prepay the Loans in
whole or in part, PROVIDED that the Company shall give the Agent (which shall
promptly advise each Bank) notice thereof not later than 10:00 A.M. (or, in the
case of prepayment of Swing Line Loans, 12:00 noon), Chicago time, on the day of
such prepayment (which shall be a Business Day), specifying the Loans to be
prepaid and the date and amount of prepayment. Each partial prepayment shall be
in a principal amount of $100,000 or a higher integral multiple thereof. Any
prepayment of a Eurodollar Loan on a day other than the last day of an Interest
Period therefor shall include interest on the principal amount being repaid and
shall be subject to SECTION 8.4.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 MAKING OF PAYMENTS. All payments of principal of or interest on the
Notes, and of all non-use fees and Letter of Credit fees, shall be made by the
Company to the Agent in immediately available funds at the office specified by
the Agent not later than noon, Chicago time, on the date due; and funds received
after that hour shall be deemed to have been received by the Agent on the next
following Business Day. The Agent shall promptly remit to each Bank or other
holder of a Note its share of all such payments received in collected funds by
the Agent for the account of such Bank or holder.
All payments under SECTION 8.1 shall be made by the Company directly to
the Bank entitled thereto.
7.2 APPLICATION OF CERTAIN PAYMENTS. Each payment of principal shall be
applied to such Loans as the Company shall
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direct by notice to be received by the Agent on or before the date of such
payment or, in the absence of such notice, as the Agent shall determine in its
discretion. Concurrently with each remittance to any Bank of its share of any
such payment, the Agent shall advise such Bank as to the application of such
payment.
7.3 DUE DATE EXTENSION. If any payment of principal or interest with
respect to any of the Notes, or of non-use fees or Letter of Credit fees, falls
due on a day which is not a Business Day, then such due date shall be extended
to the immediately following Business Day (unless, in the case of a Eurodollar
Loan, such immediately following Business Day is the first Business Day of a
calendar month, in which case such date shall be the immediately preceding
Business Day) and, in the case of principal, additional interest shall accrue
and be payable for the period of any such extension.
7.4 SETOFF. The Company agrees that the Agent and each Bank have all
rights of set-off and bankers' lien provided by applicable law, and in addition
thereto, the Company agrees that at any time any Event of Default exists, the
Agent and each Bank may apply to the payment of any obligations of the Company
hereunder, whether or not then due, any and all balances, credits, deposits,
accounts or moneys of the Company then or thereafter with the Agent or such
Bank.
7.5 PRORATION OF PAYMENTS. If any Bank shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or otherwise,
but excluding any payment pursuant to SECTION 8.7 or 14.9 or any payment to the
Swing Line Bank in respect of a Swing Line Loan) on account of principal of or
interest on any Note (or on account of its participation in any Letter of Credit
or Swing Line Loan) in excess of its pro rata share of payments and other
recoveries obtained by all Banks on account of principal of and interest on
Notes (or such participation) then held by them, such Bank shall purchase from
the other Banks such participation in the Notes (or sub- participation in
Letters of Credit or Swing Line Loans) held by them as shall be necessary to
cause such purchasing Bank to share the excess payment or other recovery ratably
with each of them; PROVIDED, HOWEVER, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Bank, the
purchase shall be rescinded and the purchase price restored to the extent of
such recovery.
7.6 TAXES. All payments of principal of, and interest on, the Loans and
all other amounts payable hereunder shall be made
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free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by any Bank's net
income or receipts (all non-excluded items being called "TAXES"). If any
withholding or deduction from any payment to be made by the Company hereunder is
required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Company will:
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Banks such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Bank will equal the full amount such Bank would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Agent or any Bank with
respect to any payment received by the Agent or such Bank hereunder, the Agent
or such Bank may pay such Taxes and the Company will promptly pay such
additional amounts (including any penalty, interest and expense) as is necessary
in order that the net amount received by such Person after the payment of such
Taxes (including any Taxes on such additional amount) shall equal the amount
such Person would have received had such Taxes not been asserted.
If the Company fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent, for the account of the respective
Banks, the required receipts or other required documentary evidence, the Company
shall indemnify the Banks for any incremental Taxes, interest or penalties that
may become payable by any Bank as a result of any such failure. For purposes of
this SECTION 7.6, a distribution hereunder by the Agent or any Bank to or for
the account of any Bank shall be deemed a payment by the Company.
Upon the request from time to time of the Company or the Agent, each Bank
that is organized under the laws of a jurisdiction other than the United States
of America shall execute and deliver to the Company and the Agent one or more
(as the Company or the Agent may reasonably request) United States
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Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents, appropriately completed, as may be applicable to establish the
extent, if any, to which a payment to such Bank is exempt from withholding or
deduction of Taxes.
The obligations of the Company under this SECTION 7.6 are subject to the
limitation set out in SECTION 14.9.1.
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR
EURODOLLAR LOANS.
8.1 INCREASED COSTS. (a) If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any Eurodollar Office of such Bank) with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency
(A) shall subject any Bank (or any Eurodollar Office of such Bank)
to any tax, duty or other charge with respect to its Eurodollar Loans, its
Note or its obligation to make Eurodollar Loans, or shall change the basis
of taxation of payments to any Bank of the principal of or interest on its
Eurodollar Loans or any other amounts due under this Agreement in respect
of its Eurodollar Loans or its obligation to make Eurodollar Loans (except
for changes in the rate of tax on the overall net income of such Bank or
its Eurodollar Office imposed by the jurisdiction in which such Bank's
principal executive office or Eurodollar Office is located); or
(B) shall impose, modify or deem applicable any reserve (including
any reserve imposed by the Board of Governors of the Federal Reserve
System, but excluding any reserve included in the determination of
interest rates pursuant to SECTION 4), special deposit or similar
requirement against assets of, deposits with or for the account of, or
credit extended by any Bank (or any Eurodollar Office of such Bank); or
(C) shall impose on any Bank (or its Eurodollar Office) any other
condition affecting its Eurodollar Loans, its Note or its obligation to
make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D of the Board of Governors of the
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Federal Reserve System, to impose a cost on) such Bank (or any Eurodollar Office
of such Bank) of making or maintaining any Eurodollar Loan, or to reduce the
amount of any sum received or receivable by such Bank (or its Eurodollar Office)
under this Agreement or under its Note with respect thereto, then within 10 days
after demand by such Bank (which demand shall be accompanied by a statement
setting forth the basis for such demand and a calculation of the amount thereof
in reasonable detail, a copy of which shall be furnished to the Agent), the
Company shall pay directly to such Bank such additional amount as will
compensate such Bank for such increased cost or such reduction.
(b) If any Bank shall reasonably determine that the adoption or phase-in
of any applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank or any
Person controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Bank's or such controlling Person's capital as a consequence of
such Bank's obligations hereunder or under any Letter of Credit to a level below
that which such Bank or such controlling Person could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's or such
controlling Person's policies with respect to capital adequacy) by an amount
deemed by such Bank or such controlling Person to be material, then from time to
time, within 10 days after demand by such Bank (which demand shall be
accompanied by a statement setting forth the basis for such demand and a
calculation of the amount thereof in reasonable detail, a copy of which shall be
furnished to the Agent), the Company shall pay to such Bank such additional
amount or amounts as will compensate such Bank or such controlling Person for
such reduction.
8.2 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If with respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being
offered to the Agent in the interbank eurodollar market for such Interest
Period, or the Agent otherwise reasonably determines (which determination,
if made in good faith, shall be binding and conclusive on the Company)
that by reason of circumstances affecting the interbank eurodollar market
adequate and reasonable means do
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not exist for ascertaining the applicable Eurodollar Rate; or
(b) Banks having an aggregate Percentage of 40% or more advise the
Agent that the Eurodollar Rate (Reserve Adjusted) as determined by the
Agent will not adequately and fairly reflect the cost to such Banks of
maintaining or funding such Eurodollar Loans for such Interest Period
(taking into account any amount to which such Banks may be entitled under
SECTION 8.1) or that the making or funding of Eurodollar Loans has become
impracticable as a result of an event occurring after the date of this
Agreement which in the opinion of such Banks materially affects such
Loans;
THEN the Agent shall promptly notify the other parties thereof and, so long as
such circumstances shall continue, (i) no Bank shall be under any obligation to
make or convert into Eurodollar Loans and (ii) on the last day of the current
Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in
full, automatically convert to a Floating Rate Loan.
8.3 CHANGES IN LAW RENDERING EURODOLLAR LOANS UNLAWFUL. In the event that
any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of any
Bank cause a substantial question as to whether it is) unlawful for any Bank to
make, maintain or fund Eurodollar Loans, then such Bank shall promptly notify
each of the other parties hereto and, so long as such circumstances shall
continue, (a) such Bank shall have no obligation to make or convert into
Eurodollar Loans (but shall make Floating Rate Loans concurrently with the
making of or conversion into Eurodollar Loans by the Banks which are not so
affected, in each case in an amount equal to such Bank's pro rata share of all
Eurodollar Loans which would be made or converted into at such time in the
absence of such circumstances) and (b) on the last day of the current Interest
Period for each Eurodollar Loan of such Bank (or, in any event, on such earlier
date as may be required by the relevant law, regulation or interpretation), such
Eurodollar Loan shall, unless then repaid in full, automatically convert to a
Floating Rate Loan. Each Floating Rate Loan made by a Bank which, but for the
circumstances described in the foregoing sentence, would be a Eurodollar Loan
(an "AFFECTED LOAN") shall remain outstanding for the same period as the Group
of Eurodollar Loans of which such Affected Loan would be a part absent such
circumstances.
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8.4 FUNDING LOSSES. The Company hereby agrees that upon demand by any Bank
(which demand shall be accompanied by a statement setting forth the basis for
the amount being claimed, a copy of which shall be furnished to the Agent), the
Company will indemnify such Bank against any net loss or expense which such Bank
may sustain or incur (including any net loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such Bank
to fund or maintain any Eurodollar Loan), as reasonably determined by such Bank,
as a result of (a) any payment, prepayment or conversion of any Eurodollar Loan
of such Bank on a date other than the last day of an Interest Period for such
Loan (including any conversion pursuant to SECTION 8.3) or (b) any failure of
the Company to borrow or convert any Loan on a date specified therefor in a
notice of borrowing or conversion pursuant to this Agreement. For this purpose,
all notices to the Agent pursuant to this Agreement shall be deemed to be
irrevocable.
8.5 RIGHT OF BANKS TO FUND THROUGH OTHER OFFICES. Each Bank may, if it so
elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign
branch or affiliate of such Bank to make such Loan, PROVIDED that in such event
for the purposes of this Agreement such Loan shall be deemed to have been made
by such Bank and the obligation of the Company to repay such Loan shall
nevertheless be to such Bank and shall be deemed held by it, to the extent of
such Loan, for the account of such branch or affiliate.
8.6 DISCRETION OF BANKS AS TO MANNER OF FUNDING. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Eurodollar Loan during each Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
8.7 MITIGATION OF CIRCUMSTANCES; REPLACEMENT OF AFFECTED BANK. (a) Each
Bank shall promptly notify the Company and the Agent of any event of which it
has knowledge which will result in, and will use reasonable commercial efforts
available to it (and not, in such Bank's good faith judgment, otherwise
disadvantageous to such Bank) to mitigate or avoid, (i) any obligation by the
Company to pay any amount pursuant to SECTION 7.6 or 8.1 or (ii) the occurrence
of any circumstances of the
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nature described in SECTION 8.2 or 8.3 (and, if any Bank has given notice of any
such event described in CLAUSE (I) or (II) above and thereafter such event
ceases to exist, such Bank shall promptly so notify the Company and the Agent).
Without limiting the foregoing, each Bank will designate a different funding
office if such designation will avoid (or reduce the cost to the Company of) any
event described in CLAUSE (I) or (II) of the preceding sentence and such
designation will not, in such Bank's sole judgment, be otherwise disadvantageous
to such Bank.
(b) At any time any Bank is an Affected Bank, the Company may replace such
Affected Bank as a party to this Agreement with one or more other bank(s) or
financial institution(s) reasonably satisfactory to the Agent (and upon notice
from the Company such Affected Bank shall assign pursuant to an Assignment
Agreement, and without recourse or warranty, its Commitment, its Loans, its
Note, its participation in Letters of Credit, and all of its other rights and
obligations hereunder to such replacement bank(s) or other financial
institution(s) for a purchase price equal to the sum of the principal amount of
the Loans so assigned, all accrued and unpaid interest thereon, its ratable
share of all accrued and unpaid non-use fees and Letter of Credit fees, any
amounts payable under SECTION 8.4 as a result of such Bank receiving payment of
any Eurodollar Loan prior to the end of an Interest Period therefor and all
other obligations owed to such Affected Bank hereunder).
8.8 CONCLUSIVENESS OF STATEMENTS; SURVIVAL OF PROVISIONS. Determinations
and statements of any Bank pursuant to SECTION 8.1, 8.2, 8.3 or 8.4 shall be
conclusive absent demonstrable error. Banks may use reasonable averaging and
attribution methods in determining compensation under SECTIONS 8.1 and 8.4, and
the provisions of such Sections shall survive repayment of the Loans,
cancellation of the Notes, cancellation or expiration of the Letters of Credit
and any termination of this Agreement.
SECTION 9 WARRANTIES.
To induce the Agent and the Banks to enter into this Agreement and to
induce the Banks to make Loans and issue or purchase participations in Letters
of Credit hereunder, the Company warrants to the Agent and the Banks that:
9.1 ORGANIZATION, ETC. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
each Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation; and the Company and
each
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Subsidiary is duly qualified to do business in each jurisdiction where the
nature of its business makes such qualification necessary (except in those
instances in which the failure to be qualified or in good standing does not have
a Material Adverse Effect) and has full power and authority to own its property
and conduct its business as presently conducted by it.
9.2 AUTHORIZATION; NO CONFLICT. The execution and delivery by the Company
of this Agreement and each other Loan Document to which it is a party, the
borrowings hereunder, the execution and delivery by each Guarantor of each Loan
Document to which it is a party and the performance by each of the Company and
each Guarantor of its obligations under each Loan Document to which it is a
party are within the corporate powers of the Company and each Guarantor, have
been duly authorized by all necessary corporate action on the part of the
Company and each Guarantor (including any necessary shareholder action), have
received all necessary governmental approval (if any shall be required), and do
not and will not (a) violate any provision of law or any order, decree or
judgment of any court or other government agency which is binding on the Company
or any Guarantor, (b) contravene or conflict with, or result in a breach of, any
provision of the Certificate of Incorporation, By-Laws or other organizational
documents of the Company or any Guarantor or of any agreement, indenture,
instrument or other document which is binding on the Company, any Guarantor or
any other Subsidiary or (c) result in, or require, the creation or imposition of
any Lien on any property of the Company, any Guarantor or any other Subsidiary
(other than Liens arising under the Loan Documents).
9.3 VALIDITY AND BINDING NATURE. Each of this Agreement and each other
Loan Document to which the Company is a party is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors' rights generally and to general principles of
equity; and each Loan Document to which any Guarantor is a party is, or upon the
execution and delivery thereof by such Guarantor will be, the legal, valid and
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors' rights generally and to general
principles of equity.
9.4 FINANCIAL CONDITION. The audited consolidated financial statements of
the Company and its Subsidiaries dated December 31, 1997, and the unaudited
consolidated financial statements of the Company and its Subsidiaries dated
September
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30, 1998, copies of which have been furnished prior to the Effective Date to
each Bank which is a party hereto on the Effective Date:
(i) were prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, except as otherwise expressly
noted therein (subject, in the case of the unaudited financial statements,
to the absence of footnotes and to customary year-end audit adjustments);
and
(ii) fairly present in all material respects the financial
condition of the Company and its Subsidiaries as of the dates thereof and
the results of operations for the periods covered thereby.
9.5 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, there has been no
material adverse change in the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole.
9.6 LITIGATION AND CONTINGENT LIABILITIES. (a) No litigation (including
derivative actions), arbitration proceeding, labor controversy or governmental
investigation or proceeding is pending or, to the Company's knowledge,
threatened against the Company or any Subsidiary which might reasonably be
expected to have a Material Adverse Effect, except as set forth in SCHEDULE
9.6(A). Other than any liability incident to such litigation or proceedings,
neither the Company nor any Subsidiary has any material contingent liabilities
not listed in such SCHEDULE 9.6(A) or 9.6(B).
(b) SCHEDULE 9.6(B) sets out descriptions of all arrangements existing on
the Effective Date pursuant to which the Company or any Subsidiary may be
required to pay any Contingent Payment.
9.7 OWNERSHIP OF PROPERTIES; LIENS. Each of the Company and each
Subsidiary owns good and, in the case of real property, marketable title to all
of its properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges and material claims (including
material infringement claims with respect to patents, trademarks, copyrights and
the like) except as permitted pursuant to SECTION 10.8.
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9.8 SUBSIDIARIES. The Company has no Subsidiaries except those listed in
SCHEDULE 9.8.
9.9 PENSION AND WELFARE PLANS. (a) During the twelve-
consecutive-month period prior to the date of the execution and delivery of this
Agreement or the making of any Loan hereunder, (i) no steps have been taken to
terminate any Pension Plan and (ii) no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a lien under Section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by the Company
of any material liability, fine or penalty. The Company has no contingent
liability with respect to any post-retirement benefit under a Welfare Plan,
other than liability for continuation coverage described in Part 6 of Subtitle B
of Title I of ERISA.
(b) All contributions (if any) have been made to any Multiemployer Pension
Plan that are required to be made by the Company or any other member of the
Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; neither the Company nor any member of the
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Pension Plan, incurred any withdrawal liability with respect to any such plan,
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, might result in a withdrawal or partial withdrawal from any such
plan; and neither the Company nor any member of the Controlled Group has
received any notice that any Multiemployer Pension Plan is in reorganization,
that increased contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the Code, that any
such plan is or may be terminated, or that any such plan is or may become
insolvent.
9.10 INVESTMENT COMPANY ACT. Neither the Company nor any Subsidiary is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940.
9.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any
Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935.
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9.12 REGULATION U. The Company is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
9.13 TAXES. Each of the Company and each Subsidiary has filed all tax
returns and reports required by law to have been filed by it and has paid all
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
9.14 SOLVENCY, ETC. On the Effective Date (or, in the case of any Person
which becomes a Guarantor after the Effective Date, on the date such Person
becomes a Guarantor), and immediately prior to and after giving effect to the
issuance of each Letter of Credit and each borrowing hereunder and the use of
the proceeds thereof, (a) each of the Company's and each Guarantor's assets will
exceed its liabilities and (b) each of the Company and each Guarantor will be
solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then constituted.
9.15 ENVIRONMENTAL MATTERS.
(a) NO VIOLATIONS. Except as set forth on SCHEDULE 9.15, neither the
Company nor any Subsidiary, nor any operator of the Company's or any
Subsidiary's properties, is in violation, or alleged violation, of any judgment,
decree, order, law, permit, license, rule or regulation pertaining to
environmental matters, including those arising under the Resource Conservation
and Recovery Act ("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 or any other Environmental Law which (i) in any
single case, requires expenditures in any three-year period of $500,000 or more
by the Company and its Subsidiaries in penalties and/or for investigative,
removal or remedial actions or (ii) individually or in the aggregate otherwise
might reasonably be expected to have a Material Adverse Effect.
(b) NOTICES. Except as set forth on SCHEDULE 9.15, neither the
Company nor any Subsidiary has received notice from any third party, including
any Federal, state or local governmental authority: (a) that any one of them has
been
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identified by the U.S. Environmental Protection Agency 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; (b) that any hazardous waste, as
defined by 42 U.S.C. ss.6903(5), any hazardous substance 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 material or other chemical or substance
regulated by any Environmental Law, excluding household hazardous waste (all of
the foregoing, "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 a remedial investigation,
removal or other response action pursuant to any Environmental Law; (c) that the
Company or any Subsidiary must conduct a remedial investigation, removal,
response action or other activity pursuant to any Environmental Law; or (d) of
any Environmental Claim.
(c) HANDLING OF HAZARDOUS SUBSTANCES. Except as set forth on
SCHEDULE 9.15, (i) no portion of the real property or other assets of the
Company or any Subsidiary has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance in all material respects
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 Company, any Subsidiary or the
operators of any real property of the Company or any Subsidiary, no Hazardous
Substances have been generated or are being used on such properties except in
accordance in all material respects with applicable Environmental Laws; (iii)
there have been no Releases or threatened Releases of Hazardous Substances on,
upon, into or from any real property or other assets of the Company or any
Subsidiary, which Releases singly or in the aggregate might reasonably be
expected to have a material adverse effect on the value of such real property or
assets; (iv) to the Company's actual knowledge, there have been no Releases on,
upon, from or into any real property in the vicinity of the real property or
other assets of the Company or any Subsidiary which, through soil or groundwater
contamination, may have come to be located on, and which might reasonably be
expected to have a material adverse effect on the value of, the real property or
other assets of the Company or any Subsidiary; and (v) any Hazardous Substances
generated by the Company and its Subsidiaries have been transported offsite only
by properly licensed carriers and delivered only to treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the best
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of the Company's knowledge, operating in compliance with such permits and
applicable Environmental Laws.
(d) INVESTIGATIONS. Except as set forth on SCHEDULE 9.15, the
Company and its Subsidiaries have taken all reasonable steps to investigate the
past and present condition and usage of the real property of the Company and its
Subsidiaries and the operations conducted by the Company and its Subsidiaries
with regard to environmental matters.
9.16 YEAR 2000 PROBLEM. The Company and its Subsidiaries 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 Problem" (that is, the risk that computer applications used by the
Company and its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999). Based on such review and program, the Company reasonably
believes that the "Year 2000 Problem" will not have a Material Adverse Effect.
9.17 INFORMATION. All information heretofore or contemporaneously herewith
furnished in writing by the Company or any Subsidiary to any Bank for purposes
of or in connection with this Agreement and the transactions contemplated hereby
is, and all written information hereafter furnished by or on behalf of the
Company or any Subsidiary to any Bank pursuant hereto or in connection herewith
will be, true and accurate in every material respect on the date as of which
such information is dated or certified, and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such
information not misleading in light of the circumstances under which made (it
being recognized by the Agent and the Banks that (a) any projections and
forecasts provided by the Company are based on good faith estimates and
assumptions believed by the Company to be reasonable as of the date of the
applicable projections or assumptions and that actual results during the period
or periods covered by any such projections and forecasts may differ from
projected or forecasted results and (b) any information provided by the Company
or any Subsidiary with respect to any Person or assets acquired or to be
acquired by the Company or any Subsidiary shall, for all periods prior to the
date of such acquisition, be limited to the knowledge of the Company or the
acquiring Subsidiary after reasonable inquiry).
SECTION 10 COVENANTS.
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Until the expiration or termination of the Commitments and thereafter
until all obligations of the Company hereunder and under the other Loan
Documents are paid in full and all Letters of Credit have been terminated, the
Company agrees that, unless at any time the Required Banks shall otherwise
expressly consent in writing, it will:
10.1 REPORTS, CERTIFICATES AND OTHER INFORMATION. Furnish to the Agent and
each Bank:
10.1.1 AUDIT REPORT. Promptly when available and in any event within 90
days after the close of each Fiscal Year: (a) a copy of the annual audit report
of the Company and its Subsidiaries for such Fiscal Year, including therein
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such Fiscal Year and consolidated statements of earnings and cash flow of the
Company and its Subsidiaries for such Fiscal Year certified without
qualification by independent auditors of recognized standing selected by the
Company and reasonably acceptable to the Required Banks, together with a written
statement from such accountants to the effect that in making the examination
necessary for the signing of such annual audit report by such accountants,
nothing came to their attention that caused them to believe that the Company was
not in compliance with any provision of SECTION 10.6, 10.7, 10.9 or 10.10 of
this Agreement insofar as such provision relates to accounting matters or, if
something has come to their attention that caused them to believe that the
Company was not in compliance with any such provision, describing such
non-compliance in reasonable detail (it being understood that any such audit is
not directed primarily toward obtaining knowledge of such non-compliance); and
(b) consolidating and regional balance sheets of the Company and its
Subsidiaries as of the end of such Fiscal Year and consolidating and regional
statements of earnings for the Company and its Subsidiaries for such Fiscal
Year, certified by the Chief Financial Officer, the Vice President, Finance,
Controller or Treasurer of the Company.
10.1.2 QUARTERLY REPORTS. Promptly when available and in any event within
45 days after the end of each Fiscal Quarter (except the last Fiscal Quarter) of
each Fiscal Year, consolidated and regional balance sheets of the Company and
its Subsidiaries as of the end of such Fiscal Quarter, together with
consolidated and regional statements of earnings and a consolidated statement of
cash flows for such Fiscal Quarter and for the period beginning with the first
day of such Fiscal Year and ending on the last day of such Fiscal Quarter,
certified by the Chief Financial Officer,
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the Vice President, Finance, Controller or Treasurer of the Company.
10.1.3 COMPLIANCE CERTIFICATES. Contemporaneously with the furnishing of a
copy of each annual audit report pursuant to SECTION 10.1.1 and of each set of
quarterly statements pursuant to SECTION 10.1.2, a duly completed compliance
certificate in the form of EXHIBIT B, with appropriate insertions, dated the
date of such annual report or such quarterly statements and signed by the Chief
Financial Officer, the Vice President, Finance, Controller or Treasurer of the
Company, containing a computation of each of the financial ratios and
restrictions set forth in SECTION 10.6 and to the effect that such officer has
not become aware of any Event of Default or Unmatured Event of Default that has
occurred and is continuing or, if there is any such event, describing it and the
steps, if any, being taken to cure it.
10.1.4 REPORTS TO SEC AND TO SHAREHOLDERS. Promptly upon the filing or
sending thereof, copies of all regular, periodic or special reports of the
Company or any Subsidiary filed with the SEC (excluding exhibits thereto,
provided that the Company shall promptly deliver any such exhibit to the Agent
or any Bank upon request therefor); copies of all registration statements of the
Company or any Subsidiary filed with the SEC (other than on Form S-8); and
copies of all proxy statements or other communications made to security holders
generally concerning material developments in the business of the Company or any
Subsidiary.
10.1.5 NOTICE OF DEFAULT, LITIGATION AND ERISA MATTERS. Promptly upon
becoming aware of any of the following, written notice describing the same and
the steps being taken by the Company or the Subsidiary affected thereby with
respect thereto:
(a) the occurrence of an Event of Default or an
Unmatured Event of Default;
(b) any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Banks which has
been instituted or, to the knowledge of the Company, is threatened against
the Company or any Subsidiary or to which any of the properties of any
thereof is subject which, if adversely determined, might reasonably be
expected to have a Material Adverse Effect;
(c) the institution of any steps by any member of the Controlled
Group or any other Person to terminate any Pension Plan, or the failure of
any member of the Controlled Group to make a required contribution to any
Pension Plan
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(if such failure is sufficient to give rise to a lien under Section 302(f)
of ERISA) or to any Multiemployer Pension Plan, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that the Company furnish a bond or other security to the PBGC
or such Pension Plan, or the occurrence of any event with respect to any
Pension Plan or Multiemployer Pension Plan which could result in the
incurrence by any member of the Controlled Group of any material
liability, fine or penalty (including any claim or demand for withdrawal
liability or partial withdrawal from any Multiemployer Pension Plan), or
any material increase in the contingent liability of the Company with
respect to any post-retirement Welfare Plan benefit, or any notice that
any Multiemployer Pension Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of an excise tax, that any such plan is or has been funded at a
rate less than that required under Section 412 of the Code, that any such
plan is or may be terminated, or that any such plan is or may become
insolvent;
(d) any cancellation or material change in any insurance maintained
by the Company or any Subsidiary;
(e) any event (including (i) any violation of any Environmental Law
or the assertion of any Environmental Claim or (ii) the enactment or
effectiveness of any law, rule or regulation) which might reasonably be
expected to have a Material Adverse Effect; or
(f) any setoff, claims, withholdings or other defenses to which any
of the Collateral, or the Banks' rights with respect to the Collateral,
are subject.
10.1.6 SUBSIDIARIES. Promptly upon any change in the list of its
Subsidiaries, a written report of such change.
10.1.7 MANAGEMENT REPORTS. Promptly upon the request of the Agent or any
Bank, copies of all detailed financial and management reports submitted to the
Company by independent auditors in connection with each annual or interim audit
made by such auditors of the books of the Company.
10.1.8 PROJECTIONS. As soon as practicable and in any event within 60 days
after the commencement of each Fiscal Year, financial projections for the
Company and its Subsidiaries for such Fiscal Year prepared in a manner
consistent with those projections delivered by the Company to the Banks prior to
the
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Effective Date or otherwise in a manner reasonably satisfactory to the Agent.
10.1.9 OTHER INFORMATION. From time to time such other information
concerning the Company and its Subsidiaries as any Bank or the Agent may
reasonably request.
10.2 BOOKS, RECORDS AND INSPECTIONS. Keep, and cause each Subsidiary to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP; permit, and cause each Subsidiary to permit, any Bank or the Agent or any
representative thereof to inspect the properties and operations of the Company
and of such Subsidiary; and permit, and cause each Subsidiary to permit, at any
reasonable time and with reasonable notice (or at any time without notice if an
Event of Default exists), any Bank or the Agent or any representative thereof to
visit any or all of its offices, to discuss its financial matters with its
officers and its independent auditors (and the Company hereby authorizes such
independent auditors to discuss such financial matters with any Bank or the
Agent or any representative thereof, provided that so long as no Event of
Default exists, a representative of the Company shall be present at any such
discussions), and to examine (and, at the expense of the Company or the
applicable Subsidiary, photocopy extracts from) any of its books or other
corporate records.
10.3 INSURANCE. Maintain, and cause each Subsidiary to maintain, with
responsible insurance companies, such insurance as may be required by any law or
governmental regulation or court decree or order applicable to it and such other
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated; and, upon request of the
Agent or any Bank, furnish to the Agent or such Bank a certificate setting forth
in reasonable detail the nature and extent of all insurance maintained by the
Company and its Subsidiaries.
10.4 COMPLIANCE WITH LAWS; PAYMENT OF TAXES AND LIABILITIES. (a) Comply,
and cause each Subsidiary to comply, in all material respects with all
applicable laws (including Environmental Laws), rules, regulations, decrees,
orders, judgments, licenses and permits; and (b) pay, and cause each Subsidiary
to pay, prior to delinquency, all taxes and other governmental charges against
it or any of its property, as well as claims of any kind which, if unpaid, might
become a Lien on any of its property; PROVIDED, HOWEVER, that the foregoing
shall not require the Company or any Subsidiary to pay any such tax or
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charge so long as it shall contest the validity thereof in good faith by
appropriate proceedings and shall set aside on its books adequate reserves with
respect thereto in accordance with GAAP.
10.5 MAINTENANCE OF EXISTENCE, ETC. Maintain and preserve, and (subject to
SECTION 10.11) cause each Subsidiary to maintain and preserve, (a) its existence
and good standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary (except in
those instances in which the failure to be qualified or in good standing does
not have a Material Adverse Effect).
10.6 FINANCIAL COVENANTS.
10.6.1 MINIMUM NET WORTH. Not permit its Net Worth at any time to be less
than the sum of (a) $100,000,000 PLUS (b) 75% of the sum of Consolidated Net
Income during the period beginning on October 1, 1998 and ending on the last day
of the most recently- ended Fiscal Quarter (PROVIDED that, if the sum of
Consolidated Net Income is less than zero for any Fiscal Quarter, for purposes
of this SECTION 10.6.1 such sum will be deemed to have been zero for such
quarter) PLUS (c) 100% of the net proceeds of any equity issued by the Company
or any of its Subsidiaries (on a consolidated basis) after the Effective Date.
10.6.2 MINIMUM INTEREST COVERAGE. Not permit the Interest Coverage Ratio
for any Computation Period to be less than the applicable ratio set forth below:
COMPUTATION INTEREST
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
Effective Date through 12/31/99 2.0 to 1.0
1/1/00 through 12/31/00 2.25 to 1.0
1/1/01 and thereafter 2.5 to 1.0.
10.6.3 FUNDED DEBT TO EBITDA RATIO. Not permit the Funded Debt to EBITDA
Ratio as of the last day of any Fiscal Quarter to exceed the applicable ratio
set forth below:
FISCAL FUNDED DEBT TO
QUARTER ENDING: EBITDA RATIO
--------------- ------------
Effective Date through 12/31/00 3.75 to 1.0
3/31/01 and thereafter 3.50 to 1.0.
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10.6.4 CAPITAL EXPENDITURES. The Company will not permit the aggregate
amount of all Capital Expenditures (excluding amounts, if any, paid to
consummate acquisitions permitted by SECTION 10.11(C) which constitute Capital
Expenditures) made by the Company and its Subsidiaries in any Fiscal Year to
exceed the product of 1.5 multiplied by the depreciation and amortization of the
Company and its Subsidiaries during the prior Fiscal Year (calculated on a PRO
FORMA basis giving effect to acquisitions and sales and other dispositions made
subsequent to such prior Fiscal Year).
10.7 LIMITATIONS ON DEBT. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to exist any Debt, except:
(a) obligations in respect of the Loans, the L/C
Applications and the Letters of Credit;
(b) unsecured Debt of the Company (other than Contingent Payments) which
represents all or part of the purchase price payable in connection with a
transaction permitted by SECTION 10.11(C); PROVIDED that the aggregate
principal amount of all such unsecured Debt (excluding Subordinated Debt)
shall not at any time exceed $10,000,000;
(c) Debt secured by Liens permitted by SUBSECTION 10.8(C) or (D), and
refinancings of any such Debt so long as the terms applicable to such
refinanced Debt are no less favorable to the Company or the applicable
Subsidiary than the terms in effect immediately prior to such refinancing,
PROVIDED that the aggregate amount of all such Debt at any time
outstanding shall not exceed $20,000,000;
(d) Debt of Subsidiaries owed to the Company;
(e) unsecured Debt of the Company to Subsidiaries;
(f) Subordinated Debt;
(g) Contingent Payments listed on SCHEDULE 9.6(B) and other Debt
outstanding on the date hereof and listed in SCHEDULE 10.7; and
(h) Contingent Payments, PROVIDED that the aggregate amount of all
Contingent Payments (other than Contingent Payments listed on SCHEDULE
9.6(B))shall not at any time exceed $10,000,000.
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10.8 LIENS. Not, and not permit any Subsidiary to, create or permit to
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:
(a) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in
good faith by appropriate proceedings and, in each case, for which it
maintains adequate reserves;
(b) Liens arising in the ordinary course of business (such as (i) Liens of
carriers, warehousemen, mechanics and materialmen and other similar Liens
imposed by law and (ii) Liens incurred in connection with worker's
compensation, unemployment compensation and other types of social security
(excluding Liens arising under ERISA) or in connection with surety bonds,
bids, performance bonds and similar obligations) for sums not overdue or
being contested in good faith by appropriate proceedings and not involving
any deposits or advances or borrowed money or the deferred purchase price
of property or services, and, in each case, for which it maintains
adequate reserves;
(c) Liens identified in SCHEDULE 10.8;
(d) subject to the limitation set forth in SECTION 10.7(C),(i) Liens
arising in connection with Capital Leases (and attaching only to the
property being leased), (ii) Liens existing on property at the time of the
acquisition thereof by the Company or any Subsidiary (and not created in
contemplation of such acquisition) and (iii) Liens that constitute
purchase money security interests on any property securing debt incurred
for the purpose of financing all or any part of the cost of acquiring such
property, PROVIDED that any such Lien attaches to such property within 60
days of the acquisition thereof and such Lien attaches solely to the
property so acquired;
(e) attachments, appeal bonds, judgments and other similar Liens, for sums
not exceeding $1,000,000 arising in connection with court proceedings,
provided the execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are being actively contested in good
faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not
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interfering in any material respect with the ordinary conduct of the
business of the Company or any Subsidiary;
(g) Liens in favor of the Agent arising under the Loan Documents; and
(h) other Liens, in addition to the Liens set forth above, securing
obligations in an aggregate amount not at any time exceeding $1,000,000.
10.9 OPERATING LEASES. Not permit the aggregate amount of all rental
payments made (or scheduled to be made) by the Company and its Subsidiaries (on
a consolidated basis) in any Fiscal Year to exceed $3,000,000.
10.10 RESTRICTED PAYMENTS. Not, and not permit any Subsidiary to, (a)
declare or pay any dividends on any of its capital stock (other than stock
dividends), (b) purchase or redeem any such stock or any warrants, units,
options or other rights in respect of such stock, (c) make any other
distribution to shareholders, (d) prepay, purchase, defease or redeem any
Subordinated Debt or (e) set aside funds for any of the foregoing; PROVIDED that
any Subsidiary may declare and pay dividends to the Company or to any other
wholly-owned Subsidiary.
10.11 MERGERS, CONSOLIDATIONS, SALES. Not, and not permit any Subsidiary
to, be a party to any merger or consolidation, or purchase or otherwise acquire
all or substantially all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or sell, transfer,
convey or lease all or any substantial part of its assets, or sell or assign
with or without recourse any receivables, except for (a) any such merger or
consolidation, sale, transfer, conveyance, lease or assignment of or by any
wholly-owned Subsidiary into the Company or into, with or to any other
wholly-owned Subsidiary; (b) any such purchase or other acquisition by the
Company or any wholly-owned Subsidiary of the assets or stock of any
wholly-owned Subsidiary; (c) any such purchase or other acquisition by the
Company or any wholly-owned Subsidiary of the assets or stock of any other
Person where (1) such assets (in the case of an asset purchase) are for use, or
such Person (in the case of a stock purchase) is engaged, solely in the
collection, processing and disposal of liquid waste and by-products thereof and
nonhazardous oil field waste and businesses which are reasonably related thereto
(including land farming bio-solids and the cleaning of tanks, trailers, barges
and similar vessels for transporting liquid waste); PROVIDED that, unless the
Required Banks otherwise consent in writing, neither the Company nor any
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Subsidiary shall acquire any facility, or any Person which owns or operates any
such facility, which requires a permit under RCRA; (2) immediately before or
after giving effect to such purchase or acquisition, no Event of Default or
Unmatured Event of Default shall have occurred and be continuing; (3) either (i)
(x) the aggregate consideration to be paid by the Company and its Subsidiaries
(including any Debt assumed or issued in connection therewith, the amount
thereof to be calculated in accordance with GAAP) in connection with such
purchase or other acquisition (or any series of related acquisitions) is not
greater than $25,000,000 and (y) the aggregate consideration to be paid in cash
or other property (other than common stock of the Company, warrants or options
for such common stock or preferred stock which has no (and which may not be
converted into or exchanged for a security which has any) mandatory redemption
provisions prior to the 100th day after the Scheduled Termination Date) by the
Company and its Subsidiaries in connection with such purchase or acquisition (or
any series of related acquisitions) is not greater than $15,000,000 or (ii) the
Required Banks have consented to such purchase or acquisition; (4) the Company
is in PRO FORMA compliance with all the financial ratios and restrictions set
forth in SECTION 10.6; and (5) such Person (or its board of directors or similar
body) has approved such acquisition or other purchase; and (d) sales and
dispositions of assets (including the stock of Subsidiaries) so long as the net
book value of all assets sold or otherwise disposed of in any Fiscal Year does
not exceed 5% of the consolidated assets of the Company as of the first day of
such Fiscal Year.
10.12 MODIFICATION OF ORGANIZATIONAL DOCUMENTS. Not permit the Certificate
of Incorporation, By-Laws or other organizational documents of the Company or
any Subsidiary to be amended or modified in any way which might reasonably be
expected to materially adversely affect the interests of the Banks.
10.13 USE OF PROCEEDS. Use the proceeds of the Loans solely to finance the
Company's working capital, for acquisitions permitted by SECTION 10.11, for
Capital Expenditures and for other general corporate purposes, including the
payment of Debt to be Repaid; and not use or permit any proceeds of any Loan to
be used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying" any Margin Stock.
10.14 FURTHER ASSURANCES. Take, and cause each Subsidiary to take, such
actions as are necessary, or as the Agent or the Required Banks may reasonably
request, from time to time (including the execution and delivery of guaranties,
security
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agreements, pledge agreements, financing statements and other documents, the
filing or recording of any of the foregoing, and the delivery of stock
certificates and other collateral with respect to which perfection is obtained
by possession) to ensure that (i) the obligations of the Company hereunder and
under the other Loan Documents are secured by substantially all of the assets
(other than real property and, unless the Required Banks otherwise request in
writing, any motor vehicle subject to a statute requiring notation on a
certificate of title to perfect a security interest in such vehicle) of the
Company and guaranteed by all of the Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary acquired or created after the
date hereof) by execution of a counterpart of the Guaranty and (ii) the
obligations of each Guarantor under the Guaranty are secured by substantially
all of the assets (other than real property and, unless the Required Banks
otherwise request in writing, any motor vehicle subject to a statute requiring
notation on a certificate of title to perfect a security interest in such
vehicle) of such Guarantor; PROVIDED that Parallel Products of Florida, Inc.
shall have no obligation to grant the Agent a lien on or security interest in
any of its assets other than accounts receivable.
10.15 TRANSACTIONS WITH AFFILIATES. Not, and not permit any Subsidiary to,
enter into, or cause, suffer or permit to exist any transaction, arrangement or
contract with any of its other Affiliates (other than the Company and its
Subsidiaries) which is on terms which are less favorable than are obtainable
from any Person which is not one of its Affiliates.
10.16 EMPLOYEE BENEFIT PLANS. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
10.17 ENVIRONMENTAL MATTERS. (a) If any material Release or Disposal of
Hazardous Substances shall occur or shall have occurred on any real property or
any other assets of the Company or any Subsidiary, the Company shall, or shall
cause the applicable Subsidiary to, cause the prompt containment and removal of
such Hazardous Substances and the remediation of such real property or other
assets as necessary to comply in all material respects with all Environmental
Laws and to preserve the value of such real property or other assets (provided
that nothing set forth in this sentence shall prevent (a) USL City
Environmental, Inc., Northern A-1 Sanitation Services, Inc. or Romic
Environmental Technologies Corporation from continuing to engage in the
businesses in which they were engaged on the
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Effective Date in a manner consistent with past practice and (b) Re-claim
Environmental Louisiana L.L.C. from accepting "F-listed" and "K-listed" waste
for reprocessing in the ordinary course of business so long as such waste will
not be hazardous waste after such processing). Without limiting the generality
of the foregoing, the Company shall, and shall cause each Subsidiary to, comply
in a reasonable and cost-effective manner with any valid Federal or state
judicial or administrative order requiring the performance at any real property
of the Company or any Subsidiary of activities in response to the Release or
threatened Release of a Hazardous Substance except for the period of time that
the Company or such Subsidiary is diligently and in good faith contesting such
order.
(b) To the extent that the transportation of "hazardous waste" as
defined by RCRA is permitted by this Agreement, the Company shall, and shall
cause its Subsidiaries to, dispose of such hazardous waste only at licensed
disposal facilities operating, to the best of the Company's or such Subsidiary's
knowledge after reasonable inquiry, in compliance with Environmental Laws.
10.18 UNCONDITIONAL PURCHASE OBLIGATIONS. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services; provided that the
foregoing shall not prohibit the Company or any Subsidiary from entering into
options for the purchase of particular assets or businesses.
10.19 INCONSISTENT AGREEMENTS. Not, and not permit any Subsidiary to,
enter into any agreement containing any provision which (a) would be violated or
breached by any borrowing by the Company hereunder or by the performance by the
Company or any Subsidiary of any of its obligations hereunder or under any other
Loan Document or (b) would prohibit the Company or any Subsidiary from granting
to the Agent, for the benefit of the Banks, a Lien on any of its assets.
10.20 BUSINESS ACTIVITIES. Not, and not permit any Subsidiary to, engage
in any line of business other than the collection, processing and disposal of
non-hazardous liquid waste and by-products thereof and non-hazardous oil field
waste and businesses which are reasonably related thereto (including land
farming bio-solids and the cleaning of tanks, trailers, barges and similar
vessels for transporting liquid waste); PROVIDED that
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USL City Environmental, Inc., Northern A-1 Sanitation Services, Inc., Re-Claim
Environmental Louisiana L.L.C., and Romic Environmental Technologies Corporation
may continue to engage in the businesses in which they were engaged on the
Effective Date in a manner consistent with past practice.
10.21 ADVANCES AND OTHER INVESTMENTS. Not, and not permit any Subsidiary
to, make, incur, assume or suffer to exist any Investment in any other Person,
except (without duplication) the following:
(a) equity Investments existing on the Effective Date in wholly-owned
Subsidiaries identified in SCHEDULE 9.8;
(b) equity Investments in Subsidiaries acquired after the Effective Date
in transactions permitted as acquisitions of stock or assets pursuant to
SECTION 10.11;
(c) in the ordinary course of business, contributions by the Company to
the capital of any of its Subsidiaries, or by any such Subsidiary to the
capital of any of its Subsidiaries;
(d) in the ordinary course of business, Investments by the Company in any
Subsidiary or by any of the Subsidiaries in the Company, by way of
intercompany loans, advances or guaranties, all to the extent permitted by
SECTION 10.7;
(e) Suretyship Liabilities permitted by SECTION 10.7;
(f) good faith deposits made in connection with prospective acquisitions
of stock or assets permitted by SECTION 10.11;
(g) loans to officers and employees not exceeding (i) $200,000 in the
aggregate to any single individual or (ii) $500,000 in the aggregate for
all such individuals;
(h) Cash Equivalent Investments;
(i) bank deposits in the ordinary course of business; PROVIDED that the
aggregate amount of all such deposits (excluding (x) amounts in payroll
accounts or for accounts payable, in each case to the extent that checks
have been issued to third parties, and (y) amounts maintained (in the
ordinary course of business consistent with past practice) in accounts of
any Person which is acquired by the Company or a Subsidiary in accordance
with the terms hereof during the 45 days following the date of such
acquisition) which
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are maintained with any bank other than a Bank shall not at any time after
April 1, 1999 exceed (x) in the case of such deposits with any single
bank, $200,000 for three consecutive Business Days and (y) in the case of
all such deposits, $2,500,000 for three consecutive Business Days; and
(j) other Investments, in addition to the Investments set forth above, in
an aggregate amount not at any time exceeding $250,000;
PROVIDED, HOWEVER, that no Investment otherwise permitted by CLAUSE (B), (C),
(D), (E), (F), (G) or (J) shall be permitted to be made if, immediately before
or after giving effect thereto, any Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
10.22 RESTRICTION OF AMENDMENTS TO ASSET PURCHASE AGREEMENT. Not amend or
otherwise modify, or waive any rights under, the Asset Purchase Agreement dated
as of December 2, 1996 by and among Sanifill, Inc., Campbell Wells, L.P.,
Campbell Wells NORM, L.P. and the Company, if such amendment, modification or
waiver is adverse to the interests of the Banks.
10.23 PROPERTY AT ETHANOL PLANT SITE. Not at any time permit the fair
market value of all property of the Company and its Subsidiaries located at the
Ethanol Plant Site, 3500 Highway 555, Bartow, Florida, 33830, to exceed
$300,000.
10.24 PARALLEL PRODUCTS OF FLORIDA. Not at any time permit Parallel
Products of Florida, Inc. to (i) engage in any business other than resource
recovery and ethyl alcohol production at the Ethanol Plant Site, 3500 Highway
555, Bartow, Florida, 33830, or (ii) to own assets (other than accounts
receivable) with a fair
market value in excess of $300,000.
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.
The obligation of each Bank to make its Loans and of any Issuing Bank to
issue Letters of Credit is subject to the following conditions precedent:
11.1 EFFECTIVENESS. This Agreement shall become effective, and all
outstanding loans made and letters of credit issued under the Existing Agreement
shall be deemed to have been made and issued (respectively) hereunder, on the
date (the "EFFECTIVE DATE") that the Agent shall have received (a) all amounts
which are then due and payable pursuant to SECTION 5 and (to the extent
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billed) SECTION 14.6, and (b) all of the following, each duly executed and dated
the Effective Date (or such earlier date as shall be satisfactory to the Agent),
in form and substance satisfactory to the Agent, and each (except for the Notes,
of which only the originals shall be signed) in sufficient number of signed
counterparts to provide one for each Bank:
11.1.1 NOTES. The Notes.
11.1.2 RESOLUTIONS. Certified copies of resolutions of the Board of
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Agreement, the Notes and the other Loan
Documents to which the Company is a party; and certified copies of resolutions
of the Board of Directors of each Subsidiary (if any) which is to execute and
deliver any document pursuant to SECTION 11.1.5, 11.1.6 or 11.1.7 authorizing or
ratifying the execution, delivery and performance by such Subsidiary of each
Loan Document to which such Subsidiary is a party.
11.1.3 CONSENTS, ETC. Certified copies of all documents evidencing any
necessary corporate action, consents and governmental approvals (if any)
required for the execution, delivery and performance by the Company and each
Subsidiary of the documents referred to in this SECTION 11.
11.1.4 INCUMBENCY AND SIGNATURE CERTIFICATES. A certificate of the
Secretary or an Assistant Secretary of the Company and each Subsidiary of the
Company as of the Effective Date certifying the names of the officer or officers
of such entity authorized to sign the Loan Documents to which such entity is a
party, together with a sample of the true signature of each such officer (it
being understood that the Agent and each Bank may conclusively rely on each such
certificate until formally advised by a like certificate of any changes
therein).
11.1.5 GUARANTY. A counterpart of the Guaranty executed by each Subsidiary
(if any) as of the Effective Date which has not previously executed a
counterpart thereof.
11.1.6 SECURITY AGREEMENT. A counterpart of the Security Agreement
executed by each Subsidiary (if any) as of the Effective Date which has not
previously executed a counterpart thereof, together with evidence, satisfactory
to the Agent, that all filings necessary to perfect the Agent's Lien on any
collateral granted under the Security Agreement have been duly made and are in
full force and effect.
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11.1.7 PLEDGE AGREEMENTS. With respect to any Subsidiary that, as of the
Effective Date has not previously executed a Subsidiary Pledge Agreement and has
one or more Subsidiaries, a Subsidiary Pledge Agreement, in each case together
with all stock certificates, stock powers and other items required to be
delivered in connection therewith.
11.1.8 CONFIRMATION. A Confirmation, substantially in the form of EXHIBIT
H, executed by the Company and each Guarantor.
11.1.9 OPINION OF COUNSEL FOR THE COMPANY AND THE GUARANTORS. The opinion
of McDermott, Will & Emery, counsel to the Company and the Guarantors.
11.1.10 OTHER. Such other documents as the Agent or any Bank may
reasonably request.
11.2 CONDITIONS. The obligation (a) of each Bank to make each Loan and (b)
of each Issuing Bank to issue each Letter of Credit is subject to the following
further conditions precedent that:
11.2.1 COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before and after
giving effect to any borrowing and the issuance of any Letter of Credit (but, if
any Event of Default of the nature referred to in SECTION 12.1.2 shall have
occurred with respect to any other Debt, without giving effect to the
application, directly or indirectly, of the proceeds thereof) the following
statements shall be true and correct:
(a) the representations and warranties of the Company and the
Guarantors set forth in this Agreement (excluding SECTIONS 9.6 and 9.8)
and the other Loan Documents shall be true and correct in all material
respects with the same effect as if then made (except to the extent stated
to relate to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such
earlier date);
(b) except as disclosed by the Company to the Agent and the Banks
pursuant to SECTION 9.6,
(i) no litigation (including derivative actions), arbitration
proceeding, labor controversy or governmental investigation or
proceeding shall be pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries which
might reasonably be expected to have a Material Adverse
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Effect or which purports to affect the legality, validity or
enforceability of this Agreement, the Notes or any other Loan
Document; and
(ii) no development shall have occurred in any litigation
(including derivative actions), arbitration proceeding, labor
controversy or governmental investigation or proceeding disclosed
pursuant to SECTION 9.6 which might reasonably be expected to have a
Material Adverse Effect;
(c) no Event of Default or Unmatured Event of Default shall have
then occurred and be continuing, and neither the Company nor any of its
Subsidiaries shall be in violation of any law or governmental regulation
or court order or decree where such violation or violations singly or in
the aggregate might reasonably be expected to have a Material Adverse
Effect; and
(d) in the case of the making of any Loan or the issuance of any
Letter of Credit which will cause the Total Outstandings to exceed
$200,000,000 for the first time after the Effective Date, the Company
shall have delivered to the Agent evidence, reasonably satisfactory to the
Agent, that the Board of Directors of the Company has approved the
Company's obtaining credit extensions hereunder in an amount equal to or
greater than $225,000,000.
11.2.2 CONFIRMATORY CERTIFICATE. If requested by the Agent or any Bank,
the Agent shall have received (in sufficient counterparts to provide one to each
Bank) a certificate dated the date of such requested Loan or Letter of Credit
and signed by a duly authorized representative of the Company as to the matters
set out in SECTION 11.2.1 (it being understood that each request by the Company
for the making of a Loan or the issuance of a Letter of Credit shall be deemed
to constitute a warranty by the Company that the conditions precedent set forth
in SECTION 11.2.1 will be satisfied at the time of the making of such Loan or
the issuance of such Letter of Credit), together with such other documents as
the Agent or any Bank may reasonably request in support thereof.
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
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12.1.1 NON-PAYMENT OF THE LOANS, ETC. Default in the payment when due of
the principal of any Loan; or default, and continuance thereof for five days, in
the payment when due of any interest, fee, reimbursement obligation with respect
to any Letter of Credit or other amount payable by the Company hereunder or
under any other Loan Document.
12.1.2 NON-PAYMENT OF OTHER DEBT. Any default shall occur under the terms
applicable to any Debt of the Company or any Subsidiary in an aggregate amount
(for all such Debt so affected) exceeding $1,000,000 and such default shall (a)
consist of the failure to pay such Debt when due (subject to any applicable
grace period), whether by acceleration or otherwise, or (b) accelerate the
maturity of such Debt or permit the holder or holders thereof, or any trustee or
agent for such holder or holders, to cause such Debt to become due and payable
prior to its expressed maturity.
12.1.3 OTHER MATERIAL OBLIGATIONS. Default in the payment when due, or in
the performance or observance of, any material obligation of, or condition
agreed to by, the Company or any Subsidiary with respect to any material
purchase or lease of goods or services where such default, singly or in the
aggregate with other such defaults might reasonably be expected to have a
Material Adverse Effect (except only to the extent that the existence of any
such default is being contested by the Company or such Subsidiary in good faith
and by appropriate proceedings and appropriate reserves have been made in
respect of such default).
12.1.4 BANKRUPTCY, INSOLVENCY, ETC. The Company or any Subsidiary becomes
insolvent or generally fails to pay, or admits in writing its inability or
refusal to pay, debts as they become due; or the Company or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Subsidiary or any property
thereof, or makes a general assignment for the benefit of creditors; or, in the
absence of such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for the Company or any Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 60
days; or any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding (except the voluntary dissolution, not under any
bankruptcy or insolvency law, of a Subsidiary), is commenced in respect of the
Company or any Subsidiary, and if such case or proceeding is not commenced by
the Company or such Subsidiary, it is consented to or acquiesced
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in by the Company or such Subsidiary, or remains for 60 days undismissed; or the
Company or any Subsidiary takes any corporate action to authorize, or in
furtherance of, any of the foregoing.
12.1.5 NON-COMPLIANCE WITH PROVISIONS OF THIS AGREEMENT. (a) Failure by
the Company to comply with or to perform any covenant set forth in SECTIONS 10.5
through 10.13, 10.15 or 10.16; or (b) failure by the Company to comply with or
to perform any other provision of this Agreement (and not constituting an Event
of Default under any of the other provisions of this SECTION 12) and continuance
of such failure described in this CLAUSE (B) for 30 days (or, in the case of
SECTION 10.14, five Business Days) after notice thereof to the Company from the
Agent or any Bank.
12.1.6 WARRANTIES. Any warranty made by the Company herein is breached or
is false or misleading in any material respect, or any schedule, certificate,
financial statement, report, notice or other writing furnished by the Company to
the Agent or any Bank in connection herewith is false or misleading in any
material respect on the date as of which the facts therein set forth are stated
or certified.
12.1.7 PENSION PLANS. (i) Institution of any steps by the Company or any
other Person to terminate a Pension Plan if as a result of such termination the
Company could be required to make a contribution to such Pension Plan, or could
incur a liability or obligation to such Pension Plan, in excess of $500,000;
(ii) a contribution failure occurs with respect to any Pension Plan sufficient
to give rise to a Lien under section 302(f) of ERISA; or (iii) there shall occur
any withdrawal or partial withdrawal from a Multiemployer Pension Plan and the
withdrawal liability (without unaccrued interest) to Multiemployer Pension Plans
as a result of such withdrawal (including any outstanding withdrawal liability
that the Company and the Controlled Group have incurred on the date of such
withdrawal) exceeds $500,000.
12.1.8 JUDGMENTS. Final judgments which exceed an aggregate of $1,000,000
shall be rendered against the Company, or any Subsidiary and shall not have been
paid, discharged or vacated or had execution thereof stayed pending appeal
within 30 days after entry or filing of such judgments.
12.1.9 INVALIDITY OF GUARANTY, ETC. The Guaranty shall cease to be in full
force and effect with respect to any Guarantor, any Guarantor shall fail
(subject to any applicable grace period) to comply with or to perform any
applicable provision of the Guaranty, or any Guarantor (or any Person by,
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through or on behalf of such Guarantor) shall contest in any manner the
validity, binding nature or enforceability of the Guaranty with respect to such
Guarantor; PROVIDED, HOWEVER, that this SECTION 12.1.9 shall not apply to any
Guarantor which ceases to exist pursuant to SECTION 10.11.
12.1.10 INVALIDITY OF COLLATERAL DOCUMENTS, ETC. Any Collateral Document
shall cease to be in full force and effect with respect to the Company or any
Guarantor, the Company or any Guarantor shall fail (subject to any applicable
grace period) to comply with or to perform any applicable provision of any
Collateral Document to which such entity is a party, or the Company or any
Guarantor (or any Person by, through or on behalf of the Company or such
Guarantor) shall contest in any manner the validity, binding nature or
enforceability of any Collateral Document.
12.1.11 CHANGE IN CONTROL. (a) Any Person or group of Persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, but
excluding the executive managers of the Company as of the Effective Date) shall
acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated under
such Act) of 30% or more of the outstanding shares of common stock of the
Company; (b) during any 24-month period, individuals who at the beginning of
such period constituted the Company's Board of Directors (together with any new
directors whose election by the Company's Board of Directors or whose nomination
for election by the Company's shareholders was approved by a vote of at least
two-thirds of the directors who either were directors at beginning of such
period or whose election or nomination was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company; or (c)
a period of 60 consecutive days shall have elapsed during which any of the
individuals named in SCHEDULE 12.1.11 shall have ceased to hold executive
offices with the Company at least equal in seniority to such individual's
present offices, as set out in such SCHEDULE 12.1.11, EXCLUDING any such
individual who has been replaced by another individual or individuals reasonably
satisfactory to the Required Banks (it being understood that any such
replacement individual shall be deemed added to SCHEDULE 12.1.11 on the date of
approval thereof by the Required Banks).
12.2 EFFECT OF EVENT OF DEFAULT. If any Event of Default described in
SECTION 12.1.4 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Notes and all other obligations
hereunder shall become immediately due and payable and the Company shall become
immediately obligated to deliver to the Agent cash collateral in
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an amount equal to the outstanding face amount of all Letters of Credit, all
without presentment, demand, protest or notice of any kind; and, if any other
Event of Default shall occur and be continuing, the Agent (upon written request
of the Required Banks) shall declare the Commitments (if they have not
theretofore terminated) to be terminated and/or declare all Notes and all other
obligations hereunder to be due and payable and/or demand that the Company
immediately deliver to the Agent cash collateral in amount equal to the
outstanding face amount of all Letters of Credit, whereupon the Commitments (if
they have not theretofore terminated) shall immediately terminate and/or all
Notes and all other obligations hereunder shall become immediately due and
payable and/or the Company shall immediately become obligated to deliver to the
Agent cash collateral in an amount equal to the face amount of all Letters of
Credit, all without presentment, demand, protest or notice of any kind. The
Agent shall promptly advise the Company of any such declaration, but failure to
do so shall not impair the effect of such declaration. Notwithstanding the
foregoing, the effect as an Event of Default of any event described in SECTION
12.1.1 or SECTION 12.1.4 may be waived by the written concurrence of all of the
Banks, and the effect as an Event of Default of any other event described in
this SECTION 12 may be waived by the written concurrence of the Required Banks.
Any cash collateral delivered hereunder shall be held by the Agent (without
liability for interest thereon) and applied to obligations arising in connection
with any drawing under a Letter of Credit. After the expiration or termination
of all Letters of Credit, such cash collateral shall be applied by the Agent to
any remaining obligations hereunder and any excess shall be delivered to the
Company or as a court of competent jurisdiction may elect.
SECTION 13 THE AGENT.
13.1 APPOINTMENT AND AUTHORIZATION. (a) Each Bank hereby irrevocably
(subject to SECTION 13.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
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(b) Each Issuing Bank shall act on behalf of the Banks with respect to any
Letters of Credit issued by it and the documents associated therewith. Each
Issuing Bank shall have all of the benefits and immunities (i) provided to the
Agent in this SECTION 13 with respect to any acts taken or omissions suffered by
such Issuing Bank in connection with Letters of Credit issued by it or proposed
to be issued by it and the applications and agreements for letters of credit
pertaining to such Letters of Credit as fully as if the term "Agent", as used in
this SECTION 13, included such Issuing Bank with respect to such acts or
omissions and (ii) as additionally provided in this Agreement with respect to
the Issuing Banks.
(c) The Swing Line Bank shall have all of the benefits and immunities (i)
provided to the Agent in this SECTION 13 with respect to any acts taken or
omissions suffered by the Swing Line Bank in connection with Swing Line Loans
made or proposed to be made by it as fully as if the term "Agent", as used in
this SECTION 13, included the Swing Line Bank with respect to such acts or
omissions and (ii) as additionally provided in this Agreement with respect to
the Swing Line Bank.
13.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it
selects with reasonable care.
13.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the
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observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
13.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation 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 (including counsel to the
Company), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Banks as it deems appropriate and, if it
so requests, confirmation from the Banks of their obligation to indemnify the
Agent 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 other Loan Document in accordance with a request or consent of
the Required Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
13.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default or Unmatured Event of Default
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Banks, unless the Agent
shall have received written notice from a Bank or the Company referring to this
Agreement, describing such Event of Default or Unmatured Event of Default and
stating that such notice is a "notice of default". The Agent will notify the
Banks of its receipt of any such notice. The Agent shall take such action with
respect to such Event of Default or Unmatured Event of Default as may be
requested by the Required Banks in accordance with SECTION 12; PROVIDED,
HOWEVER, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Event of Default or Unmatured Event of
Default as it shall deem advisable or in the best interest of the Banks.
13.6 CREDIT DECISION. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty
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to it, and that no act by the Agent hereafter taken, including any review of the
affairs of the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Company
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial or other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
13.7 INDEMNIFICATION. Whether or not the transactions contemplated hereby
are consummated, the Banks shall indemnify upon demand the Agent-Related Persons
(to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; PROVIDED, HOWEVER, that no Bank shall be liable
for any payment to the Agent-Related Person of any portion of the Indemnified
Liabilities resulting from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Bank shall reimburse the Agent upon
demand for its ratable share of any costs or out-of-pocket expenses (including
reasonable fees of attorneys for the Agent (including the allocable costs of
internal legal services and all disbursements of internal counsel)) incurred by
the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
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Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive repayment of the Loans, cancellation
of the Notes, any foreclosure under, or any modification, release or discharge
of, any or all of the Collateral Documents, any termination of this Agreement
and the resignation or replacement of the Agent.
For the purposes of this SECTION 13.7, "INDEMNIFIED LIABILITIES" shall
mean: any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
reasonable fees of attorneys for the Agent (including the allocable costs of
internal legal services and all disbursements of internal counsel)) of any kind
or nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or the replacement of any Bank) be imposed on, incurred by or asserted
against any Agent-Related Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including (a) any case, action
or proceeding before any court or other governmental authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code, and including any appellate proceeding) related
to or arising out of this Agreement or the Commitments or the use of the
proceeds thereof, whether or not any Agent-Related Person, any Bank or any of
their respective officers, directors, employees, counsel, agents or
attorneys-in-fact is a party thereto.
13.8 AGENT IN INDIVIDUAL CAPACITY. BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent, the Issuing Bank
or the Swing Line Bank hereunder and without notice to or consent of the Banks.
The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates
may receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in
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favor of the Company or such Subsidiary) and acknowledge that the Agent shall be
under no obligation to provide such information to them. With respect to their
Loans, BofA and its Affiliates shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though BofA were not
the Agent, the Issuing Bank and the Swing Line Bank, and the terms "Bank" and
"Banks" include BofA and its Affiliates, to the extent applicable, in their
individual capacities.
13.9 SUCCESSOR AGENT. The Agent may, and at the request of the Required
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Required Banks shall, with (so long as no
Event of Default exists) the consent of the Company (which shall not be
unreasonably withheld or delayed), appoint from among the Banks a successor
agent for the Banks. If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Banks and the Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent, and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this SECTION 13 and
SECTIONS 14.6 and 14.13 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Banks shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Required Banks appoint a successor agent as provided for above. Notwithstanding
the foregoing, however, BofA may not be removed as the Agent at the request of
the Required Banks unless BofA shall also simultaneously be replaced as an
"Issuing Bank" and the "Swing Line Bank" hereunder pursuant to documentation in
form and substance reasonably satisfactory to BofA.
13.10 WITHHOLDING TAX.
(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Bank agrees to deliver to the Agent:
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(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed
Internal Revenue Service ("IRS") Forms 1001 and W-8 before the
payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year
of such Bank and in each succeeding taxable year of such Bank during
which interest may be paid under this Agreement, and IRS Form W-9;
and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such
Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the obligations of the Company to such Bank, such Bank agrees
to notify the Agent of the percentage amount in which it is no longer the
beneficial owner of such obligations of the Company hereunder. To the
extent of such percentage amount, the Agent will treat such Bank's IRS
Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the obligations of
the Company to such Bank hereunder, such Bank agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed
by Sections 1441 and 1442 of the Code.
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(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such
Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required
by SUBSECTION (A) of this Section are not delivered to the Agent, then the
Agent may withhold from any interest payment to such Bank not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax.
(e) If the IRS or any other governmental authority of the United
States or any other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly
executed, or because such Bank failed to notify the Agent of a change in
circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Bank shall
indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses
(including reasonable fees of attorneys for the Agent (including the
allocable costs of internal legal services and all disbursements of
internal counsel)). The obligation of the Banks under this subsection
shall survive the repayment of the Loans, cancellation of the Notes, any
termination of this Agreement and the resignation or replacement of the
Agent.
13.11 COLLATERAL MATTERS. (a) The Banks irrevocably authorize the Agent,
at its option and in its discretion, (i) to release any Lien granted to or held
by the Agent under any Collateral Document (A) upon termination of the
Commitments and payment in full of all Loans and all other obligations of the
Company hereunder and the expiration or termination of all Letters of Credit;
(B) on property sold or to be sold or disposed of as part of or in connection
with any disposition permitted hereunder; or (D) subject to SECTION 14.1, if
approved, authorized or ratified in writing by the Required Banks; (ii) to
subordinate its interest in any Collateral to the holder of any Lien permitted
by CLAUSE (D)(I) or (D)(III) of SECTION 10.8; and (iii) to execute and deliver
UCC releases and/or subordinations with respect to any property in which neither
the Company nor any
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Subsidiary has (or at any time after the date hereof had) any interest (other
than an interest as lessor of such property under an operating lease).
(b) The Banks irrevocably authorize the Agent, at its option and in
its discretion, to release any Guarantor from its obligations under the
Guaranty if such Guarantor ceases to be a Subsidiary of the Company as a
result of a transaction permitted hereunder.
(c) Upon request by the Agent at any time, the Banks will confirm in
writing the Agent's authority to release particular types or items of
Collateral, or to release a Guarantor, pursuant to this SECTION 13.11 (it
being understood that the Agent is not required to obtain any such
confirmation).
13.12 CO-AGENTS. No Bank identified on the signature pages of this
Agreement as a "Co-Agent" shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Banks as such. Without limiting the foregoing, no Bank so identified as a "Co-
Agent" shall have or be deemed to have any fiduciary relationship with any Bank.
Each Bank acknowledges that it has not relied, and will not rely, on any Bank so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
SECTION 14 GENERAL.
14.1 WAIVER; AMENDMENTS. No delay on the part of the Agent, any Bank or
any other holder of a Note in the exercise of any right, power or remedy shall
operate as a waiver thereof, nor shall any single or partial exercise by any of
them of any right, power or remedy preclude other or further exercise thereof,
or the exercise of any other right, power or remedy. No amendment, modification
or waiver of, or consent with respect to, any provision of this Agreement or the
Notes shall in any event be effective unless the same shall be in writing and
signed and delivered by Banks having an aggregate Percentage of not less than
the aggregate Percentage expressly designated herein with respect thereto or, in
the absence of such designation as to any provision of this Agreement or the
Notes, by the Required Banks, and then any such amendment, modification, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given. No amendment, modification, waiver or consent shall
change the Percentage of any Bank without the consent of such Bank. No
amendment, modification, waiver or consent shall (i) extend or increase the
amount of the Commitments, (ii) extend the date for payment of any principal of
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or interest on the Loans or any fees payable hereunder, (iii) reduce the
principal amount of any Loan, the rate of interest thereon or any fees payable
hereunder, (iv) release the Guaranty (other than with respect to a Guarantor
which ceases to be a Subsidiary as a result of a transaction permitted
hereunder) or all or any substantial part of the collateral granted under the
Collateral Document or (v) reduce the aggregate Percentage required to effect an
amendment, modification, waiver or consent without, in each case, the consent of
all Banks. No provisions of SECTION 13 or other provision of this Agreement
affecting the Agent in its capacity as such shall be amended, modified or waived
without the consent of the Agent. No provision of this Agreement relating to the
rights or duties of an Issuing Bank in its capacity as such shall be amended,
modified or waived without the consent of such Issuing Bank. No provision of
this Agreement affecting the Swing Line Bank in its capacity as such shall be
amended, modified or waived without the written consent of the Swing Line Bank.
14.2 CONFIRMATIONS. The Company and each holder of a Note agree from time
to time, upon written request received by it from the other, to confirm to the
other in writing (with a copy of each such confirmation to the Agent) the
aggregate unpaid principal amount of the Loans then outstanding under such Note.
14.3 NOTICES. Except as otherwise provided in SECTIONS 2.2, 2.4 and 4.3,
all notices hereunder shall be in writing (including facsimile transmission) and
shall be sent to the applicable party at its address shown on SCHEDULE 14.3 or
at such other address as such party may, by written notice received by the other
parties, have designated as its address for such purpose. Notices sent by
facsimile transmission shall be deemed to have been given when sent; notices
sent by mail shall be deemed to have been given three Business Days after the
date when sent by registered or certified mail, postage prepaid; and notices
sent by hand delivery or overnight courier service shall be deemed to have been
given when received. For purposes of SECTIONS 2.2, 2.4 and 4.3, the Agent and
the Swing Line Bank shall be entitled to rely on telephonic instructions from
any person that the Agent or the Swing Line Bank in good faith believes is an
authorized officer or employee of the Company, and the Company shall hold the
Agent, the Swing Line Bank and each other Bank harmless from any loss, cost or
expense resulting from any such reliance.
14.4 COMPUTATIONS. Where the character or amount of any asset or liability
or item of income or expense is required to be determined, or any consolidation
or other accounting computation is required to be made, for the purpose of this
Agreement, such
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determination or calculation shall, to the extent applicable and except as
otherwise specified in this Agreement, be made in accordance with GAAP,
consistently applied; PROVIDED that if the Company notifies the Agent that the
Company wishes to amend any covenant in SECTION 10 to eliminate or to take into
account the effect of any change in GAAP on the operation of such covenant (or
if the Agent notifies the Company that the Required Banks wish to amend SECTION
10 for such purpose), then the Company's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Company and the Required Banks.
14.5 REGULATION U. Each Bank represents that it in good faith is not
relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
14.6 COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Agent (including the
reasonable fees and charges of counsel for the Agent and of local counsel, if
any, who may be retained by said counsel) in connection with the preparation,
execution, delivery and administration of this Agreement, the other Loan
Documents and all other documents provided for herein or delivered or to be
delivered hereunder or in connection herewith (including any amendments,
supplements or waivers to any Loan Documents), and all reasonable out-of-pocket
costs and expenses (including reasonable attorneys' fees, court costs and other
legal expenses and allocated costs of staff counsel) incurred by the Agent and
each Bank after an Event of Default in connection with the enforcement of this
Agreement, the other Loan Documents or any such other documents. Each Bank
agrees to reimburse the Agent for such Bank's pro rata share (based on its
respective Percentage) of any such costs and expenses of the Agent not paid by
the Company. In addition, the Company agrees to pay, and to save the Agent and
the Banks harmless from all liability for, (a) any stamp or other taxes
(excluding income taxes and franchise taxes based on net income) which may be
payable in connection with the execution and delivery of this Agreement, the
borrowings hereunder, the issuance of the Notes or the execution and delivery of
any other Loan Document or any other document provided for herein or delivered
or to be delivered hereunder or in connection herewith and (b) any fees of the
Company's auditors in connection with any reasonable exercise by the Agent and
the Banks of their rights pursuant to SECTION 10.2. All obligations provided for
in this SECTION 14.6 shall survive repayment of the
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Loans, cancellation of the Notes and any termination of this Agreement.
14.7 SUBSIDIARY REFERENCES. The provisions of this Agreement relating to
Subsidiaries shall apply only during such times as the Company has one or more
Subsidiaries.
14.8 CAPTIONS. Section captions used in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
14.9 ASSIGNMENTS; PARTICIPATIONS.
14.9.1 ASSIGNMENTS. Any Bank may, with the prior written consents of the
Company (which consent shall not be required at any time an Event of Default
exists) and the Agent (which consents shall not be unreasonably delayed or
withheld), at any time assign and delegate to one or more commercial banks or
other Persons (any Person to whom such an assignment and delegation is to be
made being herein called an "ASSIGNEE"), all or any fraction of such Bank's
Revolving Loans and Commitment (which assignment and delegation shall be of a
constant, and not a varying, percentage of all the assigning Bank's Revolving
Loans and Commitment) in a minimum aggregate amount (unless the Agent otherwise
consents) equal to the lesser of (i) the amount of the assigning Bank's
remaining Commitment and (ii) $5,000,000; PROVIDED, HOWEVER, that (a) no
assignment and delegation may be made to any Person if, at the time of such
assignment and delegation, the Company would be obligated to pay any greater
amount under SECTION 7.6 or SECTION 8 to the Assignee than the Company is then
obligated to pay to the assigning Bank under such Sections (and if any
assignment is made in violation of the foregoing, the Company will not be
required to pay the incremental amounts) and (b) the Company and the Agent shall
be entitled to continue to deal solely and directly with such Bank in connection
with the interests so assigned and delegated to an Assignee until the date when
all of the following conditions shall have been met:
(x) five Business Days (or such lesser period of time as the Agent
and the assigning Bank shall agree) shall have passed after written notice
of such assignment and delegation, together with payment instructions,
addresses and related information with respect to such Assignee, shall
have been given to the Company and the Agent by such assigning Bank and
the Assignee,
(y) the assigning Bank and the Assignee shall have executed and
delivered to the Company and the Agent an
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assignment agreement substantially in the form of EXHIBIT G (an
"ASSIGNMENT AGREEMENT"), together with any documents required to be
delivered thereunder, which Assignment Agreement shall have been accepted
by the Agent, and
(z) the assigning Bank or the Assignee shall have paid the Agent a
processing fee of $3,500.
From and after the date on which the conditions described above have been met,
(x) such Assignee shall be deemed automatically to have become a party hereto
and, to the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Bank hereunder, and (y) the assigning Bank, to the
extent that rights and obligations hereunder have been assigned and delegated by
it pursuant to such Assignment Agreement, shall be released from its obligations
hereunder. Within five Business Days after effectiveness of any assignment and
delegation, the Company shall execute and deliver to the Agent (for delivery to
the Assignee and the Assignor, as applicable) a new Note in the principal amount
of the Assignee's Percentage of the Commitment Amount and, if the assigning Bank
has retained a Commitment hereunder, a replacement Note in the principal amount
of the Percentage of the Commitment Amount retained by the assigning Bank (such
Note to be in exchange for, but not in payment of, the predecessor Note held by
such assigning Bank). Each such Note shall be dated the effective date of such
assignment. The assigning Bank shall mark the predecessor Note "exchanged" and
deliver it to the Company. Accrued interest on that part of the predecessor Note
being assigned shall be paid as provided in the Assignment Agreement. Accrued
interest and fees on that part of the predecessor Note not being assigned shall
be paid to the assigning Bank. Accrued interest and accrued fees shall be paid
at the same time or times provided in the predecessor Note and in this
Agreement. Any attempted assignment and delegation not made in accordance with
this SECTION 14.9.1 shall be null and void.
Notwithstanding the foregoing provisions of this SECTION 14.9.1 or any
other provision of this Agreement, any Bank may at any time assign all or any
portion of its Loans and its Note to a Federal Reserve Bank (but no such
assignment shall release any Bank from any of its obligations hereunder).
14.9.2 PARTICIPATIONS. Any Bank may at any time sell to one or more
commercial banks or other Persons participating interests in any Loan owing to
such Bank, the Note held by such Bank, the Commitment of such Bank, the direct
or participation interest of such Bank in any Letter of Credit or any other
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interest of such Bank hereunder (any Person purchasing any such participating
interest being herein called a "PARTICIPANT"); PROVIDED that any Bank selling
any such participating interest shall give notice thereof to the Company. In the
event of a sale by a Bank of a participating interest to a Participant, (x) such
Bank shall remain the holder of its Note for all purposes of this Agreement, (y)
the Company and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations hereunder and (z) all
amounts payable by the Company shall be determined as if such Bank had not sold
such participation and shall be paid directly to such Bank. No Participant shall
have any direct or indirect voting rights hereunder except with respect to any
of the events (excluding the events described in CLAUSE (V) thereof) described
in the fourth sentence of SECTION 14.1. Each Bank agrees to incorporate the
requirements of the preceding sentence into each participation agreement which
such Bank enters into with any Participant. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due and payable (as a result
of acceleration or otherwise), each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement, any Note and with respect to any Letter of Credit to the same
extent as if the amount of its participating interest were owing directly to it
as a Bank under this Agreement or such Note; PROVIDED that such right of setoff
shall be subject to the obligation of each Participant to share with the Banks,
and the Banks agree to share with each Participant, as provided in SECTION 7.5.
The Company also agrees that each Participant shall be entitled to the benefits
of SECTION 7.6 and SECTION 8 as if it were a Bank (provided that no Participant
shall receive any greater compensation pursuant to SECTION 7.6 or SECTION 8 than
would have been paid to the participating Bank if no participation had been
sold).
14.10 GOVERNING LAW. This Agreement and each Note shall be a contract made
under and governed by the internal laws of the State of Illinois. Whenever
possible each provision of this Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of the Company and rights of the Agent, the Banks and
any other holder of a Note expressed herein or in any other Loan Document shall
be in addition to and not in limitation of those provided by applicable law.
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14.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
14.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company, the Banks and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Banks and the Agent and the
successors and assigns of the Banks and the Agent.
14.13 INDEMNIFICATION BY THE COMPANY.
(a) In consideration of the execution and delivery of this Agreement by
the Agent and the Banks and the agreement to extend the Commitments provided
hereunder, the Company hereby agrees to indemnify, exonerate and hold the Agent,
each Bank and each of the officers, directors, employees, Affiliates and agents
of the Agent and each Bank (each a "BANK PARTY") free and harmless from and
against any and all actions, causes of action, suits, losses, liabilities,
damages and expenses, including reasonable attorneys' fees and charges and
allocated costs of staff counsel (collectively, for purposes of this SECTION
14.13, called the "INDEMNIFIED LIABILITIES"), incurred by the Bank Parties or
any of them as a result of, or arising out of, or relating to (i) any tender
offer, merger, purchase of stock, purchase of assets or other similar
transaction financed or proposed to be financed in whole or in part, directly or
indirectly, with the proceeds of any of the Loans, (ii) the use, handling,
release, emission, discharge, transportation, storage, treatment or disposal of
any hazardous substance at any property owned or leased by the Company or any
Subsidiary, (iii) any violation of any Environmental Laws with respect to
conditions at any property owned or leased by the Company or any Subsidiary or
the operations conducted thereon, (iv) the investigation, cleanup or remediation
of offsite locations at which the Company or any Subsidiary or their respective
predecessors are alleged to have directly or indirectly disposed of hazardous
substances or (v) the execution, delivery, performance or enforcement of this
Agreement or any other Loan Document by any of the Bank Parties, except for any
such Indemnified Liabilities arising on account of any such Bank Party's gross
negligence or willful misconduct. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. Nothing set
forth above shall be construed to
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relieve any Bank Party from any obligation it may have under this Agreement.
(b) All obligations provided for in this SECTION 14.13 shall survive
repayment of the Loans, cancellation of the Notes, any foreclosure under, or any
modification, release or discharge of any or all of the Collateral Documents and
any termination of this Agreement.
14.14 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION,
IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION
OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE COMPANY HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
14.15 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND EACH BANK
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH
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ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
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Delivered at Chicago, Illinois, as of the day and year first above written.
U S LIQUIDS INC.
By_____________________________________
Title_________________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By_____________________________________
Title_________________________________
BANK OF AMERICA NATIONAL TRUST AND SAVING
ASSOCIATION, as Issuing Bank, as Swing Line
Bank and as a Bank
By_____________________________________
Title_________________________________
BANKBOSTON, N.A., as Co-Agent and as a
Bank
By_____________________________________
Title_________________________________
BANK ONE, as Co-Agent and as a Bank
By_____________________________________
Title_________________________________
BANK OF NOVA SCOTIA, as Co-Agent and as
a Bank
By_____________________________________
Title_________________________________
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UNION BANK OF CALIFORNIA, N.A., as Co-
Agent and as a Bank
By_____________________________________
Title_________________________________
COMERICA BANK, as a Bank
By_____________________________________
Title_________________________________
FLEET BANK, N.A., as a Bank
By_____________________________________
Title_________________________________
WELLS FARGO BANK, as a Bank
By_____________________________________
Title_________________________________
PARIBAS, as a Bank
By_____________________________________
Title_________________________________
By_____________________________________
Title_________________________________
77
EXHIBIT 5.1
February 16, 1999
U S Liquids Inc.
411 N. Sam Houston Parkway East
Suite 400
Houston, Texas 77060
Gentlemen:
We have acted as counsel to U S Liquids Inc., a Delaware corporation (the
"Company"), in connection with the Registration Statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended (the "Act"), of (i) up to an aggregate of 4,100,000 shares
of the Company's Common Stock, $.01 par value (the "Common Stock"), being
offered by the Company and (ii) up to an aggregate of 500,000 shares of Common
Stock being offered by the selling stockholders (the "Selling Stockholders")
referred to in the Registration Statement. All of the shares of Common Stock
offered by the Company and the Selling Stockholders are collectively referred to
herein as (the "Shares"). This opinion also relates to any registration
statement of the Company relating to the registration of additional shares of
Common Stock pursuant to Rule 462(b) under the Act.
In connection herewith, we have examined copies of such statutes,
regulations, corporate records and documents, certificates of public and
corporate officials and other agreements, contracts, documents and instruments
as we have deemed necessary as a basis for the opinions hereafter expressed. In
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with the original documents of all documents submitted to us as copies. We have
also relied, to the extent we deemed such reliance proper, upon information
supplied by officers and employees of the Company with respect to various
factual matters relating to our opinion. We have not independently verified any
factual matter relating to this opinion.
Based on the foregoing, we are of the opinion that:
1. The Shares to be sold by the Company have been duly authorized and when
issued and delivered by the Company against payment therefor as described in the
Registration Statement, such Shares will be validly issued, fully paid and
non-assessable.
<PAGE>
February 16, 1999
Page 2
2. The Shares to be sold by the Selling Stockholders have been duly
authorized and are validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Registration Statement. By giving such consent, we do not admit
that we are included within the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations thereunder. This opinion
may be incorporated by reference in a registration statement of the Company
relating to the registration of additional shares of Common Stock pursuant to
Rule 462(b) under the Act, in which case the opinion expressed herein will apply
to the additional shares registered thereunder.
Very truly yours,
/s/HARTZOG CONGER & CASON
HARTZOG CONGER & CASON
EXHIBIT 10.4
PAYMENT AGREEMENT
This Payment Agreement (the "Agreement") is made and entered into
this 31st day of December, 1998, by and among U.S. Liquids, Inc. ("U.S. Liquids"
or "USL"), a Delaware corporation, Newpark Resources, Inc., a Delaware
corporation ("Newpark"), and Newpark Environmental Services, Inc. ("NESI"), a
Delaware corporation and wholly owned subsidiary of Newpark (i) to amend and
restate in its entirety the NOW Payment Agreement dated September 16, 1998 (as
amended effective September 22, 1998, the "NOW Payment Agreement"), by and
between NESI and USL and (ii) to amend certain other agreements referred to
herein.
WHEREAS the parties to this Agreement agree that, among the purposes
of this Agreement, the NOW Payment Agreement and the other agreements described
herein were and are: (i) cancellation of the waste disposal obligations of NESI
and Newpark under NOW Disposal Agreement (the "Disposal Agreement") dated as of
June 4, 1996, by and among Sanifill, Inc., a Delaware corporation ("Sanifill"),
Campbell Wells, Ltd., a Delaware limited partnership ("Campbell"), and NOW
Disposal Operating Co., a Delaware corporation ("Disposeco"), and the Assumption
and Guaranty Agreement dated as of August 12, 1996, by and among Newpark,
Sanifill and Campbell; (ii) termination of any obligation of Newpark and NESI to
USL extending beyond the term of this Agreement; (iii) establishment of fair
compensation to USL for, among other things, such cancellation and termination;
and (iv) modification of certain obligations of USL to Newpark and NESI,
including but not limited to its non-competition obligation, based on such
cancellation and termination.
WHEREAS, concurrently with the execution and delivery of the NOW
Payment Agreement, the parties have executed and delivered the following
agreements (the "Other Agreements") in connection with the execution and
delivery of the NOW Payment Agreement: NESI and USL executed and delivered (a)
Asset Purchase Agreement dated September 16, 1998 (as amended as of September
22, 1998, the "Purchase Agreement"); and Newpark and USL executed and delivered
(b) Settlement of Arbitration and Release dated September 17, 1998 (the
"Release"); (c) Noncompetition Agreement dated September 16, 1998 (the
"Noncompetition Agreement"); and (d) Miscellaneous Agreement dated September 16,
1998 (the "Miscellaneous Agreement").
NOW, THEREFORE, in consideration of the above premises and the
mutual covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings (unless indicated otherwise, all Article and Section
references are to Articles and Sections in this Agreement):
ADJUSTMENT DATE: January 3, 2000.
AFFILIATE: A Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with the
Person specified. For purposes of this
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definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to (i) vote 50% or more of the voting interests in such
Person or (ii) direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise.
ANNUAL VOLUME: For any Contract Year, the maximum volume of NOW
permitted to be delivered by or on behalf of NESI at no cost and accepted for
disposal by USL, which volume shall be 375,000 barrels of NOW for the first
Contract Year, 500,000 barrels of NOW for the second Contract Year and 500,000
barrels of NOW for the third Contract Year.
BASE RATE: The number reflecting the most current measure of the
Consumer Price Index in effect as of the Effective Date. The Base Rate shall be
146.4.
COLLECTION: The collection, transfer or transportation of NOW.
CONSUMER PRICE INDEX: The number reflecting the measure of the
average change in prices over time of certain goods and services purchased by
all urban consumers in the Houston Area, as compiled and reported every
even-numbered month by the United States Department of Labor, Bureau of Labor
Statistics. On the Adjustment Date, the Consumer Price Index shall be the number
last reported and in effect as of that date. If the Consumer Price Index as
defined becomes unavailable, the parties shall use the number last reported as a
measure of the average change in prices of goods and services purchased by all
urban consumers in (i) the State of Texas or, in the event that number is
unavailable, (ii) the United States.
CONTRACT YEAR: Twelve-month period commencing each July 1 during the
term of this Agreement.
COVERED REGION: The States of Louisiana, Texas, Mississippi and
Alabama, and the Gulf of Mexico.
DISPOSAL: The treatment or disposal of NOW.
EFFECTIVE DATE: July 1, 1998.
EXCLUDED NOW: NOW generated and collected on land and delivered to a
Landfarm from the site where it was generated entirely by on-land
transportation.
LANDFARMS: The NOW disposal facilities owned and operated by USL
designated as Elm Grove, LA (DNR Permit #OWD 89-1) (the "Elm Grove Landfarm");
Bourg, LA (DNR Permit #90-10 OWD) (the "Bourg Landfarm"); Bateman Island, LA
(DNR Permit #91-10 OWD) (the "Bateman Island Landfarm"); and Mermentau, LA (DNR
Permit #SWD 83-6) (the "Mermentau Landfarm").
NOW: Nonhazardous oilfield waste (including Washwater) associated
with the exploration and production of oil, gas and geothermal energy that
contains less than 30 picocuries
-2-
<PAGE>
per gram of Radium 226 or 228. Without limiting the generality of the foregoing,
for waste disposed of in Louisiana, the term NOW shall include all wastes
containing less than 30 picocuries per gram of Radium 226 or 228 classified as
NOW under Louisiana Statewide Order 29-B, as currently in effect, and all waste
that is classified as "E&P Waste" by the Louisiana Department of Natural
Resources.
PAYMENT IN FULL AND ON TIME: Payment or reimbursement made to USL on
or before any date specified for such payment in this Agreement except and
unless timely paid in accordance with Section 13.6.
PERSON: Any individual, corporation, association, partnership, joint
venture, trust, estate or other entity or organization or government or any
agency or political subdivision thereof.
QUARTER: Calendar three-month period commencing each January 1,
April 1, July I and October 1.
WASHWATER: Fluids generated by the cleaning and/or decontamination
of tanks, barges, vessels, containers or other similar structures used in the
storage and/or transportation of NOW. Washwater may contain cleaning agents and
emulsifiers, etc., in addition to the basic cleaning agent (water).
ZAPATA FACILITY: A NOW disposal facility owned and operated by USL
located near Zapata, Texas.
ARTICLE II
PAYMENT
2.1 INITIAL PAYMENT. NESI shall pay USL $4 million as follows: (a) $3
million due before the close of business on September 22, 1998, and (b) $1
million due on or before October 1, 1998.
2.2 ADDITIONAL PAYMENTS.
2.2.1 FIRST CONTRACT YEAR. Separate from and in addition to its
obligations under Section 2.1, NESI shall make an additional payment to USL in
the total amount of $8 million for the first Contract Year except as provided in
Section 12.1. NESI shall pay USL $1 million of the aforesaid additional payment
on each of the following eight occasions: November 2, 1998, December 1, 1998,
January 4, 1999, February 1, 1999, March 1, 1999, April 1, 1999, May 1, 1999,
and June 1, 1999, except as provided in Section 12.1. Failure to make Payment in
Full and on Time under this Section constitutes a breach of this Agreement.
2.2.2 SECOND CONTRACT YEAR.
a. The additional payment owed for the second Contract Year shall total
$10 million except as provided in Section 12.1, subject to
adjustment as provided in Section 2.2.2b. The additional payment for
the first and second Quarters of the second
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Contract Year shall total $5 million except as provided in Section
12.1. During the first and second Quarters of the second Contract
Year, NESI shall pay such additional payment in six equal monthly
installments due on or before July 1, 1999, August 2, 1999,
September 1, 1999, October 1, 1999, November 1, 1999, and December
1, 1999, respectively, except as provided in Section 12.1.
b. On the Adjustment Date, January 3, 2000, the additional payment for
the remainder of the second Contract Year shall be adjusted by (i)
adding to the Base Rate 70% of the positive amount, if any,
determined by subtracting the Base Rate from the Consumer Price
Index in effect on the Adjustment Date, (ii) dividing said sum by
the Base Rate and (iii) multiplying the result by $5 million, except
as provided in Section 12.l. In the event that the net change in the
Consumer Price Index is negative, the additional payment for the
third and fourth Quarters of the second Contract Year shall total $5
million except as provided in Section 12.1. NESI shall pay the
remainder of such additional payment for the second Contract Year in
six equal monthly installments due on or before January 1, 2000,
February 1, 2000, March 1, 2000, April 3, 2000, May 1, 2000, and
June 1, 2000, respectively, except as provided in Section 12.1.
Failure to make Payment in Full and on Time under this Section
constitutes a breach of this Agreement.
2.2.3 THIRD CONTRACT YEAR. The additional payment owed for the third
Contract Year shall total $8 million except as provided in Section 12.1, subject
to adjustment as provided in the following sentence. On the Adjustment Date,
January 3, 2000, the additional payment for the third Contract Year shall be
adjusted by (i) adding to the Base Rate 70% of the positive amount, if any,
determined by subtracting the Base Rate from the Consumer Price Index in effect
on the Adjustment Date, (ii) dividing said sum by the Base Rate, and (iii)
multiplying the results by $8 million except as provided in Section 12.1. In the
event that the net change in the Consumer Price Index is negative, the
additional payment for the third Contract Year shall total $8 million, except as
provided in Section 12.1. NESI shall pay such additional payment in twelve equal
monthly installments due on or before July 3, 2000, August 1, 2000, September 1,
2000, October 2, 2000, November 1, 2000, December 1, 2000, January 2, 2001,
February 1, 2001, March 1, 2001, April 2, 2001, May 1, 2001, and June 1, 2001,
respectively, except as provided in Section 12.1. Failure to make Payment in
Full and on Time under this Section constitutes a breach of this Agreement.
2.3 OBLIGATION TO PAY. NESI's obligation to make Payment in Full and on
Time where required by any Section in this Agreement exists without regard to
whether NESI exercises its option to deliver NOW, if any, to USL in accordance
with Section 3.1. Failure to make Payment in Full and on Time in every instance
for any reason whatsoever constitutes a breach of this Agreement and shall not
entitle NESI to any offsets, carryovers, or counterclaims of any kind.
ARTICLE III
DISPOSAL VOLUME
3.1 NOW DELIVERY.
3.1.1 DELIVERY OPTION.
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a. NESI may, at its option, deliver to USL for disposal at the Bateman
Island Landfarm a maximum amount of NOW equal to the Annual Volume
for such Contract Year at no cost without prior notice or approval.
Subject to the terms and conditions and the limitations set forth in
this Agreement, USL shall accept for disposal at the Bateman Island
Landfarm all NOW delivered by or on behalf of NESI, provided,
however, that in no event shall USL be obligated to accept from NESI
for disposal at any Landfarm more than the Annual Volume during any
Contract Year. Failure to deliver the full Annual Volume shall not
result in any carryforward or increase in the Annual Volume in the
succeeding Contract Year.
b. NESI shall have the right to deliver a volume no more than 10% of
the Annual Volume to the Bourg Landfarm at no cost, subject to
Section 3.1.l.a, and prior notice by NESI in accordance with Section
13.5.2, of 48 hours if such delivery shall arrive by marine
transportation; or
c. NESI shall have the right to deliver a volume no more than 10% of
the Annual Volume to the Mermentau Landfarm at no cost, subject to
Section 3.1.1.a and prior written approval by USL, which approval
will not be unreasonably withheld.
3.1.2 OBLIGATION TO PAY. NESI is obligated to pay the additional
payments required under Article II regardless of the volume of NOW, if any,
delivered to or accepted by USL in accordance with this Section 3.1, except as
provided in Section 12.1. Failure by NESI to exercise its option to deliver NOW
to USL for disposal shall not alter, lessen, decrease, alleviate, or relieve
NESI of its obligation to pay USL in accordance with Article II. NESI shall make
all payments in accordance with Article II without regard to the volume of NOW,
if any, offered or delivered to USL for disposal.
3.2 VARIANCE. The parties agree to cooperate to minimize monthly and
quarterly variances in NOW, if any, delivered for disposal at the Landfarms, in
order to avoid disruption of or problems in USL's operations.
3.3 EXCESS VOLUME.
3.3.1 ACCEPTANCE OPTION. During any Contract Year, USL has the
option, but not the obligation, to accept for disposal an amount of NOW from
NESI in excess of the Annual Volume (the "Excess Volume"). USL may decline to
accept Excess Volume for any reason. Should USL exercise its option to accept
delivery of an amount of Excess Volume of NOW, NESI agrees to pay the "Excess
Volume Rate" (as defined below) for disposal of the Excess Volume. In the event
USL elects not to accept NOW delivered by NESI in excess of the Annual Volume
during any Contract Year for any reason, including but not limited to rejection
in accordance with Section 6.6 of this Agreement, such election shall not cause
(i) the Annual Volume for any Contract Year to increase or (ii) the payments
required under this Agreement to decrease.
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3.3.2 EXCESS VOLUME RATE.
a. FIRST CONTRACT YEAR. The rate for disposal of Excess Volume of NOW (the
"Excess Volume Rate") for the first Contract Year shall be $2.86 per barrel, net
of all currently applicable taxes. The Excess Volume Rate shall never be less
than $2.86 per barrel of NOW during the term of this Agreement.
b. ADJUSTMENT OF PREVAILING RATE. On the Adjustment Date, January 3,
2000, the Excess Volume Rate shall be adjusted by (i) adding to the Base Rate
70% of the positive amount, if any, determined by subtracting the Base Rate from
the Consumer Price Index as of the Adjustment Date, (ii) dividing said sum by
the Base Rate, and (iii) multiplying the result by $2.86. If the net change in
the Consumer Price Index is negative, then the Prevailing Rate shall be $2.86
per barrel of Excess Volume of NOW until June 30, 2001.
3.3.3 INVOICE FOR EXCESS VOLUME: USL shall invoice NESI for fees
incurred from the disposal of Excess Volume of NOW, to be paid no later than 30
days from receipt of the invoice. Failure to pay USL in accordance with the
terms of the invoice shall constitute a breach of this Agreement.
3.4 RADIUM CONCENTRATION. Notwithstanding anything contained in this
Agreement to the contrary, USL shall not be obligated to accept NOW from NESI at
any Landfarm where such NOW (i) when combined with other NOW in an individual
treatment cell, would cause the weighted average concentration of Radium 226 or
228 to exceed 5 pCi/gm, excluding background, or (ii) would require the loading
of two or more treatment cells simultaneously to prevent the weighted average
concentration of Radium 226 or 228 from exceeding 5 pCi/gm, excluding
background. In the event NESI delivers NOW contravening the foregoing sentence,
USL shall have the right, but not the obligation, to reject such NOW in
accordance with Section 6.6.
ARTICLE IV
SERVICES, LEVIES, AND INSPECTION
4.1 ADDITIONAL SERVICES; DISPOSAL OF INJECTABLE SALTWATER. Pursuant to
this Agreement, USL will perform standard off-loading and customary handling
services associated with disposal of NOW up to, and including, the Annual Volume
at no additional charge. USL will perform additional services upon request of
NESI at the usual and customary rates of USL for such services, or at such other
rates as the parties may mutually agree upon. All charges for such additional
services shall be in addition to and independent of the other payments due in
accordance with this Agreement. USL will accept injectable saltwater at the
Landfarms for disposal upon request of NESI at the usual and customary rates of
USL for disposal of injectable saltwater, or at such other rates as the parties
may mutually agree upon. All charges for disposal of injectable saltwater shall
be in addition to and independent of the other amounts which are payable
pursuant to this Agreement.
4.2 DISPOSAL OF WASHWATER. NESI shall pay USL to dispose of
Washwater at the rate of
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$1.50 per barrel of Washwater. On the Adjustment Date, the rate shall be
adjusted by (i) adding to the Base Rate 70% of the positive amount, if any,
determined by subtracting the Base Rate from the Consumer Price Index as of the
Adjustment Date, (ii) dividing said sum by the Base Rate, and (iii) multiplying
the result by $1.50. If the net change in the Consumer Price Index is negative,
then the rate for disposal of Washwater shall be $1.50 per barrel. The disposal
of Washwater shall be for the benefit of NESI, and USL shall provide NESI with
billing information specified by NESI to enable NESI to bill the customer or
customers for whose account any related cleaning services were performed.
4.3 INVOICE FOR ADDITIONAL SERVICES: USL shall invoice NESI on a monthly
basis for fees or expenses incurred from any services performed pursuant to
Section 4.1 or 4.2 to be paid no later than 30 days from receipt of the invoice.
Failure to pay USL in accordance with the terms of the invoice shall constitute
a breach of this Agreement.
4.4 EXTRAORDINARY LEVIES.
4.4.1 TAXES. Notwithstanding anything to the contrary contained
herein, if during the term of this Agreement there is levied upon USL or any of
its Affiliates or upon the operations of USL any tax, fee, assessment, or other
charge (other than income taxes applicable generally) by any governmental
authority, which tax, assessment or charge increases USL's costs to operate any
Landfarm, USL shall notify NESI of the cause and the per barrel amount of the
cost increase. If NESI chooses to deliver NOW to USL following the effectiveness
of the tax, fee, assessment or other charge, USL will invoice NESI for and NESI
will be obligated to pay NESI's share of the cost increase for so long as such
tax, fee, assessment or other charge remains in effect as follows: (i) with
respect to any cost increase resulting from any tax, fee, assessment or other
charge levied by a governmental authority on a per barrel basis, an amount
determined by multiplying such per barrel charge (but not more than the increase
in cost resulting therefrom) by the number of barrels of NOW delivered by NESI
to USL; and (ii) with respect to any tax, fee, assessment or other charge levied
by a governmental authority on any basis other than per barrel, NESI's
proportionate share of the cost increase resulting from such tax, fee,
assessment or charge. NESI's proportionate share shall be calculated as follows:
(a) if such tax, fee, assessment or other charge increases the cost to operate
the Bateman Island Landfarm, the NESI's proportionate share shall be calculated
by (i) dividing the number of barrels of NOW delivered to USL by NESI by the
Annual Volume plus the total number of barrels of Excess Volume, if any,
delivered to USL by NESI and accepted by USL and (ii) multiplying the result by
the amount of the cost increase resulting from the tax, fee, assessment, or
other charge; (b) if such tax, fee, assessment or other charge increases the
cost to operate the Bourg and/or Mermentau Landfarm, then NESI's proportionate
share shall be calculated by (i) dividing the number of barrels of NOW delivered
to USL by NESI to that Landfarm by the total number of barrels delivered to that
Landfarm by all Persons and (ii) multiplying the result by the amount of the
cost increase at that Landfarm resulting from the tax, fee, assessment, or other
charge. Such payment or reimbursement shall not alter the Annual Volume or the
other payments that are due pursuant to this Agreement.
4.4.2 LANDFARM ENVIRONMENTAL REGULATIONS. Notwithstanding anything
to the contrary contained herein, if during the term of this Agreement there is
a substantial change in
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regulatory requirements related to the waste disposal business having general
applicability to the handling, treatment or disposal of NOW, which change
increases in a material manner USL's costs to operate any Landfarm, (i) USL
shall notify NESI of the cause and the per barrel amount of the cost increase
and, to the extent that NESI chooses to deliver NOW to USL, (ii) USL will
invoice NESI for NESI's proportionate share of the cost increase and NESI will
be obligated to pay such amount so long as such cost increase remains in effect.
NESI's proportionate share shall be calculated as follows: (a) if such change in
regulatory requirements increases costs to operate the Bateman Island Landfarm,
then NESI's proportionate share shall be calculated by (i) dividing the number
of barrels of NOW delivered to USL by NESI by the Annual Volume plus the total
number of barrels of Excess Volume, if any, delivered to USL by NESI and
accepted by USL and (ii) multiplying the result by the amount of the cost
increase; (b) if such change in regulatory requirements increases costs to
operate the Bourg and/or Mermentau Landfarm, then NESI's proportionate share
shall be calculated by (i) dividing the number of barrels of NOW delivered to
USL by NESI to that Landfarm by the total number of barrels delivered to that
Landfarm by all Persons and (ii) multiplying the result by the amount of the
cost increase at that Landfarm. Failure to pay USL in accordance with the terms
of the invoice shall constitute a breach of this Agreement.
4.4.3 RIGHT OF INSPECTION. In the event USL notifies NESI of a cost
increase pursuant to this Section 4.4, NESI shall have the right to conduct a
reasonable review of the calculations, working papers and the books and records
related to the determination of such fee increase. All costs of such review
shall be borne exclusively by NESI.
ARTICLE V
TERM
5.1 TERM. The term of this Agreement shall be for a period of three years,
commencing on the Effective Date and ending on June 30, 2001. Each party shall
notify the other of the pending expiration of the Agreement no later than seven
months before such expiration.
5.2 EFFECT OF BREACH OF NONCOMPETITION AGREEMENT. If USL breaches the
Noncompetition Agreement by engaging in the "Business," as that term is defined
therein, after the Effective Date, USL must pay to NESI any and all revenues
received from activities that constitute such breach. Breach of the
Noncompetition Agreement shall have no effect whatsoever on NESI's payment
obligations under this Agreement. USL shall use all reasonable commercial
efforts to enforce the Seller Noncompetition Agreement and the Buyer
Noncompetition Agreement, both dated December 13, 1996 by and between Sanifill
and USL.
ARTICLE VI
OPERATING PROCEDURES
6.1 COMPLIANCE WITH OPERATING PROCEDURES. NESI and its Affiliates shall
comply in all material respects with and abide by, and shall require their
employees, servants, agents, representatives, contractors, subcontractors,
haulers and transporters to comply in all material respects with and abide by,
all applicable federal, state and local laws, ordinances, permits, regulations,
directives, codes, standards and requirements relating to the subject matter of
this
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Agreement or the performance of services hereunder, as well as all of USL's
rules, regulations, procedures and guidelines, written or oral, as the same may
be reasonably adopted and modified from time to time, including, without
limitation, all safety and/or security regulations, practices and procedures,
and all procedures reasonably adopted by USL in compliance with its permits or
utilized by USL in the inspection, sampling and testing of material delivered to
any Landfarm for disposal.
6.2 INSPECTION AND TESTING BY NESI; NOTIFICATION. NESI agrees that it
shall inspect and test all materials accepted, acquired, taken possession of,
procured, directed, controlled or otherwise received by it from third party
generators or other parties for disposal (with the exception of any NOW produced
by third-party generators which NESI or its Affiliates treat and dispose of on
the site at which the NOW was generated) to the extent required by applicable
federal, state and local laws, ordinances, permits, regulations, directives,
codes, standards and requirements. NESI shall promptly notify USL if it becomes
aware of any unusual or special characteristics of any materials being delivered
to any Landfarm which cause such materials to require special treatment,
handling or care. Upon request by USL, NESI shall provide copies of all
inspection and test results relating to material to be disposed of at any
Landfarm under the terms of this Agreement to USL upon delivery.
6.3 SHIPMENT AND DELIVERY OF NOW. NESI, its Affiliates and/or its
contractors and subcontractors shall be responsible for proper containerization,
preparation and labeling for shipment, shipment, transportation and delivery to
any Landfarm, and shall comply fully with all applicable federal, state and
local laws, ordinances, permits, regulations, directives, codes, standards and
requirements in making such delivery to any Landfarm. USL and its Affiliates
undertake no responsibility whatsoever for the preparation, handling or
transportation of any material prior to acceptance of delivery as hereinafter
provided.
6.4 INSPECTIONS.
6.4.1 BARGES. Upon arrival of any barge transporting material to a
Landfarm at the direction of NESI or any of its Affiliates, USL shall have the
right to have an independent third party inspector selected by USL undertake an
inspection of the barge transporting material to the Landfarm for the purpose of
determining (a) the volume of materials delivered and (b) the condition of the
barge on arrival at the Landfarm. The costs of such inspector shall be split
evenly between NESI and USL, and NESI's portion of such expense shall be
included on the monthly invoices prepared by USL in accordance with Section 4.3.
Before any materials are off-loaded from the barge or any inspection or testing
is undertaken by USL, the independent inspector will provide the authorized
representatives of NESI and USL with an inspector's report indicating the time
and date, the barge identification number and volume of waste materials in the
barge. The authorized representatives of the parties will indicate their
acceptance of the inspector's report by signing the report. In the event either
authorized representative disagrees with the volume determination, either
authorized representative may request that an additional independent third-party
inspector prepare an inspector's report, the cost of which shall be borne by the
party requesting the same. If the parties are unable to agree on the actual
volume of waste after the preparation of the second inspector's report, the two
independent inspectors shall select a third independent inspector to prepare an
inspector's report, the cost of which will be borne half by NESI and half by
USL. The final volume determination shall be that volume agreed upon by the
majority of the independent inspectors that
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have inspected the barge. If the barge appears to be damaged in any significant
respect, the inspector shall summarize the apparent damage and take photographs
as appropriate to evidence the scope of the damage. The authorized
representative of NESI shall approve such damage summary by executing the same
prior to the time any material is off-loaded from the barge. With regard to
barges owned and operated by NESI, USL agrees that it shall not exercise its
right to implement the procedures set forth in this Section 6.4.1 unless the
parties have previously had a dispute or disagreement relating to the quantity
of materials delivered to a Landfarm by NESI or the condition of a barge owned
and operated by NESI and such dispute or disagreement was not amicably resolved
within 30 days.
6.4.2 TRUCKS. Upon arrival of a truck transporting material to a
Landfarm on behalf of NESI or any of its Affiliates, USL personnel shall
undertake an inspection to determine the volume of materials delivered. Before
any materials are off-loaded from the truck or any inspection or testing is
undertaken by USL, USL shall prepare a receipt indicating the time and date and
the volume of materials in the truck. The driver of the truck shall indicate his
or her acceptance of the receipt by signing the receipt. In the event the driver
disagrees with the volume determination, USL shall have the option of (i)
accepting the volume stated by the driver and preparing a receipt evidencing
such volume to be signed by the driver or (ii) rejecting such materials in
accordance with Section 6.6.
6.5 INSPECTION AND TESTING OF MATERIAL. After all inspections, if any,
pursuant to Section 6.4 have been concluded, USL shall conduct inspections,
testing and sampling using such equipment and procedures as are required by or
consistent with its permits. USL may rely exclusively on the results of its
inspection in determining whether materials delivered may be disposed at the
Landfarm in accordance with its permits and this Agreement. NESI authorizes USL
to retain samples and all data relating thereto, including test results, for so
long as required by federal, state or local law, ordinance, permit, regulation,
directive, code, standard or requirement and additionally for so long as USL in
its sole discretion shall determine.
6.6 ACCEPTANCE OR REJECTION OF MATERIAL.
6.6.1 ACCEPTANCE. USL shall only be obligated to accept waste
materials at the Landfarm which are permissible under the permit requirements of
that Landfarm at the time of delivery. For a period of ten days after the date
of delivery, USL shall have the right to reject (or revoke any prior acceptance)
all or any part of a shipment of material delivered by or on behalf of NESI to
the Landfarm if (i) such material is not in accordance with the terms of this
Agreement or (ii) USL concludes that such material exceeds the parameters of the
permits applicable to the Landfarm. USL shall notify NESI of any rejection in
writing and shall state the reason therefor. The expiration of such ten-day
period without a rejection or a revocation of a prior acceptance of material
shall constitute "Final Acceptance" of such material.
6.6.2 REJECTED MATERIAL. Rejected material shall remain at NESI's
risk and expense and shall not be deemed to be incorporated into the Landfarm or
come under the possession, custody, control or ownership of USL. Notwithstanding
the foregoing, to the extent required by federal, state or local law, ordinance,
permit, regulation, directive, code, standard or requirement, or by USL's
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safety and/or security rules, practices or procedures, USL may detain any
rejected materials, including the vehicle and/or containers in which such
rejected materials arrived, and shall notify regulatory or other authorities
wherever necessary or appropriate to do so.
6.6.3 REMOVAL. In the event USL rejects all or any part of a
shipment of material from NESI, after compliance in all material respects with
all regulatory and any other requirements involving detention of such shipment,
upon written request of USL, NESI, unless otherwise directed by a regulatory
agency or other lawful authority, shall promptly remove or cause to be removed
from the Landfarm all of the rejected material at NESI's risk and expense in a
manner consistent with all applicable federal, state and local laws, ordinances,
permits, regulations, directives, codes, standards and requirements. In the
event NESI fails to complete such removal by the fifth business day after the
date of the request by USL, USL, unless otherwise required by law or regulation,
may remove or cause to be removed from the Landfarm any and all of the rejected
material, and may containerize and transport it or cause it to be containerized
and transported to an authorized storage site or returned to NESI at its nearest
location. NESI hereby authorizes USL in such event to contract for such storage
for NESI's account. For its services, USL shall charge and NESI shall pay USL's
cost plus 15%. Any and all material that USL rejects shall remain property and
the responsibility of NESI at NESI's risk and expense.
6.7 THIRD-PARTY DELIVERIES. USL may follow the procedures set forth in
this Article VI with respect to any third-party generator's vessels or vehicles
containing materials that are delivered to any Landfarm at the direction of NESI
or its Affiliates. In addition, USL may establish and enforce other policies and
procedures relating to the independent inspection of any such third-party
generator's vessels or vehicles before the material contained in such vessels or
vehicles shall be accepted for disposal.
ARTICLE VII
COVENANTS, REPRESENTATIONS AND WARRANTIES OF NESI
NESI hereby covenants, represents and warrants to USL as follows:
7.1 AUTHORIZATION AND VALIDITY OF AGREEMENT. NESI has all requisite power
and authority to enter into this Agreement and to perform its obligations
hereunder and consummate the transactions contemplated hereby. The execution,
delivery and performance by NESI of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of NESI. No action or approval of the equity owners of NESI
is necessary to authorize NESI's execution or delivery of, or the performance of
its obligations under, this Agreement. This Agreement has been duly executed and
delivered by NESI and is a valid and binding obligation of NESI, enforceable in
accordance with its terms.
7.2 NO CONFLICT. The execution and delivery by NESI of this Agreement does
not, and exercise by NESI of its rights hereunder and the consummation of the
transactions contemplated hereby will not, (a) require any consent, approval,
order or authorization of or other action by any governmental entity on the part
of or with respect to NESI; (b) require on the part of NESI any consent by or
approval of or notice to any other Person; or (c) result in a violation of any
law, rule,
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regulation, order, judgment or decree applicable to NESI, except in any case
covered by (a), (b) or (c) where failure to obtain such consent or such
violation would not, either individually or in the aggregate, have a material
adverse effect on the transactions contemplated hereby.
7.3 LICENSED CARRIERS. Any carrier with which NESI contracts to transport
NOW and all of NESI's driver personnel shall at all times relevant to the
performance of services under this Agreement remain properly licensed and
otherwise fully qualified to perform the services required hereunder.
7.4 CUSTOMER APPROVAL. NESI's obligations under this Agreement shall not
be affected in any way by the approval, disapproval, recommendation,
instruction, direction or other communication between NESI and its customers,
including any request by any NESI customer as to where its waste should be
delivered. NESI shall remain responsible for payment under this Agreement
without reference or regard to NESI's customers.
ARTICLE VIII
COVENANTS, REPRESENTATIONS AND WARRANTIES OF USL
USL hereby covenants, represents and warrants to NESI as follows:
8.1 AUTHORIZATION AND VALIDITY OF AGREEMENT. USL has all requisite power
and authority to enter into this Agreement and to perform its obligations
hereunder and consummate the transactions contemplated hereby. The execution,
delivery and performance by USL of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of USL. No action or approval of the equity owners of USL is
necessary to authorize USL's execution or delivery of, or the performance of its
obligations under, this Agreement. This Agreement has been duly executed and
delivered by USL and is a valid and binding obligation of USL, enforceable in
accordance with its terms.
8.2 NO CONFLICT. The execution and delivery by USL of this Agreement does
not, and exercise by USL of its rights hereunder and the consummation of the
transactions contemplated hereby will not (a) require any consent, approval,
order or authorization of or other action by any governmental entity on the part
of or with respect to USL or any of its Affiliates; (b) require on the part of
USL or any of its Affiliates any consent by or approval of or notice to any
other Person; or (c) result in a violation of any law, rule, regulation, order,
judgment or decree applicable to USL or any of its Affiliates, except in any
case covered by (a), (b) or (c) where failure to obtain such consent or such
violation would not, either individually or in the aggregate, have a material
adverse effect on the transactions contemplated hereby.
8.3 SERVICES AND EQUIPMENT. USL possesses the business, professional and
technical expertise to handle, treat and dispose of NOW and possesses the
equipment, plant and employee resources required to perform this Agreement. USL
shall use its commercially reasonable efforts to turn all barges delivering
materials to the Landfarms in a timely manner consistent with the number of NESI
and third-party generator barges on site at such moment and with its general
practice of giving priority to third-party generators' barges. The equipment
shall, at all times
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relevant to the performance of services hereunder, be maintained in good and
safe condition and fit for use.
8.4 LICENSES AND PERMITS. As of the Effective Date, USL shall be duly
licensed, permitted and authorized pursuant to all applicable federal, state and
local laws to handle, treat and dispose of NOW, and the Landfarms will have been
issued all licenses, permits and authorizations required by all applicable
federal, state and local laws. At any time during the term of this Agreement,
upon NESI's reasonable request, USL shall provide to NESI, at NESI's expense, a
complete copy of the current permits applicable to the operation of the
Landfarms. During the term of this Agreement, USL shall use its best efforts to
keep all such licenses, permits and authorizations in effect and shall promptly
notify NESI if any such license, permit or authorization is to expire and not be
renewed or becomes the subject of any administrative or judicial action seeking
revocation or suspension.
8.5 WORKERS' COMPENSATION. USL shall comply in all material respects with
all applicable workers' compensation laws during the term of this Agreement. In
the event any work is performed by USL's agent or subcontractor, USL shall
obtain certification from such agent or subcontractor that it too is in
compliance in all material respects with such laws or does not fall within the
scope of such laws.
ARTICLE IX
INSURANCE
9.1 INSURANCE COVERAGE. USL and NESI, each at its own expense, shall
procure and maintain in full force and effect during the term of this Agreement
the following kinds of insurance with limits of coverage equal to or exceeding
those limits specified therefor:
9.1.1 WORKERS' COMPENSATION; EMPLOYER'S LIABILITY. Workers'
Compensation Insurance shall be obtained in accordance with the provisions of
the applicable Workers' Compensation Law or similar laws of a state having
jurisdiction over any employee. Employer's Liability Insurance shall be obtained
with a minimum limit of liability of $1,000,000. To the extent exposures fall,
or may fall, within federal jurisdictions, including the U.S. Longshore and
Harbor Workers' Compensation Act, the Defense Bases Act and the Federal
Employers Liability Act, extensions of coverage shall be obtained in accordance
with the requirements of such laws. Should operations occur where maritime
liability law, the Jones Act, or General Admiralty Law apply, applicable
coverages shall be required at limits of not less than $1,000,000.
9.1.2 GENERAL LIABILITY. Comprehensive or Commercial General
Liability Insurance, including Products/Completed Operations and Contractual
Liability, which shall cover the indemnity provisions contained in this
Agreement, shall be obtained with a combined single limit of not less than
$1,000,000 per occurrence for bodily injury and property damage.
9.1.3 AUTOMOBILE LIABILITY. Business or Commercial Automobile
Liability Insurance covering all owned, nonowned, and hired vehicles, shall be
obtained with a combined single limit of $ 1,000,000 per occurrence or accident.
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9.1.4 UMBRELLA LIABILITY. Umbrella Liability Insurance over the
foregoing coverages shall be obtained as applicable at limits of $10,000,000 per
occurrence.
9.2 COVERAGE TERMS. All coverages shall be written through insurers
authorized to transact business in the states of operation and reasonably
satisfactory and acceptable to both parties. Each party shall be added as an
additional insured, and subrogation as to the policies of the other party shall
be waived as applicable. All policies will be endorsed to provide not less than
30 days' written notice of cancellation, termination, nonrenewal or material
change in the policy. Each party will furnish the other party certificates of
insurance evidencing compliance with the requirements of Section 9.1.
9.3 SITE FINANCIAL ASSURANCE AND ENVIRONMENTAL IMPAIRMENT LIABILITY. To
the extent available on commercially reasonable terms and subject to the other
terms of this Agreement, USL shall (i) maintain policies of environmental
impairment liability insurance covering the ownership and operation of the
Landfarms in substantially such amounts and on such terms as shall be in place
on the Effective Date and (ii) comply with all applicable federal or state
governmental financial assurance requirements imposed in connection with its
operation of the Landfarms.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY USL. USL shall defend, indemnify and hold harmless
NESI and its Affiliates and their employees, officers, owners, directors and
agents, from and against any and all liabilities, penalties, fines, forfeitures,
demands, claims, causes of action, suits, judgments and costs and expenses
incidental thereto, including reasonable attorneys' fees, which any or all of
them may hereafter suffer, incur, be responsible for or pay out as a result of
personal injuries, property damage, or contamination of or adverse effects on
the environment, to the extent directly or indirectly caused by, or arising from
or in connection with (i) the negligence, gross negligence or willful act or
omission or willful misconduct of USL or any of its employees, officers, owners,
directors, agents or subcontractors in the performance of this Agreement; (ii)
the violation of any environmental rule, law or regulation by USL or any of its
employees, officers, owners, directors, agents or subcontractors; (iii)
operations of the Landfarms, including, without limitation, the receipt and
disposal of waste delivered to the Landfarms by NESI and others; or (iv) the
breach of, misrepresentation in, untruth in or inaccuracy in any representation,
warranty or covenant of USL set forth in this Agreement.
10.2 INDEMNIFICATION BY NESI. NESI shall defend, indemnify and hold
harmless USL and its Affiliates and their employees, officers, owners,
directors, agents and subcontractors, from and against any and all liabilities,
penalties, fines, forfeitures, demands, claims, causes of action, suits,
judgments and costs and expenses incidental thereto, including reasonable
attorneys' fees, which any or all of them may hereafter suffer, incur, be
responsible for or pay out with respect to claims by third parties for personal
injuries, property damage or other loss to the extent directly or indirectly
caused by, or arising from or in connection with (i) the negligence, gross
negligence or willful act or omission of NESI, any of its employees, officers,
owners, directors, agents or subcontractors or any third-party generator acting
at NESI's direction in the performance of this Agreement, (ii) the
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violation of any environmental rule, law or regulation by NESI, any of its
employees, officers, owners, directors, agents or subcontractors or any
third-party generator acting at NESI's direction; (iii) material delivered to
any of the Landfarms by NESI or any third-party generator acting at NESI's
direction which is not in accordance with the terms of this Agreement or
otherwise not permitted to be disposed at such Landfarm; or (iv) the breach of,
misrepresentation in, untruth in or inaccuracy in any representation, warranty
or covenant of NESI set forth in this Agreement.
10.3 INDEMNIFICATION PROCEDURES.
10.3.1 Promptly after receipt by an indemnified party under this
Article X of notice of the commencement of any action or proceeding evidenced by
service of process or other legal pleading, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify in writing the indemnifying party of the commencement thereof, but the
omission so to notify the indemnifying party (i) will not relieve it from any
liability that it may have to any indemnified party under this Article X unless
and to the extent that the indemnifying party has been prejudiced in any
material respect by such omission and (ii) will not relieve the indemnifying
party from any liability that it may have to any indemnified party other than
under this Article X. If any such action or proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under this Article X for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless the named parties to such action or proceeding
(including any impleaded parties) shall include both an indemnifying party and
an indemnified party and the indemnified party shall have been advised by
counsel that there may be one or more defenses available to such indemnified
party that are different from or additional to those available to the
indemnifying party (in which case, if the indemnified party notifies the
indemnifying party that it wishes to employ separate counsel at the expense of
the indemnifying party (who shall promptly pay all such expenses as incurred),
the indemnifying party shall not have the right to assume the defense of such
action or proceeding on behalf of such indemnified party).
10.3.2 If an indemnifying party, within a reasonable period of time
after notice by the indemnified party of the commencement of any action or
proceeding with respect to which the indemnified party is to make a claim
hereunder, fails to assume the defense thereof, the indemnified party shall have
the right (upon further notice to the indemnifying party) to undertake the
defense, compromise or settlement of such action or proceeding for the account
of the indemnifying party, subject to the right of the indemnifying party to
assume the defense of such action or proceeding at any time prior to settlement,
compromise or final determination thereof. The cost and expense of any such
defense and any judgment in any such action or proceeding shall be borne by the
indem nifying party, and, if paid by the indemnified party, shall be reimbursed
by the indemnifying party within thirty days after receipt of invoice therefor.
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10.3.3 Except as otherwise provided in Section 10.3.2, an
indemnifying party shall not be liable for any settlement of any litigation or
proceeding effected without its written consent. An indemnifying party shall
not, without the indemnified party's written consent, settle or com promise any
action or proceeding or consent to entry of any judgment that would impose an
injunction or other equitable relief upon the indemnified party or that does not
include as an unconditional term thereof the release by the claimant or the
plaintiff of such indemnified party from all liability in respect of such action
or proceeding.
ARTICLE XI
DISPUTE RESOLUTION
11.1 NEGOTIATION OF DISPUTES. In the event of any dispute or disagreement
arising out of or relating to the implementation and performance of this
Agreement, the parties agree to attempt to resolve such dispute in good faith.
Should a resolution of such dispute not be obtained within 15 days after the
origination of the dispute, either party may in accordance with the provisions
of this Article XI file suit. Any suit filed by any party that relates to this
Agreement must be filed in Texas state court in Harris County, Texas.
11.2 CONTINUATION OF PERFORMANCE. In the event of a dispute arising under
this Agreement, the parties shall continue performance of their respective
obligations hereunder.
11.3 EFFECT OF BREACH. Breach of this Agreement by NESI shall
automatically terminate the Noncompetition Agreement of September 16, 1998.
ARTICLE XII
SUSPENSION OF PERFORMANCE
12.1 SUSPENSION OF PERFORMANCE BY USL. USL shall have the right to suspend
operations under this Agreement at the Bateman Island Landfarm for any reason.
Upon such suspension, USL shall give NESI written notice of the basis for, and
an estimate of, the length of the suspension.
12.1.1 If USL notifies NESI that it will temporarily suspend
operations at the Bateman Island Landfarm due to litigation, court order or
directive of any governmental body having jurisdiction over the operation of the
Landfarm, or substantial changes to laws or regulations, then NESI shall
continue to make all Payments in Full and on Time as this Agreement requires;
provided, however, that USL shall make available the Bourg and/or Mermentau
Landfarms to accept, in a timely fashion, delivery of that portion of the Annual
Volume that NESI would otherwise deliver to the Bateman Island Landfarm under
Section 3.1.l.a. If USL fails to make available either the Bourg Landfarm or the
Mermentau Landfarm to accept delivery, in a timely fashion, of the NOW that NESI
desires to deliver, up to the Annual Volume (prorated for the period involved),
then NESI shall be excused from payments due each month such failure continues.
Upon the resumption of operations at the Bateman Island Landfarm, NESI may
exercise its option to deliver NOW in accordance with Section 3.1.
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12.1.2 If USL notifies NESI that it will temporarily suspend
operations at the Bateman Island Landfarm due to, caused by or resulting from
fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicles, riot
or civil commotion, sinkhole collapse, volcanic action, falling objects, weight
of snow, ice or sleet, water damage, vandalism, and malicious mischief, flood,
and/or earthquake, including order of civil authority when such order is given
as a direct result of any other cause named in this sentence, then NESI shall be
excused from payments due each month that operations are suspended. Upon the
resumption of operations at the Bateman Island Landfarm, NESI shall resume
payments and may exercise its option to deliver NOW in accordance with Section
3.1.
12.1.3 If USL notifies NESI that it will temporarily suspend
operations at the Bateman Island Landfarm voluntarily for any reason other than
under Section 12.1.1 or 12.1.2 above, NESI is excused from payments due each
month that operations are suspended. Upon the resumption of operations at the
Bateman Island Landfarm, NESI shall resume payments and may exercise its option
to deliver NOW in accordance with Section 3.1.
12.1.4 If operations are temporarily suspended at the Bourg, Bateman
Island and Mermentau Landfarms at once or in reasonably close succession, then
NESI is excused from payments due each month that operations are suspended. Upon
the resumption of operations at any Landfarm, and provided USL makes any
Landfarrn available to accept delivery in a timely fashion, of the NOW that NESI
desires to deliver, up to the Annual Volume (prorated for the period involved),
then NESI shall resume payments and may exercise its option to deliver NOW in
accordance with Section 3.1.
12.1.5 Whenever, in accordance with the foregoing provisions of this
Section 12.1, NESI is excused from making payments of a portion of the
additional payment due pursuant to this Agreement for any month or months, such
excuse shall be a permanent excuse, and the total additional payments for the
Contract Year or Contract Years in which such excuse occurs shall be reduced
accordingly.
12.2 SUSPENSION OF PERFORMANCE BY NESI. NESI has no right to suspend its
performance except as specifically provided elsewhere in this Agreement and any
other suspension or attempt to suspend its obligations shall constitute breach
of this Agreement. Disapproval, instruction or communication by a customer of
NESI, including any request by any NESI customer as to where its waste should be
delivered, in a manner contrary to the terms of this Agreement shall not
constitute force majeure nor provide a basis for suspension of performance.
ARTICLE XIII
MISCELLANEOUS
13.1 STATUS OF THE PARTIES. Each party hereto is and shall perform this
Agreement as an independent contractor, and as such, shall have and maintain
complete control over all of its employees, agents, and operations. Except as
expressly otherwise provided in this Agreement, neither party nor anyone
employed by it shall be, represent, act, purport to act or be deemed to be the
agent, representative, employee or servant of the other party.
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13.2 NO SET-OFF RIGHTS. The parties hereby agree that neither party shall
have any right to set-off or apply against any sums due under this Agreement any
sums due or amounts otherwise owing pursuant to any other provision of this
Agreement or any other agreement or arrangement between the parties.
13.3 SUBROGATION; ASSIGNMENT OF RIGHTS. In the event NESI delivers and USL
accepts a delivery of materials (the "Nonconforming Materials") containing
hazardous or dangerous substances in violation of this Agreement and in
violation of NESI's agreement with the third-party generator producing such
materials, NESI agrees that, upon the request of USL, USL shall become fully
subrogated to the rights of NESI against such generator related to the
Nonconforming Materials, and NESI shall (i) assign or take such further action
as is necessary or desirable to transfer to USL any and all rights of action of
NESI against such generator relating to such Nonconforming Materials arising at
law under NESI's agreement with such generator or in equity and (ii) use its
good faith best efforts to assist in the prosecution of any claim brought by USL
against such third party generator relating to the Nonconforming Materials.
13.4 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. USL and NESI may assign their rights, obligations and duties under this
Agreement with the written consent of the other parties to the Agreement, which
consent shall not be unreasonably withheld; provided that the assigning party
shall remain primarily liable for all obligations and duties arising hereunder.
Without limiting the generality of the foregoing, if USL sells the Landfarms
and/or related business, the purchaser shall assume USL's obligations under this
Agreement, and NESI shall retain its obligations under this Agreement.
13.5 NOTICES.
13.5.1 GENERAL. Except under Section 3.1.1, notices and other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been validly given (a) three calendar days after deposit in the
United States mails, registered or certified mail with proper postage prepaid
and return receipt requested; (b) upon transmission thereof and receipt of the
appropriate confirmation if sent via telecopier or telefax; (c) the business day
after the same shall have been deposited with a reputable overnight courier,
shipping prepaid; and (d) if delivered in person, upon delivery, in each case
addressed as follows:
If to NESI or Newpark: With a copy to:
c/o Newpark Resources, Inc. Ervin, Cohen & Jessup
3850 North Causeway, Suite 1770 9401 Wilshire Boulevard
Metairie, LA 70002 Beverly Hills, CA 90212
Attention: James D. Cole, President Attention: Bertram K. Massing, Esq.
Facsimile No.: (504) 833-9506 Facsimile No.: (310) 859-2325
If to USL: With a copy to:
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U.S. Liquids, Inc. Baker & Botts, L.L.P.
411 N. Sam Houston Parkway East One Shell Plaza
Houston, TX 77060 910 Louisiana
Attention: W. Greg Orr, President Houston, TX 77002-4995
Facsimile No.: (281) 272-4545 Attention: Philip J. John, Esq.
Facsimile No.: (713) 229-1522
or such other address as any party shall specify by written notice so given.
13.5.2 OTHER NOTICES. Notices provided for in Section 3. 1.1 shall
be made in writing by telefax or mailed to USL as follows:
U.S. Liquids, Inc.
Division Manager
P.O. Box 1467
Jennings, LA 70546
Attention: Jerry Brazell
Facsimile No.: (318) 824-3147
13.6 OPPORTUNITY TO CURE. In the event that NESI (i) fails to pay USL any
amount required under this Agreement on or before the date such payment is due
and such payment is not excused by Section 12.1 and/or (ii) otherwise fails to
perform under this Agreement, USL shall give notice to NESI of its failure to
perform in accordance with Section 13.5. The notice shall include a description
of the manner in which NESI failed to perform under this Agreement and shall
include the date on which performance was due. NESI shall have fifteen (15)
calendar days from the date notice is deemed validly given to correct or cure
its failure to perform under this Agreement. If NESI fails to do so, then such
failure shall constitute a breach of this Agreement. If NESI receives from USL
notice that NESI has failed to pay USL any amount required, due and not
otherwise excused under this Agreement and NESI fails to correct or cure such
failure within 15 days from the date such notice is given, then such failure
shall be deemed failure to make Payment in Full and on Time and shall constitute
a breach of this Agreement. Failure by USL to act in accordance with this
Section shall not itself constitute a breach of this Agreement nor shall such
failure cause USL to waive or relinquish any right or option provided by any
Section in this Agreement; provided, however, that NESI shall not be deemed to
have breached this Agreement unless and until notice of such alleged breach
shall have been given in accordance with this section, and NESI shall have
failed to cure or correct its failure to perform as specified in such notice.
13.7 NON-WAIVER. The failure of any party to enforce its rights under any
provision of this Agreement shall not be construed to be a waiver of such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other breach.
13.8 EFFECT ON NOW PAYMENT AND OTHER AGREEMENTS. The NOW Payment Agreement
is superseded in its entirety by this Agreement and shall be of no further force
or effect. Each of the Other Agreements is and shall remain in full force and
effect, except that all references to the NOW
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Payment Agreement in the Other Agreements shall be deemed to refer solely to
this Agreement unless the context requires otherwise.
13.9 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the Other Agreements
constitute the entire agreement between the parties concerning the subject
matter hereof and supersede any and all other communications, representations,
proposals, understandings or agreements, either written or oral, between the
parties hereto with respect to such subject matter. Concurrently with the
execution and delivery of this Agreement, the parties are also executing and
delivering an agreement (the "Option") under which NESI and Newpark are granted
the option to extend certain provisions of this Agreement for an additional two
years. This Agreement may not be modified or amended, in whole or in part,
except by a writing signed by both parties hereto.
13.10 SEVERABILITY. If any provision of this Agreement is declared invalid
or unenforceable, then such portion shall be deemed to be severable from this
Agreement and shall not affect the remainder hereof.
13.11 HEADINGS. The Article and Section headings contained herein are for
reference purposes only and shall not in any way affect the meaning and
interpretation of this Agreement.
13.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one instrument.
13.13 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
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ON THIS DATE, the Parties have executed multiple originals of this Payment
Agreement.
NEWPARK ENVIRONMENTAL SERVICES, INC.
Dated: December 31, 1998 By:
Name:
Title:
NEWPARK RESOURCES, INC.
Dated: December 31, 1998 By:
Name:
Title:
U.S. LIQUIDS, INC.
Dated: December 31, 1998 By:
Name:
Title:
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EXHIBIT 10.5
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Option Agreement") is made and entered into
this 31st day of December, 1998, by and among U.S. Liquids, Inc. ("U.S. Liquids"
or "USL"), a Delaware corporation, Newpark Resources, Inc., a Delaware
corporation ("Newpark"), and Newpark Environmental Services, Inc. ("NESI"), a
Delaware corporation and wholly owned subsidiary of Newpark, with reference to
the following facts:
A. Concurrently with the execution and delivery of this Option Agreement,
the parties have executed and delivered an agreement captioned "Payment
Agreement" (the "Payment Agreement") which modifies certain provisions of the
NOW Payment Agreement dated September 16, 1998 (as previously amended effective
September 22, 1998) between USL and NESI.
B. Under the Payment Agreement, Newpark and NESI retained the right, but
not the obligation, to deliver certain limited quantities of NOW to USL for
Disposal for a term ending June 30, 2001. NESI desires to obtain the option (the
"Option") to extend by up to two additional one-year periods (one period at a
time) the term (the "Term") for which it has the right to deliver NOW to USL for
Disposal.
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. DEFINITIONS
The following terms shall have the following meanings in this Option
Agreement (unless indicated otherwise, all Article and Section references in
this Option Agreement are to Articles and Sections in this Option Agreement):
ADJUSTMENT DATE: June 30, 2001 (the "First Adjustment Date") or June
30, 2002 (the "Second Adjustment Date"), as applicable.
AFFILIATE: A Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with the
Person specified. For purposes of this definition, the term "control" (including
the terms "controlling," "controlled by" and "under common control with") of a
Person means the possession, direct or indirect, of the power to (i) vote 50% or
more of the voting interests in such Person or (ii) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
ANNUAL VOLUME: For each Option Year separately, the maximum volume
of NOW permitted to be delivered by or on behalf of NESI at no cost and accepted
for Disposal by USL, which volume shall be 1,400,000 barrels of NOW for each
Option Year.
BASE RATE: 146.4.
COLLECTION: The collection, transfer or transportation of NOW.
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CONSUMER PRICE INDEX: The number reflecting the measure of the
average change in prices over time of certain goods and services purchased by
all urban consumers in the Houston Area, as compiled and reported every
even-numbered month by the United States Department of Labor, Bureau of Labor
Statistics. On any Adjustment Date, the Consumer Price Index shall be the number
last reported and in effect as of that date. If the Consumer Price Index as
defined becomes unavailable, the parties shall use the number last reported as a
measure of the average change in prices of goods and services purchased by all
urban consumers in (i) the State of Texas or, in the event that number is
unavailable, (ii) the United States.
COVERED REGION: The States of Louisiana, Texas, Mississippi and
Alabama, and the Gulf of Mexico.
DISPOSAL: The treatment or disposal of NOW.
EXCLUDED NOW: NOW generated and collected on land and delivered to a
Landfarm from the site where it was generated entirely by on-land
transportation.
LANDFARMS: The NOW disposal facilities owned and operated by USL
designated as Elm Grove, LA (DNR Permit #OWD 89-1) (the "Elm Grove Landfarm");
Bourg, LA (DNR Permit #90-10 OWD) (the "Bourg Landfarm"); Bateman Island, LA
(DNR Permit #91-10 OWD) (the "Bateman Island Landfarm"); and Mermentau, LA (DNR
Permit #SWD 83-6) (the "Mermentau Landfarm").
NOW: Nonhazardous oilfield waste (including Washwater) associated
with the exploration and production of oil, gas and geothermal energy that
contains less than 30 picocuries per gram of Radium 226 or 228. Without limiting
the generality of the foregoing, for waste disposed of in Louisiana, the term
NOW shall include all wastes containing less than 30 picocuries per gram of
Radium 226 or 228 classified as NOW under Louisiana Statewide Order 29-B, as
currently in effect, and all waste that is classified as "E&P Waste" by the
Louisiana Department of Natural Resources.
OPTION: As defined in Section B above, the right to extend the Term,
as provided in this Option Agreement.
OPTION PAYMENT: The amount that NESI must pay to USL for an Option
Year if it exercises the Option as to such Option Year, which, except as
provided in Section 12.1, shall be no less than $8 Million, adjusted as provided
in Section 2.2 of this Option Agreement.
OPTION YEAR:The twelve-month period commencing July 1, 2001 (the
"First Option Year"), and/or the twelve-month period commencing July 1, 2002
(the "Second Option Year").
PAYMENT IN FULL AND ON TIME: Payment or reimbursement made to USL on
or before any date specified for such payment in this Option Agreement except
and unless timely paid in accordance with Section 13.6 of this Option Agreement.
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PERSON: Any individual, corporation, association, partnership, joint
venture, trust, estate or other entity or organization or government or any
agency or political subdivision thereof.
TERM: As defined in Section B above.
WASHWATER: Fluids generated by the cleaning and/or decontamination
of tanks, barges, vessels, containers or other similar structures used in the
storage and/or transportation of NOW. Washwater may contain cleaning agents and
emulsifiers, etc., in addition to the basic cleaning agent (water).
ZAPATA FACILITY: A NOW disposal facility owned and operated by USL
located near Zapata, Texas.
2. GRANT AND EXERCISE OF OPTION
2.1 GRANT OF OPTION. USL hereby grants to NESI the Option, which may
be exercised or not exercised by NESI in its sole discretion. The Option may be
exercised by NESI as to the First Option Year only by giving to USL written
notice of the exercise of the Option on or before December 31, 2000; if the
Option is exercised as to the First Option Year, the Option may be exercised by
NESI as to the Second Option Year only by giving to USL written notice of the
exercise of the Option on or before December 31, 2001.
2.2 PAYMENTS BY NESI. For each Option Year as to which NESI
exercises the Option, NESI shall pay to USL an amount equal to the Option
Payment for such year. On the First Adjustment Date, June 30, 2001, the Option
Payment for the First Option Year shall be adjusted by (i) dividing 100% of the
Consumer Price Index in effect on that date by 100% of the Base Rate; and (ii)
multiplying the result by $8 million except as provided in Section 12.1. In the
event the net change in the Consumer Price Index is negative, the Option Payment
for the First Option Year shall be $8 million, except as provided in Section
12.1. NESI shall pay the Option Payment for the First Option Year in twelve
equal monthly installments due on or before July 2, 2001, August 1, 2001,
September 3,2001, October 1, 2001, November 1, 2001, December 3, 2001, January
2, 2002, February 1, 2002, March 1, 2002, April 1, 2002, May 1, 2002, and June
3, 2002, respectively, except as provided in Section 12.1. On the Second
Adjustment Date, June 30, 2002, the Option Payment for the Second Option Year
shall be adjusted by (i) dividing 100% of the Consumer Price Index in effect on
that date by 100% of the Base Rate; and (ii) multiplying the result by $8
million except as provided in Section 12.1. In the event the net change in the
Consumer Price Index is negative, then the Option Payment for the second Option
Year shall be $8 million except as provided in Section 12.1. NESI shall pay the
Option Payment for the Second Option Year in twelve equal monthly installments
due on or before July 1, 2002, August 1, 2002, September 2, 2002, October 1,
2002, November 1, 2002, December 2, 2002, January 1, 2003, February 3, 2003,
March 3, 2003, April 1, 2003, May 1, 2003, and June 2, 2003, respectively,
except as provided in Section 12.l.
2.3 OBLIGATION TO PAY. NESI's obligation to make Payment in Full and
on Time in any Option Year as to which NESI has exercised the Option exists
without regard to whether NESI exercises its option to deliver NOW, if any, to
USL in accordance with Section 3.1. Failure
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to make Payment in Full and on Time in every instance for any reason whatsoever
constitutes a breach of this Option Agreement and shall not entitle NESI to any
offsets, carryovers, or counterclaims of any kind.
2.4 REIMBURSEMENT FOR REVENUES. For each Option Year as to which
NESI exercises the Option, NESI shall recover 100% of any revenues received by
USL and its Affiliates during each calendar quarter of that Option Year from the
"Business," as that term is defined in the Noncompetition Agreement dated
September 16, 1998, between USL and Newpark. USL shall reimburse NESI in the
proper amount within 30 days of the end of each calendar quarter.
3. DISPOSAL VOLUME
3.1 NOW DELIVERY.
3.1.1 DELIVERY OPTION.
a. NESI may, at its option, deliver to USL for Disposal at the Bateman
Island Landfarm a maximum amount of NOW equal to the Annual Volume
for such Contract Year at no cost without prior notice or approval.
Subject to the terms and conditions and the limitations set forth in
this Agreement, USL shall accept for Disposal at the Bateman Island
Landfarm all NOW delivered by or on behalf of NESI, provided,
however, that in no event shall USL be obligated to accept from NESI
for Disposal at any Landfarm more than the Annual Volume during any
Contract Year. Failure to deliver the full Annual Volume shall not
result in any carryforward or increase in the Annual Volume in the
succeeding Contract Year.
b. NESI shall have the right to deliver a volume no more than 10% of
the Annual Volume to the Bourg Landfarm at no cost, subject to
Section 3.1.l.a, and prior notice by NESI in accordance with Section
13.5.2, of 48 hours if such delivery shall arrive by marine
transportation; or
c. NESI shall have the right to deliver a volume no more than 10% of
the Annual Volume to the Mermentau Landfarm at no cost, subject to
Section 3.1.1.a and prior written approval by USL, which approval
will not be unreasonably withheld.
3.1.2 OBLIGATION TO PAY. If NESI has exercised the Option as
to an Option Year, NESI is obligated to make the Option Payment regardless of
the volume of NOW, if any, delivered to or accepted by USL in accordance with
this Section 3.1, except as provided in Section 12.1. Failure by NESI to
exercise its option to deliver NOW to USL for Disposal shall not alter, lessen,
decrease, alleviate, or relieve NESI of its obligation to pay USL in accordance
with Article 2. NESI shall make all payments in accordance with Article 2
without regard to the volume of NOW, if any, offered or delivered to USL for
Disposal.
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3.2 VARIANCE. The parties agree to cooperate to minimize monthly and
quarterly variances in NOW, if any, delivered for Disposal at the Landfarms, in
order to avoid disruption of or problems in USL's operations.
3.3 RADIUM CONCENTRATION. Notwithstanding anything contained in this
Option Agreement to the contrary, USL shall not be obligated to accept NOW from
NESI at any Landfarm where such NOW (i) when combined with other NOW in an
individual treatment cell, would cause the weighted average concentration of
Radium 226 or 228 to exceed 5 pCi/gm, excluding background, or (ii) would
require the loading of two or more treatment cells simultaneously to prevent the
weighted average concentration of Radium 226 or 228 from exceeding 5 pCi/gm,
excluding background. In the event NESI delivers NOW contravening the foregoing
sentence, USL shall have the right, but not the obligation, to reject such NOW
in accordance with Section 6.6.
4. SERVICES, LEVIES AND INSPECTION
4.1 ADDITIONAL SERVICES; DISPOSAL OF INJECTABLE SALTWATER. Pursuant
to this Option Agreement, USL will perform standard off-loading and customary
handling services associated with disposal of NOW up to, and including, the
Annual Volume at no additional charge. USL will perform additional services upon
request of NESI at the market rates of USL for such services, or at such other
rates as the parties may mutually agree upon. All charges for such additional
services shall be in addition to and independent of the Option Payment. USL will
accept injectable saltwater at the Landfarms for disposal upon request of NESI
at the market rates of USL for disposal of injectable saltwater, or at such
other rates as the parties may mutually agree upon. All charges for disposal of
injectable saltwater shall be in addition to and independent of the Option
Payment.
4.2 DISPOSAL OF WASHWATER. NESI shall pay USL to dispose of
Washwater at the rate of $1.50 per barrel of Washwater. On each Adjustment Date,
the rate shall be adjusted by (i) adding to the Base Rate 70% of the positive
amount, if any, determined by subtracting the Base Rate from the Consumer Price
Index as of that Adjustment Date, (ii) dividing said sum by the Base Rate, and
(iii) multiplying the result by $1.50. If the net change in the Consumer Price
Index is negative, then the rate for disposal of Washwater shall be $1.50 per
barrel. The disposal of Washwater shall be for the benefit of NESI, and USL
shall provide NESI with billing information specified by NESI to enable NESI to
bill the customer or customers for whose account any related cleaning services
were performed.
4.3 INVOICE FOR ADDITIONAL SERVICES: USL shall invoice NESI on a
monthly basis for fees or expenses incurred from any services performed pursuant
to Section 4.1 or 4.2 to be paid no later than 30 days from receipt of the
invoice. Failure to pay USL in accordance with the terms of the invoice shall
constitute a breach of this Option Agreement.
4.4 EXTRAORDINARY LEVIES.
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4.4.1 TAXES. Notwithstanding anything to the contrary
contained herein, if during the term of this Option Agreement there is levied
upon USL or any of its Affiliates or upon the operations of USL any tax, fee,
assessment, or other charge (other than income taxes applicable generally) by
any governmental authority, which tax, assessment or charge increases USL's
costs to operate any Landfarm, USL shall notify NESI of the cause and the per
barrel amount of the cost increase. If NESI chooses to deliver NOW to USL
following the effectiveness of the tax, fee, assessment or other charge, USL
will invoice NESI for and NESI will be obligated to pay NESI's share of the cost
increase for so long as such tax, fee, assessment or other charge remains in
effect as follows: (i) with respect to any cost increase resulting from any tax,
fee, assessment or other charge levied by a governmental authority on a per
barrel basis, an amount determined by multiplying such per barrel charge (but
not more than the increase in cost resulting therefrom) by the number of barrels
of NOW delivered by NESI to USL; and (ii) with respect to any tax, fee,
assessment or other charge levied by a governmental authority on any basis other
than per barrel, NESI's proportionate share of the cost increase resulting from
such tax, fee, assessment or charge. NESI's proportionate share shall be
calculated as follows: (a) if such tax, fee, assessment or other charge
increases the cost to operate the Bateman Island Landfarm, the NESI's
proportionate share shall be calculated by (i) dividing the number of barrels of
NOW delivered to USL by NESI by the Annual Volume and (ii) multiplying the
result by the amount of the cost increase resulting from the tax, fee,
assessment, or other charge; (b) if such tax, fee, assessment or other charge
increases the cost to operate the Bourg and/or Mermentau Landfarm, then NESI's
proportionate share shall be calculated by (i) dividing the number of barrels of
NOW delivered to USL by NESI to that Landfarm by the total number of barrels
delivered to that Landfarm by all Persons and (ii) multiplying the result by the
amount of the cost increase at that Landfarm resulting from the tax, fee,
assessment, or other charge. Such payment or reimbursement shall not alter the
Annual Volume nor alter the Option Payment.
4.4.2 LANDFARM ENVIRONMENTAL REGULATIONS. Notwithstanding
anything to the contrary contained herein, if during the term of this Option
Agreement there is a substantial change in regulatory requirements related to
the waste disposal business having general applicability to the handling,
treatment or disposal of NOW, which change increases in a material manner USL's
costs to operate any Landfarm, (i) USL shall notify NESI of the cause and the
per barrel amount of the cost increase and, to the extent that NESI chooses to
deliver NOW to USL, (ii) USL will invoice NESI for NESI's proportionate share of
the cost increase and NESI will be obligated to pay such amount so long as such
cost increase remains in effect. NESI's proportionate share shall be calculated
as follows: (a) if such change in regulatory requirements increases costs to
operate the Bateman Island Landfarm, then NESI's proportionate share shall be
calculated by (i) dividing the number of barrels of NOW delivered to USL by NESI
by the Annual Volume and (ii) multiplying the result by the amount of the cost
increase; (b) if such change in regulatory requirements increases costs to
operate the Bourg and/or Mermentau Landfarm, then NESI's proportionate share
shall be calculated by (i) dividing the number of barrels of NOW delivered to
USL by NESI to that Landfarm by the total number of barrels delivered to that
Landfarm by all Persons and (ii) multiplying the result by the amount of the
cost increase at that Landfarm. Failure to pay USL in accordance with the terms
of the invoice shall constitute a breach of this Option Agreement.
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4.4.3 RIGHT OF INSPECTION. In the event USL notifies NESI of a
cost increase pursuant to this Section 4.4, NESI shall have the right to conduct
a reasonable review of the calculations, working papers and the books and
records related to the determination of such fee increase. All costs of such
review shall be borne exclusively by NESI.
5. GUARANTY BY NEWPARK
5.1 PERFORMANCE OF OPTION AGREEMENT. Newpark hereby covenants and
agrees that it shall cause NESI to fully perform all of its obligations under
this Option Agreement in a timely manner. Newpark further covenants and agrees
that it shall take all action, including, without limitation, supplying
information necessary for the determination of quantities of NOW that may be
delivered pursuant to this Option Agreement, or shall refrain from taking any
action, as is necessary or appropriate, to permit NESI to fully perform all of
its obligations under this Option Agreement in a timely manner.
5.2 UNCONDITIONAL GUARANTEE. Newpark hereby unconditionally and
irrevocably guarantees the performance in full of all obligations of NESI under
this Option Agreement, with the same force and effect and to the same extent as
if Newpark had the same rights and obligations hereunder as NESI.
5.3 NO SET-OFF; GUARANTY OF PERFORMANCE OR PAYMENT UPON DEMAND.
Newpark shall perform any obligations or pay any amounts due in respect of the
obligations of NESI hereunder promptly upon demand by USL or its Affiliates,
without any set-off, defense or deduction for any claims or counterclaims of any
kind, except for any such setoffs, defenses, or deductions that NESI could
assert hereunder.
5.4 WAIVER OF DILIGENCE, ETC. Newpark hereby waives diligence,
presentment, demand, protest and notice of any kind with respect to this
Guarantee, as well as any requirement that USL or its affiliates exhaust any
rights or take any action against NESI.
5.5 WAIVER OF SURETYSHIP DEFENSES. To the extent permitted by
applicable law, Newpark hereby waives any and all legal and equitable defenses
that arise by reason of Newpark's status as a surety for NESI, which defenses
would not be available to Newpark if it had the same rights and obligations
hereunder as NESI.
5.6 STATUS. This Section 5 shall remain in full force and effect
with respect to each Option Year for which the Option is exercised and shall
terminate thereafter when and to the extent that this Option Agreement is
terminated.
6. OPERATING PROCEDURES
6.1 COMPLIANCE WITH OPERATING PROCEDURES. NESI and its Affiliates
shall comply in all material respects with and abide by, and shall require their
employees, servants, agents, representatives, contractors, subcontractors,
haulers and transporters to comply in all material respects with and abide by,
all applicable federal, state and local laws, ordinances, permits,
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regulations, directives, codes, standards and requirements relating to the
subject matter of this Option Agreement or the performance of services
hereunder, as well as all of USL's rules, regulations, procedures and
guidelines, written or oral, as the same may be reasonably adopted and modified
from time to time, including, without limitation, all safety and/or security
regulations, practices and procedures, and all procedures reasonably adopted by
USL in compliance with its permits or utilized by USL in the inspection,
sampling and testing of material delivered to any Landfarm for disposal.
6.2 INSPECTION AND TESTING BY NESI; NOTIFICATION. NESI agrees that
it shall inspect and test all materials accepted, acquired, taken possession of,
procured, directed, controlled or otherwise received by it from third party
generators or other parties for disposal (with the exception of any NOW produced
by third-party generators which NESI or its Affiliates treat and dispose of on
the site at which the NOW was generated) to the extent required by applicable
federal, state and local laws, ordinances, permits, regulations, directives,
codes, standards and requirements. NESI shall promptly notify USL if it becomes
aware of any unusual or special characteristics of any materials being delivered
to any Landfarm which cause such materials to require special treatment,
handling or care. Upon request by USL, NESI shall provide copies of all
inspection and test results relating to material to be disposed of at any
Landfarm under the terms of this Option Agreement to USL upon delivery.
6.3 SHIPMENT AND DELIVERY OF NOW. NESI, its Affiliates and/or its
contractors and subcontractors shall be responsible for proper containerization,
preparation and labeling for shipment, shipment, transportation and delivery to
any Landfarm, and shall comply fully with all applicable federal, state and
local laws, ordinances, permits, regulations, directives, codes, standards and
requirements in making such delivery to any Landfarm. USL and its Affiliates
undertake no responsibility whatsoever for the preparation, handling or
transportation of any material prior to acceptance of delivery as hereinafter
provided.
6.4 INSPECTIONS.
6.4.1 BARGES. Upon arrival of any barge transporting material
to a Landfarm at the direction of NESI or any of its Affiliates, USL shall have
the right to have an independent third party inspector selected by USL undertake
an inspection of the barge transporting material to the Landfarm for the purpose
of determining (a) the volume of materials delivered and (b) the condition of
the barge on arrival at the Landfarm. The costs of such inspector shall be split
evenly between NESI and USL, and NESI's portion of such expense shall be
included on the monthly invoices prepared by USL in accordance with Section 4.3.
Before any materials are off-loaded from the barge or any inspection or testing
is undertaken by USL, the independent inspector will provide the authorized
representatives of NESI and USL with an inspector's report indicating the time
and date, the barge identification number and volume of waste materials in the
barge. The authorized representatives of the parties will indicate their
acceptance of the inspector's report by signing the report. In the event either
authorized representative disagrees with the volume determination, either
authorized representative may request that an additional independent third-party
inspector prepare an inspector's report, the cost of which shall be borne by the
party requesting the same. If the parties are unable to agree on the actual
volume of waste after the preparation of the second inspector's report, the two
independent inspectors shall select a third independent inspector
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to prepare an inspector's report, the cost of which will be borne half by NESI
and half by USL. The final volume determination shall be that volume agreed upon
by the majority of the independent inspectors that have inspected the barge. If
the barge appears to be damaged in any significant respect, the inspector shall
summarize the apparent damage and take photographs as appropriate to evidence
the scope of the damage. The authorized representative of NESI shall approve
such damage summary by executing the same prior to the time any material is
off-loaded from the barge. With regard to barges owned and operated by NESI, USL
agrees that it shall not exercise its right to implement the procedures set
forth in this Section 6.4.1 unless the parties have previously had a dispute or
disagreement relating to the quantity of materials delivered to a Landfarm by
NESI or the condition of a barge owned and operated by NESI and such dispute or
disagreement was not amicably resolved within 30 days.
6.4.2 TRUCKS. Upon arrival of a truck transporting material to
a Landfarm on behalf of NESI or any of its Affiliates, USL personnel shall
undertake an inspection to determine the volume of materials delivered. Before
any materials are off-loaded from the truck or any inspection or testing is
undertaken by USL, USL shall prepare a receipt indicating the time and date and
the volume of materials in the truck. The driver of the truck shall indicate his
or her acceptance of the receipt by signing the receipt. In the event the driver
disagrees with the volume determination, USL shall have the option of (i)
accepting the volume stated by the driver and preparing a receipt evidencing
such volume to be signed by the driver or (ii) rejecting such materials in
accordance with Section 6.6.
6.5 INSPECTION AND TESTING OF MATERIAL. After all inspections, if
any, pursuant to Section 6.4 have been concluded, USL shall conduct inspections,
testing and sampling using such equipment and procedures as are required by or
consistent with its permits. USL may rely exclusively on the results of its
inspection in determining whether materials delivered may be disposed at the
Landfarm in accordance with its permits and this Option Agreement. NESI
authorizes USL to retain samples and all data relating thereto, including test
results, for so long as required by federal, state or local law, ordinance,
permit, regulation, directive, code, standard or requirement and additionally
for so long as USL in its sole discretion shall determine.
6.6 ACCEPTANCE OR REJECTION OF MATERIAL.
6.6.1 ACCEPTANCE. USL shall only be obligated to accept waste
materials at the Landfarm which are permissible under the permit requirements of
that Landfarm at the time of delivery. For a period of ten days after the date
of delivery, USL shall have the right to reject (or revoke any prior acceptance)
all or any part of a shipment of material delivered by or on behalf of NESI to
the Landfarm if (i) such material is not in accordance with the terms of this
Option Agreement or (ii) USL concludes that such material exceeds the parameters
of the permits applicable to the Landfarm. USL shall notify NESI of any
rejection in writing and shall state the reason therefor. The expiration of such
ten-day period without a rejection or a revocation of a prior acceptance of
material shall constitute "Final Acceptance" of such material.
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6.6.2 REJECTED MATERIAL. Rejected material shall remain at
NESI's risk and expense and shall not be deemed to be incorporated into the
Landfarm or come under the possession, custody, control or ownership of USL.
Notwithstanding the foregoing, to the extent required by federal, state or local
law, ordinance, permit, regulation, directive, code, standard or requirement, or
by USL's safety and/or security rules, practices or procedures, USL may detain
any rejected materials, including the vehicle and/or containers in which such
rejected materials arrived, and shall notify regulatory or other authorities
wherever necessary or appropriate to do so.
6.6.3 REMOVAL. In the event USL rejects all or any part of a
shipment of material from NESI, after compliance in all material respects with
all regulatory and any other requirements involving detention of such shipment,
upon written request of USL, NESI, unless otherwise directed by a regulatory
agency or other lawful authority, shall promptly remove or cause to be removed
from the Landfarm all of the rejected material at NESI's risk and expense in a
manner consistent with all applicable federal, state and local laws, ordinances,
permits, regulations, directives, codes, standards and requirements. In the
event NESI fails to complete such removal by the fifth business day after the
date of the request by USL, USL, unless otherwise required by law or regulation,
may remove or cause to be removed from the Landfarm any and all of the rejected
material, and may containerize and transport it or cause it to be containerized
and transported to an authorized storage site or returned to NESI at its nearest
location. NESI hereby authorizes USL in such event to contract for such storage
for NESI's account. For its services, USL shall charge and NESI shall pay USL's
cost plus 15%. Any and all material that USL rejects shall remain property and
the responsibility of NESI at NESI's risk and expense.
6.7 THIRD-PARTY DELIVERIES. USL may follow the procedures set forth
in this Article VI with respect to any third-party generator's vessels or
vehicles containing materials that are delivered to any Landfarm at the
direction of NESI or its Affiliates. In addition, USL may establish and enforce
other policies and procedures relating to the independent inspection of any such
third-party generator's vessels or vehicles before the material contained in
such vessels or vehicles shall be accepted for disposal.
7. COVENANTS, REPRESENTATIONS AND WARRANTIES OF NESI
NESI hereby covenants, represents and warrants to USL as follows:
7.1 AUTHORIZATION AND VALIDITY OF AGREEMENT. NESI has all requisite
power and authority to enter into this Option Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. The
execution, delivery and performance by NESI of this Option Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of NESI. No action or approval of the equity
owners of NESI is necessary to authorize NESI's execution or delivery of, or the
performance of its obligations under, this Option Agreement. This Option
Agreement has been duly executed and delivered by NESI and is a valid and
binding obligation of NESI, enforceable in accordance with its terms.
7.2 NO CONFLICT. The execution and delivery by NESI of this Option
Agreement does not, and exercise by NESI of its rights hereunder and the
consummation of the transactions
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contemplated hereby will not, (a) require any consent, approval, order or
authorization of or other action by any governmental entity on the part of or
with respect to NESI; (b) require on the part of NESI any consent by or approval
of or notice to any other Person; or (c) result in a violation of any law, rule,
regulation, order, judgment or decree applicable to NESI, except in any case
covered by (a), (b) or (c) where failure to obtain such consent or such
violation would not, either individually or in the aggregate, have a material
adverse effect on the transactions contemplated hereby.
7.3 LICENSED CARRIERS. Any carrier with which NESI contracts to
transport NOW and all of NESI's driver personnel shall at all times relevant to
the performance of services under this Option Agreement remain properly licensed
and otherwise fully qualified to perform the services required hereunder.
7.4 CUSTOMER APPROVAL. For each Option Year as to which the Option
has been exercised by NESI, NESI's obligations under this Option Agreement shall
not be affected in any way by the approval, disapproval, recommendation,
instruction, direction or other communication between NESI and its customers,
including any request by any NESI customer as to where its waste should be
delivered. NESI shall remain responsible for payment under this Option Agreement
without reference or regard to NESI's customers.
8. COVENANTS, REPRESENTATIONS AND WARRANTIES OF USL
USL hereby covenants, represents and warrants to NESI as follows:
8.1 AUTHORIZATION AND VALIDITY OF AGREEMENT. USL has all requisite
power and authority to enter into this Option Agreement and to perform its
obligations hereunder and consummate the transactions contemplated hereby. The
execution, delivery and performance by USL of this Option Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of USL. No action or approval of the equity
owners of USL is necessary to authorize USL's execution or delivery of, or the
performance of its obligations under, this Option Agreement. This Option
Agreement has been duly executed and delivered by USL and is a valid and binding
obligation of USL, enforceable in accordance with its terms.
8.2 NO CONFLICT. The execution and delivery by USL of this Option
Agreement does not, and exercise by USL of its rights hereunder and the
consummation of the transactions contemplated hereby will not (a) require any
consent, approval, order or authorization of or other action by any governmental
entity on the part of or with respect to USL or any of its Affiliates; (b)
require on the part of USL or any of its Affiliates any consent by or approval
of or notice to any other Person; or (c) result in a violation of any law, rule,
regulation, order, judgment or decree applicable to USL or any of its
Affiliates, except in any case covered by (a), (b) or (c) where failure to
obtain such consent or such violation would not, either individually or in the
aggregate, have a material adverse effect on the transactions contemplated
hereby.
8.3 SERVICES AND EQUIPMENT. USL possesses the business, professional
and technical expertise to handle, treat and dispose of NOW and possesses the
equipment, plant and
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employee resources required to perform this Option Agreement. USL shall use its
commercially reasonable efforts to turn all barges delivering materials to the
Landfarms in a timely manner consistent with the number of NESI and third-party
generator barges on site at such moment and with its general practice of giving
priority to third-party generators' barges. The equipment shall, at all times
relevant to the performance of services hereunder, be maintained in good and
safe condition and fit for use.
8.4 LICENSES AND PERMITS. As of the Effective Date, USL shall be
duly licensed, permitted and authorized pursuant to all applicable federal,
state and local laws to handle, treat and dispose of NOW, and the Landfarms will
have been issued all licenses, permits and authorizations required by all
applicable federal, state and local laws. At any time during the term of this
Option Agreement, upon NESI's reasonable request, USL shall provide to NESI, at
NESI's expense, a complete copy of the current permits applicable to the
operation of the Landfarms. During the term of this Option Agreement, USL shall
use its best efforts to keep all such licenses, permits and authorizations in
effect and shall promptly notify NESI if any such license, permit or
authorization is to expire and not be renewed or becomes the subject of any
administrative or judicial action seeking revocation or suspension.
8.5 WORKERS' COMPENSATION. USL shall comply in all material respects
with all applicable workers' compensation laws during the term of this Option
Agreement. In the event any work is performed by USL's agent or subcontractor,
USL shall obtain certification from such agent or subcontractor that it too is
in compliance in all material respects with such laws or does not fall within
the scope of such laws.
9. INSURANCE
9.1 INSURANCE COVERAGE. USL and NESI, each at its own expense, shall
procure and maintain in full force and effect during the term of this Option
Agreement the following kinds of insurance with limits of coverage equal to or
exceeding those limits specified therefor:
9.1.1 WORKERS' COMPENSATION; EMPLOYER'S LIABILITY. Workers'
Compensation Insurance shall be obtained in accordance with the provisions of
the applicable Workers' Compensation Law or similar laws of a state having
jurisdiction over any employee. Employer's Liability Insurance shall be obtained
with a minimum limit of liability of $1,000,000. To the extent exposures fall,
or may fall, within federal jurisdictions, including the U.S. Longshore and
Harbor Workers' Compensation Act, the Defense Bases Act and the Federal
Employers Liability Act, extensions of coverage shall be obtained in accordance
with the requirements of such laws. Should operations occur where maritime
liability law, the Jones Act, or General Admiralty Law apply, applicable
coverages shall be required at limits of not less than $1,000,000.
9.1.2 GENERAL LIABILITY. Comprehensive or Commercial General
Liability Insurance, including Products/Completed Operations and Contractual
Liability, which shall cover the indemnity provisions contained in this Option
Agreement, shall be obtained with a combined single limit of not less than
$1,000,000 per occurrence for bodily injury and property damage.
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9.1.3 AUTOMOBILE LIABILITY. Business or Commercial Automobile
Liability Insurance covering all owned, nonowned, and hired vehicles, shall be
obtained with a combined single limit of $ 1,000,000 per occurrence or accident.
9.1.4 UMBRELLA LIABILITY. Umbrella Liability Insurance over the
foregoing coverages shall be obtained as applicable at limits of $10,000,000 per
occurrence.
9.2 COVERAGE TERMS. All coverages shall be written through insurers
authorized to transact business in the states of operation and reasonably
satisfactory and acceptable to both parties. Each party shall be added as an
additional insured, and subrogation as to the policies of the other party shall
be waived as applicable. All policies will be endorsed to provide not less than
30 days' written notice of cancellation, termination, nonrenewal or material
change in the policy. Each party will furnish the other party certificates of
insurance evidencing compliance with the requirements of Section 9.1.
9.3 SITE FINANCIAL ASSURANCE AND ENVIRONMENTAL IMPAIRMENT LIABILITY.
To the extent available on commercially reasonable terms and subject to the
other terms of this Option Agreement, USL shall (i) maintain policies of
environmental impairment liability insurance covering the ownership and
operation of the Landfarms in substantially such amounts and on such terms as
shall be in place on the Effective Date and (ii) comply with all applicable
federal or state governmental financial assurance requirements imposed in
connection with its operation of the Landfarms.
10. INDEMNIFICATION
10.1 INDEMNIFICATION BY USL. USL shall defend, indemnify and hold
harmless NESI and its Affiliates and their employees, officers, owners,
directors and agents, from and against any and all liabilities, penalties,
fines, forfeitures, demands, claims, causes of action, suits, judgments and
costs and expenses incidental thereto, including reasonable attorneys' fees,
which any or all of them may hereafter suffer, incur, be responsible for or pay
out as a result of personal injuries, property damage, or contamination of or
adverse effects on the environment, to the extent directly or indirectly caused
by, or arising from or in connection with (i) the negligence, gross negligence
or willful act or omission or willful misconduct of USL or any of its employees,
officers, owners, directors, agents or subcontractors in the performance of this
Option Agreement; (ii) the violation of any environmental rule, law or
regulation by USL or any of its employees, officers, owners, directors, agents
or subcontractors; (iii) operations of the Landfarms, including, without
limitation, the receipt and disposal of waste delivered to the Landfarms by NESI
and others; or (iv) the breach of, misrepresentation in, untruth in or
inaccuracy in any representation, warranty or covenant of USL set forth in this
Option Agreement.
10.2 INDEMNIFICATION BY NESI. NESI shall defend, indemnify and hold
harmless USL and its Affiliates and their employees, officers, owners,
directors, agents and subcontractors, from and against any and all liabilities,
penalties, fines, forfeitures, demands, claims, causes of action, suits,
judgments and costs and expenses incidental thereto, including reasonable
attorneys' fees, which any or all of them may hereafter suffer, incur, be
responsible for or pay out with respect
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to claims by third parties for personal injuries, property damage or other loss
to the extent directly or indirectly caused by, or arising from or in connection
with (i) the negligence, gross negligence or willful act or omission of NESI,
any of its employees, officers, owners, directors, agents or subcontractors or
any third-party generator acting at NESI's direction in the performance of this
Option Agreement, (ii) the violation of any environmental rule, law or
regulation by NESI, any of its employees, officers, owners, directors, agents or
subcontractors or any third-party generator acting at NESI's direction; (iii)
material delivered to any of the Landfarms by NESI or any third-party generator
acting at NESI's direction which is not in accordance with the terms of this
Option Agreement or otherwise not permitted to be disposed at such Landfarm; or
(iv) the breach of, misrepresentation in, untruth in or inaccuracy in any
representation, warranty or covenant of NESI set forth in this Option Agreement.
10.3 INDEMNIFICATION PROCEDURES.
10.3.1 Promptly after receipt by an indemnified party under
this Article X of notice of the commencement of any action or proceeding
evidenced by service of process or other legal pleading, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
hereunder, notify in writing the indemnifying party of the commencement thereof,
but the omission so to notify the indemnifying party (i) will not relieve it
from any liability that it may have to any indemnified party under this Article
X unless and to the extent that the indemnifying party has been prejudiced in
any material respect by such omission and (ii) will not relieve the indemnifying
party from any liability that it may have to any indemnified party other than
under this Article X. If any such action or proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under this Article X for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless the named parties to such action or proceeding
(including any impleaded parties) shall include both an indemnifying party and
an indemnified party and the indemnified party shall have been advised by
counsel that there may be one or more defenses available to such indemnified
party that are different from or additional to those available to the
indemnifying party (in which case, if the indemnified party notifies the
indemnifying party that it wishes to employ separate counsel at the expense of
the indemnifying party (who shall promptly pay all such expenses as incurred),
the indemnifying party shall not have the right to assume the defense of such
action or proceeding on behalf of such indemnified party).
10.3.2 If an indemnifying party, within a reasonable period of
time after notice by the indemnified party of the commencement of any action or
proceeding with respect to which the indemnified party is to make a claim
hereunder, fails to assume the defense thereof, the indemnified party shall have
the right (upon further notice to the indemnifying party) to undertake the
defense, compromise or settlement of such action or proceeding for the account
of the
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indemnifying party, subject to the right of the indemnifying party to assume the
defense of such action or proceeding at any time prior to settlement, compromise
or final determination thereof. The cost and expense of any such defense and any
judgment in any such action or proceeding shall be borne by the indemnifying
party, and, if paid by the indemnified party, shall be reimbursed by the
indemnifying party within thirty days after receipt of invoice therefor.
10.3.3 Except as otherwise provided in Section 10.3.2, an
indemnifying party shall not be liable for any settlement of any litigation or
proceeding effected without its written consent. An indemnifying party shall
not, without the indemnified party's written consent, settle or compromise any
action or proceeding or consent to entry of any judgment that would impose an
injunction or other equitable relief upon the indemnified party or that does not
include as an unconditional term thereof the release by the claimant or the
plaintiff of such indemnified party from all liability in respect of such action
or proceeding.
11. DISPUTE RESOLUTION
11.1 NEGOTIATION OF DISPUTES. In the event of any dispute or
disagreement arising out of or relating to the implementation and performance of
this Option Agreement, the parties agree to attempt to resolve such dispute in
good faith. Should a resolution of such dispute not be obtained within 15 days
after the origination of the dispute, either party may in accordance with the
provisions of this Article XI file suit. Any suit filed by any party that
relates to this Option Agreement must be filed in Texas state court in Harris
County, Texas.
11.2 CONTINUATION OF PERFORMANCE. In the event of a dispute arising
under this Option Agreement, the parties shall continue performance of their
respective obligations hereunder.
12. SUSPENSION OF PERFORMANCE
12.1 SUSPENSION OF PERFORMANCE BY USL. USL shall have the right to
suspend operations under this Option Agreement at the Bateman Island Landfarm
for any reason. Upon such suspension, USL shall give NESI written notice of the
basis for, and an estimate of, the length of the suspension.
12.1.1 If USL notifies NESI that it will temporarily suspend
operations at the Bateman Island Landfarm due to litigation, court order or
directive of any governmental body having jurisdiction over the operation of the
Landfarm, or substantial changes to laws or regulations, then NESI shall
continue to make all Payments in Full and on Time as this Option Agreement
requires; provided, however, that USL shall make available the Bourg and/or
Mermentau Landfarms to accept, in a timely fashion, delivery of that portion of
the Annual Volume that NESI would otherwise deliver to the Bateman Island
Landfarm under Section 3.1.l.a. If USL fails to make available either the Bourg
Landfarm or the Mermentau Landfarm to accept delivery, in a timely fashion, of
the NOW that NESI desires to deliver, up to the Annual Volume (prorated for the
period involved), then NESI shall be excused from payments due each month such
failure continues. Upon the resumption of operations at the Bateman Island
Landfarm, NESI may exercise its option to deliver NOW in accordance with Section
3.1.
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12.1.2 If USL notifies NESI that it will temporarily suspend
operations at the Bateman Island Landfarm due to litigation, court order or
directive of any governmental body having jurisdiction over the operation of the
Landfarm, or substantial changes to laws or regulations, then NESI shall
continue to make all Payments in Full and on Time as this Option Agreement
requires; provided, however, that USL shall make available the Bourg and/or
Mermentau Landfarms to accept, in a timely fashion, delivery of that portion of
the Annual Volume that NESI would otherwise deliver to the Bateman Island
Landfarm under Section 3.1.l.a. If USL fails to make available either the Bourg
Landfarm or the Mermentau Landfarm to accept delivery, in a timely fashion, of
the NOW that NESI desires to deliver, up to the Annual Volume (prorated for the
period involved), then NESI shall be excused from payments due each month such
failure continues. Upon the resumption of operations at the Bateman Island
Landfarm, NESI may exercise its option to deliver NOW in accordance with Section
3.1.
12.1.3 If USL notifies NESI that it will temporarily suspend
operations at the Bateman Island Landfarm voluntarily for any reason other than
under Section 12.1.1 or 12.1.2 above, NESI is excused from payments due each
month that operations are suspended. Upon the resumption of operations at the
Bateman Island Landfarm, NESI shall resume payments and may exercise its option
to deliver NOW in accordance with Section 3.1.
12.1.4 If operations are temporarily suspended at the Bourg,
Bateman Island and Mermentau Landfarms at once or in reasonably close
succession, then NESI is excused from payments due each month that operations
are suspended. Upon the resumption of operations at any Landfarm, and provided
USL makes any Landfarrn available to accept delivery in a timely fashion, of the
NOW that NESI desires to deliver, up to the Annual Volume (prorated for the
period involved), then NESI shall resume payments and may exercise its option to
deliver NOW in accordance with Section 3.1.
12.1.5 Whenever, in accordance with the foregoing provisions
of this Section 12.1, NESI is excused from making payments of a portion of the
Option Payment for any month or months, such excuse shall be a permanent excuse,
and the total Option Payment for the Option Year or Option Years in which such
excuse occurs shall be reduced accordingly.
12.2 SUSPENSION OF PERFORMANCE BY NESI. NESI has no right to suspend
its performance except as specifically provided elsewhere in this Option
Agreement and any other suspension or attempt to suspend its obligations shall
constitute breach of this Option Agreement. Disapproval, instruction or
communication by a customer of NESI, including any request by any NESI customer
as to where its waste should be delivered, in a manner contrary to the terms of
this Option Agreement shall not constitute force majeure nor provide a basis for
suspension of performance.
13. MISCELLANEOUS
13.1 STATUS OF THE PARTIES. Each party hereto is and shall perform
this Option Agreement as an independent contractor, and as such, shall have and
maintain complete control over
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all of its employees, agents, and operations. Except as expressly otherwise
provided in this Option Agreement, neither party nor anyone employed by it shall
be, represent, act, purport to act or be deemed to be the agent, representative,
employee or servant of the other party.
13.2 NO SET-OFF RIGHTS. The parties hereby agree that neither party
shall have any right to set-off or apply against any sums due under this Option
Agreement any sums due or amounts otherwise owing pursuant to any other
provision of this Option Agreement or any other agreement or arrangement between
the parties.
13.3 SUBROGATION; ASSIGNMENT OF RIGHTS. In the event NESI delivers
and USL accepts a delivery of materials (the "Nonconforming Materials")
containing hazardous or dangerous substances in violation of this Option
Agreement and in violation of NESI's agreement with the third-party generator
producing such materials, NESI agrees that, upon the request of USL, USL shall
become fully subrogated to the rights of NESI against such generator related to
the Nonconforming Materials, and NESI shall (i) assign or take such further
action as is necessary or desirable to transfer to USL any and all rights of
action of NESI against such generator relating to such Nonconforming Materials
arising at law under NESI's agreement with such generator or in equity and (ii)
use its good faith best efforts to assist in the prosecution of any claim
brought by USL against such third party generator relating to the Nonconforming
Materials.
13.4 BINDING EFFECT; ASSIGNMENT. This Option Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. USL and NESI may assign their rights, obligations and
duties under this Option Agreement with the written consent of the other parties
to the Agreement, which consent shall not be unreasonably withheld; provided
that the assigning party shall remain primarily liable for all obligations and
duties arising hereunder. Without limiting the generality of the foregoing, if
USL sells the Landfarms and/or related business, the purchaser shall assume
USL's obligations under this Option Agreement, and NESI shall retain its
obligations under this Option Agreement.
13.5 NOTICES.
13.5.1 GENERAL. Except under Section 3.1.1, notices and other
communications provided for in this Option Agreement shall be in writing and
shall be deemed to have been validly given (a) three calendar days after deposit
in the United States mails, registered or certified mail with proper postage
prepaid and return receipt requested; (b) upon transmission thereof and receipt
of the appropriate confirmation if sent via telecopier or telefax; (c) the
business day after the same shall have been deposited with a reputable overnight
courier, shipping prepaid; and (d) if delivered in person, upon delivery, in
each case addressed as follows:
If to NESI or Newpark: With a copy to:
c/o Newpark Resources, Inc. Ervin, Cohen & Jessup
3850 North Causeway, Suite 1770 9401 Wilshire Boulevard
Metairie, LA 70002 Beverly Hills, CA 90212
Attention: James D. Cole, President Attention: Bertram K. Massing, Esq.
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<PAGE>
Facsimile No.: (504) 833-9506 Facsimile No.: (310) 859-2325
If to USL: With a copy to:
U.S. Liquids, Inc. Baker & Botts, L.L.P.
411 N. Sam Houston Parkway East One Shell Plaza
Houston, TX 77060 910 Louisiana
Attention: W. Greg Orr, President Houston, TX 77002-4995
Facsimile No.: (281) 272-4545 Attention: Philip J. John, Esq.
Facsimile No.: (713) 229-1522
or such other address as any party shall specify by written notice so given.
13.5.2 OTHER NOTICES. Notices provided for in Section 3.1.1
shall be made in writing by telefax or mailed to USL as follows:
U.S. Liquids, Inc.
Division Manager
P.O. Box 1467
Jennings, LA 70546
Attention: Jerry Brazell
Facsimile No.: (318) 824-3147
13.6 OPPORTUNITY TO CURE. In the event that NESI (i) fails to pay
USL any amount required under this Option Agreement on or before the date such
payment is due and such payment is not excused by Section 12.1 and/or (ii)
otherwise fails to perform under this Option Agreement, USL shall give notice to
NESI of its failure to perform in accordance with Section 13.5. The notice shall
include a description of the manner in which NESI failed to perform under this
Option Agreement and shall include the date on which performance was due. NESI
shall have fifteen (15) calendar days from the date notice is deemed validly
given to correct or cure its failure to perform under this Option Agreement. If
NESI fails to do so, then such failure shall constitute a breach of this Option
Agreement. If NESI receives from USL notice that NESI has failed to pay USL any
amount required, due and not otherwise excused under this Option Agreement and
NESI fails to correct or cure such failure within 15 days from the date such
notice is given, then such failure shall be deemed failure to make Payment in
Full and on Time and shall constitute a breach of this Option Agreement. Failure
by USL to act in accordance with this Section shall not itself constitute a
breach of this Option Agreement nor shall such failure cause USL to waive or
relinquish any right or option provided by any Section in this Option Agreement;
provided, however, that NESI shall not be deemed to have breached this Option
Agreement unless and until notice of such alleged breach shall have been given
in accordance with this section, and NESI shall have failed to cure or correct
its failure to perform as specified in such notice.
13.7 NON-WAIVER. The failure of any party to enforce its rights
under any provision of this Option Agreement shall not be construed to be a
waiver of such provision. No waiver of any breach of this Option Agreement shall
be held to be a waiver of any other breach.
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13.8 ENTIRE AGREEMENT; AMENDMENT. This Option Agreement, the Payment
Agreement and the Other Agreements referred to in the Payment Agreement
constitute the entire agreement between the parties concerning the subject
matter hereof and supersede any and all other communications, representations,
proposals, understandings or agreements, either written or oral, between the
parties hereto with respect to such subject matter. This Option Agreement may
not be modified or amended, in whole or in part, except by a writing signed by
both parties hereto.
13.9 SEVERABILITY. If any provision of this Option Agreement is
declared invalid or unenforceable, then such portion shall be deemed to be
severable from this Option Agreement and shall not affect the remainder hereof.
13.10 HEADINGS. The Article and Section headings contained herein
are for reference purposes only and shall not in any way affect the meaning and
interpretation of this Option Agreement.
13.11 COUNTERPARTS. This Option Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which shall constitute one instrument.
13.12 GOVERNING LAW. This Option Agreement SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
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ON THIS DATE, the Parties have executed multiple originals of this Option
Agreement.
NEWPARK ENVIRONMENTAL SERVICES, INC.
Dated: December 31, 1998 By:
Name:
Title:
NEWPARK RESOURCES, INC.
Dated: December 31, 1998 By:
Name:
Title:
U.S. LIQUIDS, INC.
Dated: December 31, 1998 By:
Name:
Title:
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EXHIBIT 10.74
PURCHASE AND SALE OF ASSETS AGREEMENT
THIS PURCHASE AND SALE OF ASSETS AGREEMENT (the "Agreement") is executed
and delivered as of December 31, 1998, between MESA PROCESSING, INC., a Texas
corporation ("Buyer"), THOMAS B. BLANTON, the sole shareholder of Buyer ("T.
Blanton"), and U S LIQUIDS OF TEXAS, INC., a Texas corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns certain assets relating to the operation of its fats
and oils (including yellow and brown grease) collection, transportation,
processing and marketing business in the State of Texas and elsewhere (the
"Business"); and
WHEREAS, a portion of the assets of the Business relating to the marketing
and distribution of yellow and brown grease (the "Marketing Segment") were
acquired from T. Blanton and certain of his affiliates by Seller in 1997, and T.
Blanton has continued to manage such Marketing Segment of the Business on behalf
of Sellers; and
WHEREAS, as part of the Marketing Segment of the Business, Seller owns
certain improved real property located at 3701 North Grove Street, Fort Worth,
Texas, consisting of approximately 3.5 acres (the "Fort Worth Owned Property"),
and Seller leases certain improved real property located at 419 Logan Street,
Laredo, Texas, consisting of approximately one acre (the "Laredo Property") and
certain office space located at 131 East Exchange, Suite 232, Fort Worth, Texas
(the "Fort Worth Leased Property"); and
WHEREAS, Buyer, an affiliate of T. Blanton, desires to purchase and
acquire certain assets, properties and contractual rights of Seller used in
connection with the Marketing Segment of the Business, and Seller desires to
sell such assets, properties and contractual rights to Buyer, all in accordance
with the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
SALE OF ASSETS
SECTION 1.1 DESCRIPTION OF ASSETS. Upon the terms and subject to the
conditions set forth in this Agreement, Seller does hereby grant, convey, sell,
transfer and assign to Buyer the following assets, properties and contractual
rights of Seller, wherever located, subject to the exclusions hereinafter set
forth:
(a) all real property interests (whether owned or leased) used or
for use in the Marketing Segment of the Business (collectively, sometimes
referred to herein as the
<PAGE>
"Real Property"), as specifically described on Schedule 1.1(a) hereto, and
all improvements thereon;
(b) all equipment used or for use in the operations of the Marketing
Segment of the Business listed on Schedule 1.1(b) attached hereto and made
a part hereof (the "Equipment");
(c) all of the motor vehicles (whether owned or leased) used or for
use primarily in the Marketing Segment of the Business, and all radios,
attachments, accessories and materials handling equipment now located in
or on such motor vehicles (the "Rolling Stock"), as the same are listed
and more completely described by manufacturer, model number and model year
on Schedule 1.1(c), attached hereto and made a part hereof;
(d) the accounts receivable relating to the Marketing Segment of the
Business as of the Effective Date (hereinafter defined) set forth on
Schedule 1.1(d) attached hereto and made a part hereof (as may be amended
pursuant to Section 2.2 hereof);
(e) all of Seller's rights with respect to its customers arising out
of the Marketing Segment of the Business (the "Customer Accounts"); a
listing of all Customer Accounts is set forth on Schedule 1.1(e) attached
hereto and made a part hereof;
(f) all of Seller's inventory of finished yellow and brown grease
products (i) in transit between one of Seller's processing facilities
located in Houston, Dallas, the Rio Grande Valley or San Antonio and
Seller's customers, and (ii) in transit purchases from third party
facilities with , respect to the Marketing Segment of the Business as of
the Closing Date, which inventory is listed on Schedule 1.1(f) (the
"Inventory");
(g) to the extent transferable, all permits, licenses, franchises,
consents and other approvals relating exclusively to the Marketing Segment
of the Business set forth on Schedule 1.1(g) (the "Permits") attached
hereto and made a part hereof, true and complete copies of which are
attached to Schedule 1.1(g);
(h) all contractual rights and obligations relating exclusively to
the Marketing Segment of the Business, including without limitation, all
employment contracts, leases, supply and other contracts to which Seller
is a party or by which Seller is bound, a list of which contracts is set
forth on Schedule 1.1(h) attached hereto and made a part hereof;
(i) all of Seller's existing documents, files and other material
related exclusively to all current or past customers of the Marketing
Segment of the Business;
(j) all of Seller's railcar leases relating exclusively to the
Marketing Segment of the Business; and
(k) all of Seller's right, title and interest, if any, in and to
shares of stock in Grasas Alimenticias Premezciadas, S.A. de C.V., a
company organized and existing in
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the Republic of Mexico, and Mesa International, Inc., a company organized
and existing in Barbados.
All of the foregoing assets, properties and contractual rights are
hereinafter sometimes collectively called the "Assets."
SECTION 1.2 EXCLUDED ASSETS. The parties agree that there shall be
excluded from the Assets the following which are not being sold to Buyer
pursuant to this Agreement ( the "Excluded Assets"): (a) all cash (including
petty cash) on hand and on deposit of Sellers; (b) all real property (whether
owned or leased), other than the Real Property; (c) all accounts receivable of
Sellers other than the Accounts Receivable as of the Effective Date (hereinafter
defined); (d) all contracts and contract rights and obligations of Seller
(whether oral or in writing) other than the Customer Accounts and any other
contracts expressly assigned to Buyer hereunder, (e) all commitments, lists,
leases, permits, licenses, consents, approvals, franchises and other instruments
not relating to the Customer Accounts or the Marketing Segment of the Business,
or not legally assignable to Buyer; (f) all computer hardware, software and
peripheral equipment of Sellers, whether or not relating to the Marketing
Segment of the Business, other than the items listed on Schedule 1.1(b) hereto,
(g) all items of inventory in any collection or processing facility of Seller or
which is en route to any such collection or processing facility, (h) all motor
vehicles of Seller that are not Rolling Stock; (i) all other assets and
property, real or personal, tangible or intangible, not listed or referred to in
Section 1.1 hereof as expressly assigned to Buyer hereunder, and (j) all of the
specific assets and property set forth on Schedule 1.2 hereof.
SECTION 1.3 ASSUMPTION OF OBLIGATIONS. Buyer agrees to assume and perform
all of Seller's contractual obligations related to the Customer Contracts, the
employees and all other assumed contracts listed on Schedule 1.1 (h), to the
extent, and only to the extent, such obligations first mature and are required
to be performed after the close of business on the Closing Date.
ARTICLE II
PURCHASE PRICE
SECTION 2.1 PURCHASE PRICE.
(a) Buyer shall pay to Seller for the Assets the sum of
$1,703,129.00, which sum is subject to adjustment in accordance with
Section 2.2 hereof (the "Purchase Price").
(b) The Purchase Price shall be payable on the Closing Date as
follows:
(i) Buyer and T. Blanton, as guarantor, shall execute and
deliver a promissory note in favor of Seller in the
principal amount of $1,078,222.00, payable on or before
March 10, 1999, in substantially the form attached
hereto as EXHIBIT A;
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(ii) Buyer and T. Blanton, as guarantor, shall execute and
deliver a second promissory note (together with the note
in Section 2.1(b)(i), collectively referred to as the
"Notes") in favor of Seller in the principal amount of
$624,907.00, in substantially the form attached hereto
as EXHIBIT B.
(iii) Payment of the Notes shall be secured by a pledge (the
"Pledge") from T. Blanton of U S Liquids Inc. stock
having a value on the Closing Date of 125% of the
Principal Amount, determined by using the closing price
of the Parent Stock, as reported in the WALL STREET
JOURNAL, and the terms and provisions of which Pledge
shall be substantially in the form attached hereto as
EXHIBIT C.
SECTION 2.2 ADJUSTMENTS TO PURCHASE PRICE. The parties agree that promptly
following the Closing, the Accounts Receivable and the inventory of the Seller
relating to the Marketing Segment of the Business shall be audited by Arthur
Andersen L.L.P., Seller's independent auditors. In the event that the audit
reflects that the Accounts Receivable balance as of the Closing Date is greater
or less than $1,078,222.00, the parties agree to adjust the Note referred to in
Section 2.1(b)(i) above up or down to reflect the full audited amount of such
Accounts Receivable. In the event that the audit reflects that the inventory
balance as of the Closing Date is greater or less than $258,907.00, the parties
agree to adjust the Note referred to in Section 2.1(b)(ii) above up or down by
the difference between $258,907.00 and the audited inventory balance. Each party
agrees to promptly and diligently take all actions necessary to effect the
foregoing adjustments to the Purchase Price, including without limitation the
preparation and execution of revised Notes as contemplated in this Section 2.2.
ARTICLE III
CLOSING
SECTION 3.1 TIME AND PLACE OF CLOSING. Unless the parties otherwise agree,
this transaction shall be closed simultaneously with the execution and delivery
of this Agreement and the other documents and instruments referred to in this
Article III (the "Closing"). The Closing shall take place at a location mutually
acceptable to Buyer and Seller.
SECTION 3.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver
to Buyer, all duly executed:
(a) a General Conveyance, Assignment, Assumption and Bill of Sale,
in form and substance substantially as set forth on EXHIBIT D (the "Bill
of Sale");
(b) a fully executed and acknowledged Special Warranty Deed, in form
and substance substantially as set forth on EXHIBIT E;
(c) an executed Supply Agreement (as defined in Section 4.2);
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(d) motor vehicle Certificates of Title and/or registrations to the
Rolling Stock, properly endorsed to Buyer;
(f) fully executed consents to the assignment of the Customer
Accounts set forth on Schedule 1.1(e), if any;
(g) a certified copy of the resolutions of the shareholders and
directors of Seller authorizing the execution of this Agreement, the sale
of the Assets to Buyer, and the consummation of the transactions
contemplated herein, along with an incumbency certificate of Seller; and
(h) such other separate instruments of sale, assignment or transfer
reasonably required by Buyer.
SECTION 3.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver
to Seller, all duly executed:
(a) duly executed Notes comprising the price set forth in
Section 2.1(a) and (b);
(b) an executed Bill of Sale;
(c) a duly executed Pledge Agreement;
(d) an executed Supply Agreement.
(e) a certified copy of the resolutions of the shareholders and
directors of Buyer authorizing the execution of this Agreement, the
purchase of the Assets from Seller, and the consummation of the
transactions contemplated herein, along with an incumbency certificate of
Buyer;
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ARTICLE IV
COVENANTS
SECTION 4.1 TRANSITION. Seller will not take any action that is designed
or intended to have the effect of discouraging any customer or business
associate of Seller from maintaining the same business relationships with Buyer
after the Closing that it maintained with Seller before the Closing. The
covenant set forth in this Section 4.1 shall survive the Closing and the
transfer of the Assets.
SECTION 4.2 SUPPLY AGREEMENT. Buyer and Seller shall, contemporaneously
with the Closing, enter into an agreement for the supply of yellow and brown
grease processed by Seller at certain of its facilities, which agreement shall
be substantially in the form attached hereto as EXHIBIT F.
SECTION 4.3 EMPLOYEES. Buyer agrees to offer employment to all of the
employees of Seller set forth on Schedule 5.1(i) at substantially the same level
compensation and benefits as was provided by Seller. All such employees of
Seller shall be terminated by Seller as of the Closing Date. Prior to such
termination, Buyer shall indemnify Seller and promptly reimburse Seller for any
and all costs or obligations it may incur as a result of the termination of such
employees.
SECTION 4.4 GUARANTY. T. Blanton hereby absolutely and unconditionally
guaranties the full and faithful performance by Buyer of all of its obligations
under this Agreement, including without limitation, the obligations of Buyer
under Section 4.3 and Article VIII hereof. In the event that Buyer fails to
promptly perform when due any obligation arising under Section 8.4 of the Asset
Purchase Agreement, Seller shall provide written notice of such non-performance
to T. Blanton, and, without the necessity of Seller taking any further action to
collect or enforce the performance of such obligation, T. Blanton shall promptly
pay or perform such obligations on behalf of Buyer.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 5.1 Seller represents and warrants to Buyer that as of the Closing
Date:
(a) CORPORATE ORGANIZATION. Seller is a corporation duly formed,
validly existing and in good standing under the laws of the State of
Texas.
(b) AUTHORITY. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the compliance by
Seller with the terms of this Agreement do not and will not conflict with
or result in a breach of any terms of, or constitute a default under, the
articles of incorporation or bylaws of Seller, or any instruments or other
agreement to which Seller are a party or by which Seller are bound. This
Agreement constitutes a valid obligation of Seller enforceable against
Seller
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in accordance with its terms except as limited by bankruptcy, insolvency,
reorganization or other such laws concerning the rights of creditors.
(c) EQUIPMENT. Listed on Schedule 1.1(b) hereto is a complete and
accurate list of all equipment used or for use exclusively in connection
with the Marketing Segment of the Business.
(d) ROLLING STOCK. Listed on Schedule 1.1(c) hereto is a complete
and accurate list of all Rolling Stock used or for use exclusively in
connection with the Marketing Segment of the Business.
(e) CUSTOMER ACCOUNTS. Listed on Schedule 1.1(e) hereto is a listing
of the Customer Accounts as of the date hereof.
(f) TITLE TO REAL PROPERTY. Seller has good title or leasehold
interest, as the case may be, to the Real Property, except for any
encumbrances on title which would be shown by a current survey undertaken
by a registered surveyor or on a commitment for owner's title insurance
commitment on Real Property ("Permitted Encumbrances"). At the Closing,
Seller shall convey and warrant good title to the owned Real Property by,
through and under the Seller, and not otherwise.
(g) TITLE TO THE PERSONAL PROPERTY. Seller has good and marketable
title to all of the Assets constituting personal property, free and clear
of all liens, encumbrances, security interests, equities or restrictions
whatsoever, and by virtue of the grant, conveyance, sale, transfer, and
assignment of the Assets hereunder, Buyer shall receive good and
marketable title to all of the Assets constituting owned personal
property, free and clear of all liens, encumbrances, security interests,
equities or restrictions whatsoever.
(i) EMPLOYEES. Attached as Schedule 5.1(i) hereof is a complete list
of all employees of Seller relating primarily to the Marketing Segment of
the Business and their respective rates of compensation (including a
breakdown of the portion thereof attributable to salary, bonus and other
compensation, respectively) as of the date of Closing.
SECTION 5.2 DISCLAIMER OF WARRANTIES. Except for the representations and
warranties of Seller expressly set forth in this Agreement, (i) Seller makes no
warranties, express or implied, with respect to the quality, design, physical
condition, fitness for a particular purpose or capacity of any of the Real
Property or the Assets; (ii) all such Real Property and Assets are being
transferred to the Buyer "AS IS" and "WITH ALL FAULTS" in the condition existing
on the closing date; and (iii) THE SELLER EXPRESSLY DISCLAIMS AND NEGATES TO THE
BUYER AND ALL THIRD PARTIES ANY AND ALL WARRANTIES CONCERNING SUCH ASSETS,
EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, OTHER THAN THOSE EXPRESSLY SET
FORTH IN THIS AGREEMENT, INCLUDING WITHOUT LIMITATION (A) ANY WARRANTY OF
QUALITY, CONDITION OR
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MERCHANTABILITY; (B) ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; OR (C)
ANY WARRANTY OF HABITABILITY.
SECTION 5.3 SURVIVAL. Each of the representations and warranties set forth
in this Article V shall survive the Closing and the transfer of the Assets.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 6.1. Buyer and T. Blanton, jointly and severally, represent and
warrant to Seller that as of the Closing Date:
(a) CORPORATE ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas.
(b) AUTHORIZATION. Buyer has all requisite corporate power and corporate
authority to enter into this Agreement, perform its respective obligations
hereunder and consummate the transactions contemplated hereby. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby and the compliance by Buyer with the terms of this Agreement do not and
will not conflict with or result in a breach of any terms of, or constitute a
default under, Buyer's Articles of Incorporation or Bylaws or any other
agreement or instrument to which Buyer is a party or by which Buyer is bound.
All necessary corporate action has been taken by Buyer with respect to the
execution and delivery of this Agreement, and this Agreement constitutes a valid
obligation of Buyer enforceable in accordance with its terms except as limited
by bankruptcy, insolvency, reorganization or other such laws concerning the
rights of creditors.
(c) ORDINARY COURSE OPERATION. The Marketing Segment of the Business,
which has been managed by T. Blanton on behalf of Seller since June, 1997, has
to the knowledge of Buyer and T. Blanton, not undertaken or engaged in any
activities which were not in the ordinary course of such business operations.
(d) PURCHASES OF INVENTORY. Except as set forth on Schedule 6.1(d), the
Marketing Segment of the Business, which has been managed by T. Blanton on
behalf of Seller, has not made or engaged in any purchases of fats or oils
products from third parties with respect to which payables are not or were not
generated and reflected on the books of Sellers.
(e) NO KNOWN BREACHES. Buyer and T. Blanton are not aware of any facts or
circumstances that are not disclosed by Seller in the schedules to this
Agreement, and which, by virtue of such nondisclosure, would result in or could
be construed as a breach of any of the representations and warranties made by
Seller herein.
SECTION 6.2 SURVIVAL. Each of the representations and warranties set forth
in this Article VI shall survive the Closing and the transfer of the Assets.
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ARTICLE VII
NONCOMPETITION
SECTION 7.1 NONCOMPETITION COVENANTS. In consideration for the purchase
and sale of the Assets, Buyer and T. Blanton, jointly and severally, agree that
for a period of five years following the date of Closing, neither of them shall
directly or indirectly, through a subsidiary or affiliate (including, without
limitation, through family members of T. Blanton), without the prior express
written consent of Seller:
(i) engage, whether as a corporation on its own account, or as an
officer, director, shareholder, owner, partner, joint venturer, investor,
agent, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in the
business of: siting, developing, constructing, permitting or operating a
facility for the processing, treatment or disposal of hazardous or
non-hazardous liquid waste and/or products (including, without limitation,
waste oil, waste water, yellow grease, brown grease, grease trap waste,
grit trap waste and oil contaminated water); cleaning or maintenance of
industrial tanks or storage containers used for the collection or storage
of any such materials; and transportation, collection or processing of any
such materials, in each case within the United States of America (the
"Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of Seller in a managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the
employ of Seller;
(iii) call upon any person or entity which is, at that time, or
which has been, within two years prior to that time, a customer of Seller
or Buyer, as the case may be, within the Territory for the purpose of
soliciting contracts or business with such customer for the siting,
developing, constructing, permitting or operating a facility for the
processing, treatment or disposal of hazardous or non-hazardous liquid
waste and/or products (including, without limitation, waste oil, waste
water, yellow grease, brown grease, grease trap waste, grit trap waste and
oil contaminated water); cleaning or maintenance of industrial tanks or
storage containers used for the collection or storage of any such
materials; and transportation, collection or processing of any such
materials, in each case within the Territory;
(iv) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called
upon by Seller or T. Blanton, or for which Seller or T. Blanton made an
acquisition analysis for Seller;
(v) disclose the identity of Seller's customers, whether in
existence or proposed, to any person, firm, partnership, corporation or
business for any reason or purpose whatsoever; or
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(vi) promote or assist, financially or otherwise (including, without
limitation, lending, guaranteeing loans or otherwise providing financial
assurance in any way), any person, firm, partnership, corporation or other
entity whatsoever to do any of the above.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Buyer or T. Blanton from (i) acquiring as an investment not more than
one percent of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter, (ii) engaging in the
marketing and distribution of processed yellow or brown grease, or other fat or
oil products in any location, or (iii) engaging in any of the activities
described in Schedule 7.1 attached hereto, which schedule may be amended from
time to time by mutual agreement of the parties.
SECTION 7.2 INJUNCTIVE RELIEF. Because of the difficulty of measuring
economic losses to Seller as a result of the breach of the foregoing covenant,
and because of the immediate and irreparable damage that would be caused to
Seller for which it would have no other adequate remedy, Buyer and T. Blanton
agree that, in the event of breach by any of them of the foregoing covenant, the
covenant may be enforced by Seller by, without limitation, injunctions and
restraining orders.
SECTION 7.3 REASONABLENESS OF COVENANTS. It is agreed by the parties that
the foregoing covenants in this Article VII impose a reasonable restraint on
Buyer and T. Blanton in light of the activities and business of the Seller on
the date of the execution of this Agreement and future plans of the Seller.
SECTION 7.4 SEVERABILITY OF COVENANTS. The covenants in this Article VII
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenants. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
SECTION 7.5 INDEPENDENT COVENANTS. All of the covenants in this Article
VII shall be construed as an agreement independent of any other provision of
this Agreement, and the existence of any claim or cause of action of Buyer or T.
Blanton against Seller, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by Seller of such covenants. It is
specifically agreed that the duration of the noncompetition covenants stated
above shall be computed by excluding from such computation any time during which
Buyer or T. Blanton are in violation of any provision of this Article VII and
any time during which there is pending in any court of competent jurisdiction
any action (including any appeal from any judgment brought by any person,
whether or not a party to this Agreement, in which action Seller seeks to
enforce the agreements and covenants of Buyer or T. Blanton, or in which any
person contests the validity or such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement.
SECTION 7.6 MATERIALITY. Buyer and T. Blanton hereby agree that the
foregoing noncompetition covenants are a material and substantial part of this
transaction, and that, but for
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such covenants, Seller would not be willing to consummate the sale of the Assets
and the other transactions contemplated by this Agreement.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION BY SELLER. Notwithstanding investigation at
any time made by or on behalf of Buyer, Seller agrees to defend, indemnify and
hold harmless Buyer, its officers, shareholders, directors, divisions,
subdivisions affiliates, parent, employees, agents, successors, assigns and the
Assets from and against all losses, claims, actions, causes of action, damages,
liabilities, expenses and other costs of any kind or amount whatsoever
(including, without limitation, reasonable attorneys' fees), whether equitable
or legal, matured or contingent, known or unknown, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, which result, either before or
after the date of this Agreement, from:
(a) any inaccuracy in or breach of any representation or
warranty made by Seller in this Agreement;
(b) failure of Seller duly to perform and observe any term, provision,
covenant, agreement or condition under this Agreement;
(c) liability of Seller imposed upon Buyer for the conduct of the Business
by the Seller prior to the Closing;
(d) any claim by a third party that, if true, would mean that a condition
for indemnification set forth in this Section 8.1 had been satisfied.
Buyer shall be deemed to have suffered such loss, claim, action, cause of
action, damage, liability, expense or other cost, or to have paid or to have
become obligated to pay any sum on account, of, the matters referred to in
subparagraphs (a) -(d) of this Section 8.1 if the same shall be suffered, paid
or incurred by Buyer or any parent, subsidiary, affiliate, or successor of
Buyer. The amount of the loss, claim, action, cause of action, damage,
liability, expense or other cost deemed to be suffered, paid or incurred by
Buyer shall be an amount equal to the loss, claim, action, cause of action,
damage, liability, expense or other cost suffered, aid or incurred by such
parent, subsidiary, affiliate, or successor.
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SECTION 8.2 INDEMNIFICATION BY BUYER. Notwithstanding investigation at any
time made by or on behalf of Seller, Buyer and T. Blanton, jointly and
severally, agree to defend, indemnify and hold harmless Seller, its officers,
shareholders, directors, divisions, subdivisions affiliates, parent, employees,
agents, successors, assigns and the Assets from and against all losses, claims,
actions, causes of action, damages, liabilities, expenses and other costs of any
kind or amount whatsoever (including, without limitation, reasonable attorneys'
fees), whether equitable or legal, matured or contingent, known or unknown,
foreseen or unforeseen, ordinary or extraordinary, patent or latent, which
result, either before or after the date of this Agreement, from:
(a) inaccuracy in or breach of any representation or warranty made
by Buyer and/or T.
Blanton in this Agreement;
(b) failure of Buyer or T. Blanton duly to perform and observe any
term, provision, covenant, agreement or condition under this Agreement;
(c) liability of Buyer or T. Blanton imposed upon Seller for the
conduct of the Business by the Buyer or T. Blanton following the Closing;
(d) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in this Section 8.2 had been
satisfied.
Seller shall be deemed to have suffered such loss, claim, action, cause of
action, damage, liability, expense or other cost, or to have paid or to have
become obligated to pay any sum on account, of, the matters referred to in
subparagraphs (a) -(d) of this Section 8.2 if the same shall be suffered, paid
or incurred by Seller or any parent, subsidiary, affiliate, or successor of
Seller. The amount of the loss, claim, action, cause of action, damage,
liability, expense or other cost deemed to be suffered, paid or incurred by
Seller shall be an amount equal to the loss, claim, action, cause of action,
damage, liability, expense or other cost suffered, aid or incurred by such
parent, subsidiary, affiliate, or successor.
SECTION 8.3 PROCEDURE FOR INDEMNIFICATION. Promptly after a party hereto
(hereinafter the "Indemnified Party") has received notice of or has knowledge of
any claim by a person not a party to this Agreement ("Third Person" or the
commencement of any action or proceeding by a Third Person, the Indemnified
Party shall, as a condition precedent to a claim with respect thereto being made
against any party obligated to provide indemnification pursuant to this
Agreement (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding
(the "Notice"). The Notice shall state the nature and the basis of such claim
and a reasonable estimate of the amount thereof. The Indemnifying Party, after
receipt of the Notice, shall defend and settle, at its own expense and by its
own counsel, each such matter so long as the Indemnifying Party pursues the same
diligently and in good faith and the claim does not involve injunction or
equitable relief or involve criminal penalties. The Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or
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control. Notwithstanding the foregoing, the Indemnified Party shall have the
right to participate in any matter through counsel of its own choosing at its
own expense, provided that the Indemnifying Party's counsel shall always be lead
counsel and shall determine all litigation and settlement steps, strategy and
the like. After the Indemnifying Party has received the Notice, the Indemnifying
Party shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses, out-of-pocket
and allocable share of employee compensation incurred in connection with such
participation for any employee whose participation is so requested. The
foregoing notwithstanding, if the Indemnifying Party fails diligently to defend
any such matter to which the Indemnified Party is entitled to indemnification
hereunder or if the claim involves criminal penalties, the Indemnified Party may
undertake such defense through counsel of its choice and at the Indemnifying
Party's expense. In each case where the Indemnifying Party is obligated to pay
the costs and expenses of the Indemnified Party, the Indemnifying Party shall
pay the costs and expenses of the Indemnified Party as such costs and expenses
are incurred. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
Section with respect to such Third Person claim shall be limited to the amount
so offered in settlement by said Third Person and the Indemnified Party shall
reimburse the Indemnifying Party for any additional costs of defense which it
subsequently incurs with respect to such claim.
SECTION 8.4 LIMITATIONS ON INDEMNIFICATION; TIME LIMITS FOR CLAIMS.
(a) Buyer shall not be entitled to assert any claim for indemnification
under this Article VIII unless and until such time as all claims of Buyer for
indemnification hereunder exceed $20,000 in the aggregate, at which time any and
all claims of Buyer for indemnification, in excess of $20,000, may be asserted.
Seller shall not be liable under this Article VIII for aggregate losses in
excess of the amount of the Purchase Price.
(b) No claim for indemnification may be made by any indemnified party in
respect of indemnifiable losses unless written notice thereof shall have been
received by the indemnifying party on or prior to two years after the date
hereof.
SECTION 8.5 REMEDIES; DEFAULT; NOTICE AND CURE. Except in the case of
fraud or intentional misrepresentation, indemnification pursuant to this Article
VIII is the sole and exclusive remedy of the parties after the Closing for
matters arising out of the representations, warranties, covenants and agreements
of Seller or Buyer set forth in this Agreement (without limiting the rights of
the parties under any other agreement), except as otherwise expressly provided
in Section 7.2. No party shall be deemed in breach of its obligations hereunder
unless it has received written notice from the other party of noncompliance with
a term or provision of this Agreement specifying the specific item of
noncompliance and the defaulting party has failed to cure such noncompliance
within ten (10) days after receipt of such notice; provided, however, that if
the nature of such default is such that it cannot be cured solely by the payment
of money and that more than 10 days may be reasonably required to effect a cure,
then the defaulting party
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shall not be deemed to be in default if such party shall commence such cure
within such 10 day period and thereafter diligently and in good faith prosecutes
such cure to successful completion.
ARTICLE IX
GENERAL
SECTION 9.1 FURTHER ASSURANCE. From time to time after the Closing, each
of the parties will, without further consideration, execute and deliver such
other instruments of conveyance and transfer, and take such other action as the
other party may reasonably request: (i) to more effectively convey, transfer to
and vest in Buyer and to put Buyer in possession of the Assets to be transferred
hereunder, and in the case of contracts and rights, if any, which cannot be
transferred to Buyer effectively without the consents of third parties, to
endeavor to obtain such consents promptly, and if any be unobtainable, to use
reasonable efforts to provide Buyer with the benefits thereof in some other
manner; and (ii) to more effectively transfer to Seller the consideration
identified herein.
SECTION 9.2 WAIVER. Except as otherwise provided herein, no delay of or
omission in the exercise of any right, power or remedy accruing to any party as
a result of any breach or default by any other party under this Agreement shall
impair any such right, power or remedy, nor shall it be construed as a waiver of
or acquiescence in any such breach or default, or of or in any similar breach or
default occurring later; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default occurring before or after that
waiver.
SECTION 9.3 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
SECTION 9.4 NOTICE. All notices or communications required or permitted
under this Agreement shall be given in writing and served either by personal
delivery, overnight courier or by deposit in the United States mail and sent by
first class registered or certified mail, return receipt requested, postage
prepaid:
If to the Seller:
U S Liquids of Texas, Inc.
411 N. Sam Houston Parkway East
Houston, TX 77060
Attn: W. Gregory Orr
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With a copy to:
Jared D. Nielsen, Esq.
440 Benmar, Suite 2090
Houston, TX 77060
If to Buyer:
Mesa Processing, Inc.
P.O. Box 4247
Ft. Worth, TX 76164
Attn: Thomas Blanton
with a copy to:
Frank R. Jelinek, Esq.
801 E. Abram
Suite 102
Arlington, TX 76010
Notice shall be deemed given and effective the day personally delivered, the day
after bing sent by overnight courier, subject to signature verification, and
three days after deposit in the U.S. mail as provided above, or when actually
received, if earlier. Either party may change the address for notices or
communications to be given to it by written notice to the other party given as
provided in this Section.
SECTION 9.5 ENTIRE AGREEMENT. This Agreement, the Schedules hereto and the
other agreements referred to herein constitute the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersede all prior and contemporaneous agreements and understandings, oral or
written, relative to said subject matter.
SECTION 9.6 BINDING EFFECT; ASSIGNMENT. This Agreement and the various
rights and obligations arising hereunder shall inure to the benefit of and be
binding upon the parties hereto and their respective executors, administrators,
heirs, legal representatives, successors and permitted assigns.
SECTION 9.7 EXPENSES OF TRANSACTION. Seller shall pay all costs and
expenses incurred by Seller in connection with this Agreement and the
transactions contemplated hereby and thereby, including, without limitation, the
fees and expenses of Seller's attorneys and accountants and will make all
necessary arrangements so that the Assets will not be charged with or diminished
by any such cost or expense. Buyer shall pay all costs and expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby
and thereby, including without limitation, the fees and expenses of its
attorneys and accountants.
SECTION 9.8 BROKER'S COMMISSION. Seller represents and warrants to Buyer
and Buyer represents and warrants to Seller that the warranting party has had no
dealing with any dealer, broker or agent so as to entitle such dealer, broker or
agent to a commission or fee in connection
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with the sale of the Assets to Buyer. If for any reason any commission or fee
shall become due, the party dealing with such dealer, broker or agent shall pay
such commission or fee and agrees to indemnify and save the other party harmless
from all claims for such commission or fee and from all attorneys' fees,
litigation costs and other expense relating to such claim.
SECTION 9.9 MODIFICATION; REMEDIES CUMULATIVE. This Agreement may not be
changed, amended, terminated, augmented, rescinded or otherwise altered, in
whole or in part, except by a writing executed by all of the parties hereto. No
right, remedy or election given by any term of this Agreement shall be deemed
exclusive but each shall be cumulative with all other rights, remedies and
elections available at law or in equity.
SECTION 9.10 SEVERABILITY. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties. If such modification is not possible,
such provision shall be severed from this Agreement. In either case the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
SECTION 9.11 GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the internal laws of the State of
Texas, without giving effect to any choice or conflict of law provision or rule
(whether of the State of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
BUYER:
MESA PROCESSING, INC.
By:______________________________
THOMAS B. BLANTON, President
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T. BLANTON
_________________________________
THOMAS B. BLANTON
SELLER:
U S LIQUIDS OF TEXAS, INC.
By:______________________________
SEAN KELLEY, Vice President
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EXHIBIT 10.75
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "Agreement") dated as of December 31, 1998, is
between US Liquids of Texas, Inc., a Texas corporation ("USLT"), and MESA
PROCESSING, INC., a Texas corporation ("MESA").
WITNESSETH:
WHEREAS, USLT is in the business of collecting, transporting and
processing fats and oils at various facilities;
WHEREAS, on the date hereof, MESA has acquired certain of the assets of
USLT relating to the marketing of yellow and brown grease products; and
WHEREAS, MESA desires to purchase and USLT desires to sell to MESA all of
the yellow and brown grease products processed by USLT, or its affiliates, in
accordance with the terms and provision set forth herein.
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, and for other good and valuable, the receipt and sufficiency
of which are hereby acknowledged for all purposes, MESA and USLT hereby agree as
follows.
1. SALE AND PURCHASE OF PRODUCTS
USLT shall, and shall cause its affiliates to, sell and MESA shall purchase
yellow grease products ("Yellow Grease") and brown grease products ("Brown
Grease") meeting the specifications (the "Specifications") attached hereto as
EXHIBIT I (the "Products").
USLT further grants MESA a right of first purchase with respect to all Products
it produces at any USLT Facilities which do not conform to the Specifications.
Unless the parties have otherwise mutually agreed, prior to any sale by USLT of
Products which do not meet the Specifications, USLT shall provide MESA with at
least 72 hours prior notice of the availability of such non-conforming Products
for sale and the terms of such proposed sale. If MESA desires to purchase such
non-conforming Products, it shall promptly notify USLT of such intent to
purchase and shall consummate such purchase and take delivery in accordance with
the terms hereof.
2. TERM
The initial term of this Agreement shall commence on the date hereof and
extend for a period of one year; PROVIDED, HOWEVER, that the Agreement shall
automatically be extended after the initial term for up to four consecutive
additional periods of twelve months each unless (i) MESA shall give written
notice at least 90 days prior to the expiration of the then current term of
its intent to terminate this Agreement, or (ii) the agreement shall be
earlier terminated as otherwise provided herein.
3. QUANTITY
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USLT will supply and MESA shall purchase from USLT all Products produced at any
processing facilities of USLT or its affiliates (the "Facilities") in accordance
with the terms hereof. MESA acknowledges that USLT cannot guarantee the
availability of any absolute quantity of Product for purchase by MESA hereunder
during any month during the term hereof. To the extent USLT produces Yellow
Grease and Brown Grease products during the term hereof, USLT will use
reasonable efforts to produce Products that meet the Specifications.
4. DELIVERY AND TRANSPORTATION
MESA agrees to diligently take delivery of Products from the Facilities in such
a manner and at such times that the aggregate supply of either yellow grease or
brown grease Products stored by USLT at any such Facility shall not exceed
150,000 pounds of such type of Product at any single Facility. In the event that
any of the Facilities at any time during the term hereof experiences supply of
either type of Product in excess of such volumes, Seller shall notify MESA of
such excess supply, which notice may be verbal with a confirmation faxed to
MESA, and MESA shall promptly dispatch railcars or tank trucks to take delivery
of such excess Products. If MESA has not taken delivery of the excess products
within 48 hours from the time of notification, USLT may sell or otherwise
dispose of any excess Products in any reasonable manner. MESA shall be
responsible for payment to USLT of the reasonable difference, if any, between
the sale price for such Products sold by USLT and the amount USLT would have
received if sold to and delivery taken by MESA as provided in this Agreement
plus all actual costs and expenses incurred by USLT in connection with such sale
or disposal, including without limitation, all shipping, insurance, taxes,
disposal fees and other costs. Any such amount due and owing from MESA will be
included in the next or subsequent USLT invoice to MESA.
USLT shall deliver Products hereunder, FOB the relevant Facility, into railcars
or tank trailers supplied by MESA. All deliveries of Product into tank trailers
shall be documented by weight tickets and bills of lading prepared by USLT. All
deliveries of Products into rail cars shall be documented by weight tickets
obtained by MESA from a third party weigh station located not more than 100
miles from the relevant Facility. MESA shall, within 48 hours of the time MESA
receives a third party rail weight ticket, provide to USLT a copy of the third
party rail weight ticket. In the event USLT does not receive a copy of such
third party rail weight ticket within five days from the date of delivery, USLT
may invoice MESA based upon the maximum load capacity of the type of railcar to
which delivery was made assuming 7.4 lbs per gallon of Product, which invoice
shall be adjusted (by issuance of a credit to MESA) to reflect the actual amount
delivered if MESA delivers a third party rail weight ticket for such shipment to
USLT within 21 days of the date of delivery.
In the event MESA may reasonably request delivery to railcars from a facility
that can not accomodate rail traffic, MESA shall designate by written order to
USLT, at least 48 hours prior to the required delivery, the location of a rail
spur within 25 miles of the relevant facility and the quantity, grade and time
for delivery. USLT shall deliver or arrange for the delivery of the ordered
Products to such railcars and shall include the actual cost reasonably incurred
by USLT for such delivery in its invoice for such Products. USLT shall not be
obligated to remain at the designated delivery site for more than two hours from
the delivery time designated in the notice.
<PAGE>
Risk of loss and title to Product (or other non-conforming grease products
purchased by MESA) shall pass to MESA upon loading into such rail cars or tank
trailers. Once loaded into railcars or tank trailers, MESA shall be responsible
for all costs, obligations and liabilities associated with transportation of
Product.
5. PRICE
MESA shall pay to USLT the following prices for Products purchased during any
calendar month during the term of this Agreement:
YELLOW GREASE: The weighted average1 of the average daily
price reported for (Yellow) grease for the New
York, Chicago, Gulf and Los Angeles markets as
published in each edition of FATS AND OILS
BULLETIN by Jacobsen Publishing Co. during the
immediately preceding month.
BROWN GREASE: The weighted average1 of the price quotes for
Chicago (Brown) grease as published in each
edition of FATS AND OILS BULLETIN by Jacobsen
Publishing Co. during the immediately preceding
month.
(1) For purposes of the foregoing, such average daily prices shall be
weighted for the number of days that such pricing remains applicable (i.e.
the number of days during such calendar month that such published pricing
quotes remain as the most current published prices until superceded by a
new published price).
In the event MESA purchases Yellow Grease or Brown Grease from any facility
operated by a third party within 100 miles of any of the Facilities, and such
price per pound exceeds the applicable price per pound for Yellow Grease or
Brown Grease, as the case may be, during such applicable month as set forth in
this Section 5, MESA agrees to pay an equal price to USLT for all quantities of
Yellow Grease or Brown Grease, as the case may be, produced by and purchased
from USLT by MESA during such month. Notwithstanding the foregoing, MESA shall
not be obligated to pay such greater price for quantities of Yellow Grease in
any month in which the quantity of Brown Grease produced by USLT at the
Facilities exceeds the quantity of Yellow Grease produced by USLT at the
Facilities.
Any purchases of nonconforming grease products shall be pursuant to mutually
agreed upon pricing and terms.
USLT shall invoice MESA on a shipment by shipment basis for Product purchased
hereunder. Such invoices shall intially, through August 31, 1999, be due and
payable within sixty days of receipt by MESA from USLT of its invoice.
Thereafter, such invoices shall be due and payable within forty-five days of
receipt by Mesa.
<PAGE>
6. NOTICES
All notices under this Agreement shall be deemed to be properly given with the
postmarked date governing when (i) sent by U.S. Mail, with postage prepaid, AND
(ii) sent by facsimile transmission, both addressed as follows:
If to MESA: MESA PROCESSING, INC.
P.O. Box 4247
Ft. Worth, TX 76164
Attn: Thomas Blanton, President
FAX: (817) 624-1690
If to USLT: US LIQUIDS OF TEXAS, INC.
411 N. Sam Houston Parkway East
Suite 400
Houston, Texas 77060
Attn: Sean Kelley, Vice President
FAX: (281) 272-4546
7. CONFIDENTIALITY.
The parties agree that during the term of this Agreement and for two years
following the termination of this Agreement, any information of a confidential
or proprietary nature which is disclosed by any party hereunder to the other
party or which relates in any way to the activities undertaken by the parties
under this Agreement shall be held in confidence for the exclusive use and
benefit of the parties. The parties shall not divulge or communicate to any
person or entity or exploit for any purpose whatever any confidential
information disclosed to it by another party, or any confidential information
obtained or produced in relation to this Agreement. This prohibition will not
prevent the disclosure of confidential information to (1) directors, officers,
employees or advisers engaged by any of the parties in connection with the
foregoing who are bound to maintain the confidentiality of such confidential
information, (2) a judicial, governmental or other authority having
jurisdiction, or (3) a recognized stock exchange in accordance with its
requirements. Information will not be deemed confidential for these purposes if
such information (i) is available to the public other than as a result of
disclosure by one of the parties to this Agreement, (ii) was or is available
from another source which did not receive such information either directly or
indirectly from a party to this Agreement, (iii) was already known to the party
at the time the information was provided to such party, or (iv) is independently
developed or acquired without being in breach of any obligation hereunder. In
addition, subject to the terms of this Section 7, each party may use any
confidential information jointly developed under this Agreement for its own
internal purposes.
The contents and timing for any press releases and formal announcements
regarding any of the matters provided for in this Agreement shall require the
prior written approval of each of the parties, which approval shall not be
unreasonably withheld. Notwithstanding the above, nothing herein shall prevent a
party from issuing press releases and formal announcements that such party
reasonably believes are required by law or the rules of any recognized stock
exchange;
<PAGE>
provided, however, that unless such party determines that it is required to
immediately issue a release or announcement, such party shall inform the other
thereof beforehand and further provided that any party will be entitled to
require that its name be withheld from such press release or public
announcement.
8. WARRANTIES; REMEDIES; LIMITATION OF LIABILITY.
USLT hereby warrants to MESA (i) that it will convey to MESA good title to all
Products (and nonconforming grease products) purchased hereunder, free and clear
of all liens, encumbrances and security interests, and (ii) that all Product
will conform to the Specifications. EXCEPT AS SET FORTH ABOVE IN THIS SECTION,
USLT MAKES NO OTHER WARRANTIES, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, WITH RESPECT TO PRODUCT
SOLD HEREUNDER.
If USLT breaches the foregoing warranty with regard to any Product purchased
hereunder, USLT's sole liability and MESA's sole remedy shall be as follows:
USLT shall, at its sole expense, (i) replace the non-conforming Product with
Product conforming to such warranty; or, at MESA's option, (ii) refund the
purchase price.
USLT shall also reimburse MESA for any reasonable costs incurred by MESA, less
any proceeds received by MESA, to return, store, transport or dispose of
non-conforming goods. USLT shall, however, have no liability to MESA under this
paragraph if MESA fails to notify USLT of such non-conformity (i) within 10 days
after date of delivery or (ii) if the non-conformity is not reasonably
discoverable within that time period, then within 10 days after the date on
which the non-conformity was or should have been discovered.
IN NO EVENT SHALL EITHER PARTY BE LIABLE UNDER THIS AGREEMENT FOR INCIDENTAL,
SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES FOR ITS FAILURE TO HAVE PERFORMED ANY
OBLIGATION UNDERTAKEN OR IMPOSED UNDER THIS AGREEMENT.
9. TERMINATION.
In case either party shall breach this Agreement by failing to comply with any
of the terms and conditions hereof, then the other party shall give notice in
writing specifying the breach complained of, and if the same not be remedied
within 10 days from the time such notice is given, this Agreement may be
canceled by the non-breaching party.
<PAGE>
10. FORCE MAJEURE.
Neither party shall be liable under this Agreement for delays or other
non-performance caused by any unusual occurrence beyond the party's reasonable
control, including, but not limited to, war, fire, strikes or other labor
troubles, unforeseeable breakage of equipment, accidents beyond the control of
either party, acts of God, and unforeseeable actions of governmental authority,
laws, rules and/or regulations. Upon the occurrence of an event of force
majeure, the party affected thereby shall give prompt notice to the other party
of such and shall thereafter undertake all commercially reasonable efforts to
remedy and/or mitigate the event of force majeure. In the event of an event of
force majeure declared by either party, the term of this Agreement shall be
extended automatically for a period equal in length to the period of the force
majeure.
11. RELATIONSHIP OF THE PARTIES.
Nothing in this Agreement shall be construed or implied to create a joint
venture, partnership, agency or other fiduciary or other relationship between
USLT and MESA. The sole relationship between the parties hereto is that of
vendor and vendee.
Each party reserves the exclusive right to exercise complete control over and/or
direction of its employees, agents, representatives and subcontractors in
connection with this Agreement and the work to be performed hereunder. Neither
party shall have any authority to employ any person as employee, agent,
representative, or subcontractor for or on behalf of the other party for any
purpose.
Neither party shall make any representations on behalf of the other party, nor
shall either party assume or create any obligation, expressed or implied, on
behalf of the other party.
12. RESTRICTION ON CERTAIN INTERNATIONAL SALES.
MESA agrees that under no circumstances will it knowingly divulge any of the
information obtained under this Agreement or transfer any Products marketed
under this Agreement to national persons or entities of the following nations,
nor will it permit or authorize the transfer or shipment, direct or indirect, of
any Products to these nations: the Democratic Peoples' Republic of Korea
(sometimes referred to as North Korea), Cuba, Libya, Iraq or Iran.
13. INDEMNIFICATION.
Each party shall be responsible for and indemnify the other party against all
losses, claims, expenses or damages suffered by the other party that result in
any way from any accident, injury, or damage either to person or property or
from death of any persons by reason of any act or omission on its part and
related to the subject matter of this Agreement.
<PAGE>
14. GOVERNING LAW.
This contract shall be governed by and construed in accordance with the laws of
the State of Texas.
15. ASSIGNMENT.
Neither MESA nor USLT shall assign this contract or any rights hereunder other
than to a corporate affiliate or successor to essentially the entire relevant
line of business without the prior written consent of the other party, which
consent shall not be unreasonably withheld.
16. NON-WAIVER.
Failure of USLT or MESA to exercise any rights under this Agreement upon one
occasion shall not waive USLT's or MESA's right to exercise the same on another
occasion.
17. COMPLETE AGREEMENT; AMENDMENT.
This Agreement constitutes the complete and entire agreement between the parties
hereto, and supersedes any previous communications, representations or
agreements, whether verbal or written, with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate as of this 31st day of December, 1998.
US LIQUIDS OF TEXAS, INC.
By:____________________________________
Sean Kelley, Vice President
MESA PROCESSING, INC.
By:____________________________________
Thomas B. Blanton, President
<PAGE>
EXHIBIT I
YELLOW GREASE
Free Fatty Acids o 15%
Moisture, Impurities and Unsaponifiable o 2%
BROWN GREASE
Free Fatty Acids o 85%
Moisture, Impurities o 2%
Unsaponifiable o 3%
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated March 3, 1998,
and April 24, 1998 included in U S Liquids' Form 10-K for the year ended
December 31, 1997, and Form 8-K/A filed with the SEC on June 2, 1998 and to all
references to our firm included in this registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
February 16, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM U S LIQUIDS, INC. 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-END> SEP-30-1998
<CASH> 4,827
<SECURITIES> 0
<RECEIVABLES> 30,185
<ALLOWANCES> (1,683)
<INVENTORY> 1,190
<CURRENT-ASSETS> 38,795
<PP&E> 86,902
<DEPRECIATION> 8,626
<TOTAL-ASSETS> 221,317
<CURRENT-LIABILITIES> 36,340
<BONDS> 0
0
0
<COMMON> 123
<OTHER-SE> 118,742
<TOTAL-LIABILITY-AND-EQUITY> 221,317
<SALES> 0
<TOTAL-REVENUES> 77,860
<CGS> 0
<TOTAL-COSTS> 63,894
<OTHER-EXPENSES> (235)
<LOSS-PROVISION> 1,341
<INTEREST-EXPENSE> 2,310
<INCOME-PRETAX> 11,891
<INCOME-TAX> 4,835
<INCOME-CONTINUING> 7,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,056
<EPS-PRIMARY> .73
<EPS-DILUTED> .64
</TABLE>
