<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1998.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WASTE CONNECTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4953 94-3283464
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2260 DOUGLAS BOULEVARD, SUITE 280
ROSEVILLE, CALIFORNIA 95661
(916) 772-2221
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RONALD J. MITTELSTAEDT
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
WASTE CONNECTIONS, INC.
2260 DOUGLAS BOULEVARD, SUITE 280
ROSEVILLE, CALIFORNIA 95661
(916) 772-2221
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES OF ALL COMMUNICATIONS TO:
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ROBERT D. EVANS, ESQ. STEPHEN A. RIDDICK, ESQ.
SHARTSIS, FRIESE & GINSBURG LLP PIPER & MARBURY L.L.P.
ONE MARITIME PLAZA, 18TH FLOOR 36 SOUTH CHARLES STREET
SAN FRANCISCO, CALIFORNIA 94111 BALTIMORE, MARYLAND 21201
(415) 421-6500 (410) 539-2530
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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, please 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, 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(d)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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=====================================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value...................... $27,600,000 $8,142.00
=====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) promulgated under the Securities
Act of 1933.
------------------------
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 BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
, 1998
2,000,000 SHARES
[LOGO]
WASTE CONNECTIONS, INC.
COMMON STOCK
------------------
All of the 2,000,000 shares of Common Stock (the "Common Stock") offered
hereby are being sold by Waste Connections, Inc. (the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be between
$10.00 and $12.00 per share. For information relating to factors to be
considered in determining the initial public offering price, see "Underwriting."
Application has been made to have the Common Stock approved for quotation on the
Nasdaq National Market under the symbol "WCNX."
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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============================================================================================================
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
- ------------------------------------------------------------------------------------------------------------
Per Share................................. $ $ $
- ------------------------------------------------------------------------------------------------------------
Total(2).................................. $ $ $
============================================================================================================
</TABLE>
(1) Before deducting expenses of the offering payable by the Company estimated
at $ .
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 300,000 shares of Common Stock solely to cover
over-allotments, if any. To the extent the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about ,
1998.
BT ALEX. BROWN CIBC OPPENHEIMER
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3
This Prospectus contains registered services marks, trademarks and trade
names of the Company, including the Waste Connections, Inc. name and logo.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent auditors
and with quarterly reports containing unaudited interim consolidated financial
information for each of the first three quarters of each fiscal year.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements, including the Notes thereto, appearing
elsewhere in this Prospectus. Except as otherwise noted herein, all information
in this Prospectus: (i) gives effect to the automatic conversion upon
consummation of this offering of all outstanding shares of Series A Preferred
Stock into 2,499,998 shares of Common Stock; and (ii) assumes no exercise of the
Underwriters' over-allotment option. See "Description of Capital Stock,"
"Underwriting" and Notes 8 and 9 of Notes to the Company's Financial Statements
included elsewhere herein. Unless otherwise specified herein, all references to
the "Company" or "Waste Connections" mean Waste Connections, Inc. and its
subsidiaries, and all references to "solid waste" mean non-hazardous solid
waste.
THE COMPANY
Waste Connections is a regional, integrated solid waste services company
that provides solid waste collection, transfer, disposal and recycling services
in secondary markets of the Western U.S. As of March 1, 1998, the Company served
more than 120,000 commercial, industrial and residential customers in
Washington, California and Idaho. The Company owns six collection operations and
operates two transfer stations, one Subtitle D landfill and one recycling
facility.
Waste Connections was founded in September 1997 to execute an
acquisition-based growth strategy in secondary markets of the Western U.S. The
Company has acquired five solid waste services operations since its formation
and has identified more than 300 independent operators of such businesses in the
states where it currently operates, many of which it believes may be suitable
for acquisition by the Company. In addition, the Company is currently assessing
potential acquisitions of solid waste services operations in Kansas, Montana,
Nebraska, Oklahoma, Oregon, South Dakota, Texas and Wyoming.
The Company has targeted secondary markets in the Western U.S. because it
believes that (i) a large number of independent solid waste services companies
suitable for acquisition by the Company are located in these markets; (ii) there
is less competition in these markets from large, well-capitalized solid waste
services companies; and (iii) these markets have strong projected economic and
population growth rates. In addition, the Company's senior management team has
extensive experience acquiring and operating solid waste services businesses in
the Western U.S.
The Company has developed a market-based operating strategy tailored to the
competitive and regulatory factors that affect the markets in which it operates.
In certain Western U.S. markets, where waste collection services are governed by
exclusive franchise agreements, municipal contracts and governmental
certificates (referred to in Washington as "G certificates"), the Company
generally intends to pursue a collection-based operating strategy. In these
markets, which include the Company's current markets of Washington, California
and Idaho, the Company believes that controlling the waste stream by providing
collection services under exclusive franchise agreements, municipal contracts
and governmental certificates is often more important to a solid waste services
company's growth and profitability than owning or operating landfills. In
markets where the Company considers ownership of landfills advantageous due to
competitive and regulatory factors, the Company generally intends to pursue an
integrated, disposal-based strategy.
The Company's objective is to build a leading solid waste services company
in the secondary markets of the Western U.S. by (i) acquiring collection,
transfer, disposal and recycling operations in new markets and through "tuck-in"
acquisitions in existing markets; (ii) securing additional exclusive franchises,
municipal contracts and governmental certificates; (iii) generating internal
growth in existing markets by increasing market penetration and adding services
to its existing operations; and (iv) enhancing profitability by increasing
operating efficiencies of existing and acquired operations. The Company believes
that the experience of the members of its senior management team and their
knowledge of and reputation in the solid waste industry in the
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Company's targeted markets will provide the Company with significant competitive
advantages as it pursues its growth strategy.
The Company was incorporated in Delaware in 1997. Its principal executive
offices are located at 2260 Douglas Boulevard, Suite 280, Roseville, California
95661, and its telephone number is (916) 772-2221.
BACKGROUND
In September 1997, the Company joined with two other parties to bid on
certain solid waste and recycling businesses offered for sale by Browning-Ferris
Industries, Inc. ("BFI"). The Company acquired the stock of Browning-Ferris
Industries of Washington, Inc., a provider of solid waste services to more than
75,000 customers through three municipal contracts and one G certificate in and
around Clark County, Washington, and the stock of its subsidiary, Fibres
International, Inc., a provider of solid waste services to more than 27,000
customers through eight municipal contracts and one G certificate in King and
Snohomish Counties, Washington. The acquired companies subsequently changed
their names to Waste Connections of Washington, Inc. and Waste Connections
International, Inc., respectively. The two other parties acquired selected BFI
solid waste collection and transportation assets and operations in Idaho, and
BFI's recycling assets and operations in Washington, Idaho and Oklahoma.
RECENT DEVELOPMENTS
MADERA ACQUISITION
Effective February 1, 1998, the Company acquired Madera Disposal Systems,
Inc. ("Madera"), an integrated solid waste services company operating in north
central California, with 1997 revenues of approximately $7.8 million. In
connection with the Madera acquisition, the Company acquired one franchise
agreement and one municipal contract, pursuant to which it serves more than
8,000 commercial, industrial and residential customers, and agreements to
operate two transfer stations, one Subtitle D landfill (the "Fairmead Landfill")
and one recycling facility. The operating agreement for the Fairmead Landfill
has a remaining term of approximately 11 years. As of March 1, 1998, the
Fairmead Landfill was estimated to have a remaining life of approximately 26
years. Approximately 45% of the solid waste disposed of at the Fairmead Landfill
in 1997 was delivered by Madera.
IDAHO ACQUISITIONS
On January 30, 1998, the Company acquired the stock of Waste Connections of
Idaho, Inc., a provider of solid waste collection services to more than 12,000
customers in and around Idaho Falls and Pocatello, Idaho through subscription
agreements with residential customers and seven municipal contracts. Waste
Connections of Idaho, Inc. was formed in September 1997 by affiliates of the
Company for the purpose of acquiring certain assets of Browning-Ferris
Industries of Idaho, Inc.
Effective March 1, 1998, the Company acquired certain solid waste
collection assets from Hunter Enterprises, Inc., a solid waste services company
located in eastern Idaho. These assets "tuck in" to the Company's Idaho
operations and serve approximately 3,500 residential and commercial customers.
REVOLVING CREDIT FACILITY
On January 30, 1998, the Company entered into a revolving credit facility
with BankBoston, N.A., which provides a borrowing capacity of $25.0 million. The
revolving credit facility was obtained primarily to fund acquisitions and to
refinance debt incurred in connection with the acquisition the Company completed
in September 1997. As of March 1, 1998, the aggregate
4
<PAGE> 6
outstanding principal indebtedness under the revolving credit facility was
approximately $17.0 million.
THE OFFERING
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<S> <C>
Common Stock offered by the Company.................. 2,000,000 shares
Common Stock to be outstanding after this offering... 7,799,998 shares(1)
Use of proceeds...................................... Repayment of existing indebtedness
and for general corporate purposes,
including possible acquisitions and
capital expenditures.
Proposed Nasdaq National Market symbol............... WCNX
</TABLE>
- ---------------
(1) Excludes 2,308,800 shares of Common Stock issuable upon the exercise of
warrants and options outstanding as of March 1, 1998, at a weighted average
exercise price of $3.58 per share. See "Management -- Stock Option Plan,"
"Management -- Certain Transactions" and Note 9 of Notes to the Company's
Financial Statements included elsewhere herein.
5
<PAGE> 7
WASTE CONNECTIONS, INC. AND PREDECESSORS
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSORS COMBINED(1) WASTE
----------------------------------------------------- CONNECTIONS, INC. PRO FORMA AS
NINE MONTHS THREE MONTHS ADJUSTED
YEARS ENDED DECEMBER 31, ENDED ENDED YEAR ENDED
------------------------------------- SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997 1997(2) 1997(3)
------- ------- ------- ------- ------------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Revenues............... $24,581 $27,613 $27,595 $22,160 $18,114 $ 6,237 $32,812
Cost of operations..... 19,512 22,730 22,573 17,594 14,753 4,703 24,338
Selling, general and
administrative....... 4,112 3,871 4,207 3,775 3,009 619 3,867
Depreciation and
amortization......... 948 1,248 1,417 1,286 1,083 354 1,986
Start-up and
integration.......... -- -- -- -- -- 493 493
Stock compensation..... -- -- -- -- -- 2,484 2,484
------- ------- ------- ------- ------- --------- -------
Income (loss) from
operations........... 9 (236) (602) (495) (731) (2,416) (356)
Interest expense....... (468) (739) (369) (237) (456) (600) --
Other income (expense),
net.................. 686 868 103 2,514 14 (36) 151
------- ------- ------- ------- ------- --------- -------
Income (loss) before
income taxes......... 227 (107) (868) 1,782 (1,173) (3,052) (205)
Income tax (provision)
benefit.............. (77) -- 269 (505) -- 186 (876)
------- ------- ------- ------- ------- --------- -------
Net income (loss)...... $ 150 $ (107) $ (599) $ 1,277 $(1,173) $ (2,866) $(1,081)
======= ======= ======= ======= ======= ========= =======
Redeemable convertible
preferred stock
accretion............ $ (531) $ --
--------- -------
Net loss applicable to
common stockholders.. $ (3,397) $(1,081)
========= =======
Basic net loss per
share................ $ (1.48) $ (0.14)
========= =======
Shares used in the per
share calculations... 2,300,000 7,799,998
</TABLE>
<TABLE>
<CAPTION>
WASTE CONNECTIONS, INC.
DECEMBER 31, 1997
-----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(4) ADJUSTED(4)(5)
------- ------------ --------------
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BALANCE SHEET DATA:
Cash...................................................... $ 820 $ 1,296 $ 3,313
Working capital........................................... 836 297 3,764
Property and equipment, net............................... 4,185 7,215 7,215
Total assets.............................................. 18,880 33,414 35,431
Long-term debt(6)......................................... 6,762 15,732 --
Redeemable convertible preferred stock.................... 7,523 7,523 --
Redeemable common stock(7)................................ -- 2,800 --
Total stockholders' equity (deficit)...................... (697) (697) 28,825
</TABLE>
(see footnotes on following page)
6
<PAGE> 8
- ---------------
(1) The combined financial data for the Company's predecessors for the years
ended December 31, 1993, 1994, 1995 and 1996 do not purport to present the
combined results of operations of the Company's predecessors in accordance
with generally accepted accounting principles ("GAAP"). Instead, they
represent merely a summation of statement of operations data and balance
sheet data of the individual predecessor companies on an historical basis
and exclude the effects of pro forma adjustments. This data will not be
comparable to and may not be indicative of the Company's results of
operations. In addition, the combined financial data of the predecessor
operations may not necessarily be indicative of the financial position or
results of operations that would have been realized had the predecessor
companies been operated as stand-alone entities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and the audited financial statements of the Company and its predecessors.
(2) Represents the period from inception of the Company (September 9, 1997)
through December 31, 1997. Operations commenced October 1, 1997.
(3) Assumes the Company's acquisitions of Madera Disposal Systems, Inc., Waste
Connections of Idaho, Inc. and the Company's predecessors occurred on
January 1, 1997, adjusted to reflect the sale of the Common Stock offered
hereby at an assumed initial public offering price of $11.00 per share and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Unaudited Pro Forma Financial Statements."
(4) Assumes the Company's acquisitions of Madera Disposal Systems, Inc. and
Waste Connections of Idaho, Inc. occurred on December 31, 1997.
(5) Adjusted to reflect the sale of the Common Stock offered by the Company
hereby at an assumed initial public offering price of $11.00 per share and
the application of the estimated net proceeds therefrom, as described in
"Use of Proceeds."
(6) Excludes redeemable convertible preferred stock.
(7) Common Stock issued in connection with the acquisition of Madera is
redeemable in certain circumstances, as defined in the Stock Purchase
Agreement between the Company and the Madera shareholders; however, the
redemption right expires upon the closing of this offering. See Notes 2 and
9 of Notes to the Company's Financial Statements included elsewhere herein.
7
<PAGE> 9
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered by this
Prospectus. This Prospectus contains certain forward-looking statements that
involve risks and uncertainties. Discussions containing such forward-looking
statements may be found in the material set forth under "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as in the Prospectus generally.
The cautionary statements contained in this Prospectus should be read as
applying to all related forward-looking statements wherever they appear in this
Prospectus. The Company's actual results could differ materially from those
discussed here as a result of various factors, including without limitation
those discussed below and elsewhere in this Prospectus.
Limited Operating History; Integration of Completed Acquisitions. The
Company was formed in September 1997 and commenced operations on October 1,
1997. Accordingly, the Company has only a limited operating history upon which
to base an evaluation of its business and its prospects. The disclosures
regarding the Company contained in this Prospectus must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in
their early stages of development. In addition, there can be no assurance that
the Company's recently assembled senior management team will be able to manage
the Company successfully and implement the Company's operating and growth
strategies effectively.
The Company's effective integration of acquired businesses into its
organization and operations is and will continue to be important to the
Company's growth and future financial performance. A part of the Company's
strategy is to achieve economies of scale and operating efficiencies by
increasing its size through acquisitions. These goals may not be achieved unless
the Company effectively combines the operations of acquired businesses with its
existing operations. Because of the Company's limited operating history, there
can be no assurance that its recently assembled senior management team will
succeed in integrating the Company's completed and future acquisitions. Any
difficulties the Company encounters in the integration process could have a
material adverse effect on its business, financial condition and results of
operations.
Growth Strategy Implementation; Ability to Manage Growth. The Company's
growth strategy includes (i) expanding through acquisitions, (ii) acquiring
additional exclusive franchise agreements and municipal contracts and (iii)
generating internal growth. The Company's ability to execute its growth strategy
will depend on a number of factors, including the success of existing and
emerging competition, the availability of acquisition targets, the ability to
maintain profit margins in the face of competitive pressures, the ability to
continue to recruit, train and retain qualified employees, the strength of
demand for the Company's services and the availability of capital to support its
growth.
If the Company is able to execute its growth strategy, it may experience
periods of rapid growth. Such growth, if it occurs, could place a significant
strain on the Company's management, operational, financial and other resources.
The Company's ability to maintain and manage its growth effectively will require
it to expand its management information systems capabilities and its operational
and financial systems and controls. Moreover, the Company will need to attract,
train, motivate, retain and manage additional senior managers, technical
professionals and other employees. Any failure to expand the Company's
operational and financial systems and controls or to recruit and integrate
appropriate personnel at a pace consistent with the Company's revenue growth
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Strategy."
Availability of Acquisition Targets. The Company expects that a substantial
part of its future growth will come from acquiring solid waste collection,
transfer and disposal operations. There can be no assurance that the Company
will be able to identify suitable acquisition candidates or, if such
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candidates are identified, to negotiate their acquisition at prices or on terms
and conditions favorable to the Company. The Company's failure to implement its
acquisition strategy successfully would limit its potential growth. See
"Business -- Strategy" and "-- Acquisition Program."
The Company competes for acquisition candidates with other entities, some
of which have greater financial resources than the Company. Increased
competition for acquisition candidates may result in fewer acquisition
opportunities being available to the Company, as well as less attractive
acquisition terms, including increased purchase prices. These circumstances may
increase acquisition costs to levels that are beyond the Company's financial
capability or pricing parameters or that may have an adverse effect on the
Company's results of operations and financial condition. The Company believes
that a significant factor in its ability to consummate acquisitions after
completion of this offering will be the relative attractiveness of shares of the
Company's Common Stock as consideration for potential acquisition candidates.
This attractiveness may depend in large part on the relative market price and
capital appreciation prospects of the Common Stock compared to the equity
securities of the Company's competitors. If the market price of the Company's
Common Stock were to decline materially over a prolonged period of time, the
Company's acquisition program could be materially adversely affected.
Highly Competitive Industry. The solid waste services industry is highly
competitive and fragmented and requires substantial labor and capital resources.
Certain of the markets in which the Company competes or will likely compete are
served by one or more large, national solid waste companies, as well as by
numerous regional and local solid waste companies of varying sizes and
resources, some of which have accumulated substantial goodwill. The Company also
competes with counties, municipalities and solid waste districts that maintain
their own waste collection and disposal operations. These counties,
municipalities and solid waste districts may have financial advantages over the
Company, because of their access to user fees and similar charges, tax revenues
and tax-exempt financing. Certain of the Company's competitors may also be
better capitalized, have greater name recognition or be able to provide services
at a lower cost than the Company. The Company's inability to compete with
governmental service providers and larger and better capitalized companies could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company derives a substantial portion of its revenue from exclusive
municipal contracts and franchise agreements, of which a significant number will
be subject to competitive bidding at some time in the future. See
"Business -- Services." The Company intends to bid on additional municipal
contracts and franchise agreements as a means of adding customers. There can be
no assurance that the Company will be the successful bidder to obtain or retain
contracts that come up for competitive bidding. In addition, some of the
Company's contracts may be terminated by the customer before the end of the
contract term. Municipalities in Washington may by law annex unincorporated
territory, which would remove such territory from the area covered by G
certificates issued by the Washington Utilities and Transportation Commission.
Such annexation could reduce the areas covered by the Company's G certificates
and subject more of the Company's Washington operations to competitive bidding
in the future. See "Business -- G Certificates." The Company's inability to
replace revenues from contracts lost through competitive bidding or early
termination or the renegotiation of existing contracts with other revenues
within a reasonable time period could have a material adverse effect on the
Company's business, financial condition and results of operations.
Intense competition exists not only to provide services to customers but
also to acquire other businesses within each market. Other companies have
adopted or should be expected to adopt the Company's strategy of acquiring and
consolidating regional and local businesses to develop a national presence.
Increasing consolidation in the solid waste services industry is expected to
increase competitive pressures. See "Business -- Competition."
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Potential Inability to Finance the Company's Potential Growth. The Company
anticipates that any future business acquisitions will be financed through cash
from operations, borrowings under its bank line of credit, the issuance of
shares of the Company's Common Stock and/or seller financing. If acquisition
candidates are unwilling to accept, or the Company is unwilling to issue, shares
of the Company's Common Stock as part of the consideration for such
acquisitions, the Company may be required to use more of its available cash
resources or borrowings under its credit facility to fund such acquisitions. To
the extent that cash from operations and borrowings under the Company's credit
facility are insufficient to fund acquisitions, the Company will require
additional equity and/or debt financing. Additionally, growth through the
development or acquisition of new landfills, transfer stations and other
facilities, as well as the ongoing maintenance of such landfills, transfer
stations or other facilities, may require substantial capital expenditures.
There can be no assurance that the Company will have sufficient existing capital
resources or be able to raise sufficient additional capital resources on terms
satisfactory to the Company to meet any or all of the foregoing capital
requirements.
The terms of the Company's credit facility require the Company to obtain
the consent of the lending banks prior to consummating acquisitions of other
businesses for cash consideration (including all liabilities assumed) in excess
of $3.0 million. The Company's inability to obtain such consent could prevent
the Company from completing certain acquisitions, which could inhibit the
Company's ability to execute its growth strategy. Furthermore, the Company's
credit facility contains various financial covenants predicated on the Company's
current and projected financial condition following completion of an
acquisition. If the Company is unable to satisfy these financial covenants on a
pro forma basis following completion of an acquisition, it would be unable to
complete the acquisition without a waiver from its lending banks. Whether or not
a waiver is needed, if the results of the Company's future operations differ
materially from those that are anticipated, the Company may no longer be able to
comply with the covenants in the credit facility. The Company's failure to
comply with such covenants may result in a default under the credit facility,
which could result in acceleration of the date for repayment of debt incurred
under the credit facility and would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Dependence on Management. The Company depends significantly on the services
of the members of its senior management team, the loss of any of whom may have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company currently maintains "key man" life insurance
with respect to Ronald J. Mittelstaedt, its President, Chief Executive Officer
and Chairman, in the amount of $3.0 million. See "Management."
Geographic Concentration. The Company's operations and customers are
located in Washington, California and Idaho, and the Company expects to focus
its operations on the Western U.S. for at least the foreseeable future. As of
March 1, 1998, approximately 68% of the Company's total annualized revenues were
derived from customers located in Washington. Therefore, the Company's business,
financial condition and results of operations are susceptible to downturns in
the general economy in the Western U.S., particularly in Washington, and other
factors affecting the region, such as state regulations affecting the solid
waste services industry and severe weather conditions. In addition, the costs
and time involved in permitting, and the scarcity of, available landfills in the
Western U.S. could make it difficult for the Company to expand vertically in
those markets. There can be no assurance that the Company will complete a
sufficient number of acquisitions in other markets to lessen its geographic
concentration. See "Business -- Strategy."
Seasonality of Business. Based on historic trends experienced by the
businesses acquired by the Company, the Company's results of operations will
vary seasonally, with revenues typically lowest in the first quarter of the
year, higher in the second and third quarters, and lower in the fourth quarter
than in the second and third quarters. This seasonality reflects the lower
volume of solid waste generated during the late fall, winter and early spring
months, resulting from decreased solid
10
<PAGE> 12
waste volume relating to construction and demolition activities during the
winter months in the Western U.S. In addition, certain of the Company's
operating costs should be generally higher in the winter months, because adverse
winter weather conditions slow waste collection activities, resulting in higher
labor costs, and greater precipitation increases the weight of collected waste,
resulting in higher disposal costs, which are calculated on a per ton basis.
Because a majority of the Company's operating expenses are expected to remain
fairly constant throughout the fiscal year, operating income should be expected
to be generally lower in the winter months. There can be no assurance that
future seasonal and quarterly fluctuations will not have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Government Regulation. The Company is subject to extensive and evolving
environmental laws and regulations, the enforcement of which has become
increasingly stringent in recent years as a result of greater public interest in
protecting the environment. These laws and regulations impose substantial costs
on the Company and affect the Company's business in many ways, including as set
forth below and under "Business -- Regulation."
If the Company implements its strategy for landfill ownership and
operation, it will be necessary to obtain and maintain in effect one or more
licenses or permits, as well as zoning, environmental and/or other land use
approvals. These licenses or permits and approvals are difficult and time-
consuming to obtain and renew and are frequently subject to opposition by
various elected officials or citizens' groups. See "Business -- Legal
Proceedings." There can be no assurance that the Company will be successful in
obtaining and maintaining in effect the permits and approvals required for the
successful ownership or operation (including capacity increases) of any future
landfill activities engaged in by the Company, and the failure by the Company to
obtain or maintain in effect a permit or approval significant to its landfill
business could have a material adverse effect on the Company's results of
operations and financial condition.
The design, operation and closure of landfills is extensively regulated.
These regulations include, among others, the regulations ("Subtitle D
Regulations") establishing minimum federal requirements adopted by the U.S.
Environmental Protection Agency (the "EPA") in October 1991 under Subtitle D of
the Resource Conservation and Recovery Act of 1976 ("RCRA"). Failure to comply
with these regulations could require the Company to undertake investigatory or
remedial activities, to curtail operations or to close a landfill temporarily or
permanently. Future changes to these regulations may require the Company to
modify, supplement or replace equipment or facilities at costs that may be
substantial. The failure of regulatory agencies to enforce these regulations
vigorously or consistently may give an advantage to competitors of the Company
whose facilities do not comply with the Subtitle D Regulations or their state
counterparts. The Company's financial obligations arising from any failure to
comply with these regulations could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Companies in the solid waste services business, including the Company, are
frequently subject in the normal course of business to judicial and
administrative proceedings involving federal, state or local agencies or
citizens' groups. Governmental agencies may seek to impose fines or penalties on
the Company or to revoke or deny renewal of the Company's operating permits,
franchises or licenses for violations or alleged violations of environmental
laws or regulations or require the Company to make expenditures to remediate
potential environmental problems relating to waste disposed of or stored by the
Company or its predecessors, or resulting from its or its predecessors'
transportation and collection operations. The Company may also be subject to
actions brought by individuals or community groups in connection with the
permitting, franchising or licensing of its operations, any alleged violation of
such permits, franchises or licenses or other matters. Any adverse outcome in
these proceedings could have a material adverse effect on the Company's
11
<PAGE> 13
business, financial condition and results of operations and may subject the
Company to adverse publicity. See "Potential Environmental Liability" below and
"Business -- Legal Proceedings."
Potential Environmental Liability. The Company is subject to liability for
any environmental damage that its solid waste facilities may cause, including
damage to neighboring landowners or residents, particularly as a result of the
contamination of soil, groundwater or surface water, and especially drinking
water. The Company's potential liability includes damage resulting from
conditions existing prior to the acquisition of such facilities by the Company.
The Company may also be subject to liability for any off-site environmental
contamination caused by pollutants or hazardous substances whose transportation,
treatment or disposal was arranged by the Company or its predecessors. Any
substantial liability for environmental damage incurred by the Company could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Regulation."
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA" or "Superfund"), imposes strict, joint and several
liability on the present owners and operators of facilities from which a release
of hazardous substances into the environment has occurred, as well as any party
that owned or operated the facility at the time of disposal of the hazardous
substances, regardless of when the hazardous substance was first detected.
CERCLA defines the term "hazardous substances" very broadly to include more than
700 substances that are specified under RCRA, have specific hazardous
characteristics defined under RCRA or are regulated under any of several other
statutes.
Similar liability is imposed on the generators of waste that contains
hazardous substances and on hazardous substance transporters that select the
treatment, storage or disposal site. All such persons, who are referred to as
potentially responsible parties ("PRPs"), generally are jointly and severally
liable for the expense of waste site investigation, waste site cleanup costs and
natural resource damages, regardless of whether they exercised due care and
complied with all relevant laws and regulations. These costs can be very
substantial. Furthermore, such liability can be based on the existence of even
very small amounts of hazardous substances; unlike most of the other statutes
that regulate hazardous substances, CERCLA does not require any minimum volume
or concentration of a hazardous substance to be present before imposing
liability. It is likely that hazardous substances have in the past come to be
located in landfills with which the Company is or will become associated. If any
of the Company's sites or operations ever experiences environmental problems,
the Company could be subject to substantial liability, which could have a
material adverse effect on its business, financial condition and results of
operations. See "Business -- Regulation."
With respect to each business that the Company acquires or has acquired,
there may be liabilities that the Company fails or is unable to discover,
including liabilities arising from noncompliance with environmental laws by
prior owners, and for which the Company, as a successor owner, may be legally
responsible. Representations, warranties and indemnities from the sellers of
such businesses, if obtained and if legally enforceable, may not cover fully the
resulting environmental liabilities, because of their limited scope, amount or
duration, the financial limitations of the warrantor or indemnitor or other
reasons. Certain environmental liabilities, even though expressly not assumed by
the Company, may nonetheless be imposed on the Company under certain legal
theories of successor liability, particularly under CERCLA. The Company's
insurance program does not cover liabilities associated with any environmental
cleanup or remediation of the Company's own sites. An uninsured claim against
the Company, if successful and of sufficient magnitude, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Acquisition Program."
Limitations on Landfill Permitting and Expansion. The Company currently
owns no landfills and operates only one landfill. The Company's ability to meet
its growth objectives may depend in part, however, on its ability to acquire,
lease and expand landfills and develop new landfill sites. As of March 1, 1998,
the estimated total remaining permitted disposal capacity of the Fairmead
Landfill
12
<PAGE> 14
in Madera County, California operated by the Company was approximately 600,000
tons, with approximately 3.5 million additional tons of disposal capacity in
various stages of permitting. There can be no assurance that the Company will be
successful in obtaining new landfill sites or expanding the permitted capacity
of the Fairmead Landfill once its remaining permitted disposal capacity has been
consumed.
In some areas in which the Company operates, suitable land for new sites or
expansion of existing landfill sites may be unavailable. Landfills in states in
which the Company operates are subject to state regulations and practices that
generally require operating permits to be renewed at least every five years. The
process of obtaining required permits and approvals to build, operate and expand
solid waste management facilities, including landfills and transfer stations,
has become increasingly difficult and expensive, often taking several years,
requiring numerous hearings and compliance with zoning, environmental and other
requirements and often subject to resistance from citizen, public interest or
other groups. There can be no assurance that the Company will succeed in
obtaining or maintaining the permits it requires to expand or that such permits
will not contain burdensome terms and conditions. Even when granted, final
permits to expand are often not approved until the remaining permitted disposal
capacity of a landfill is very low. Furthermore, local laws and ordinances also
may affect the Company's ability to obtain permits to expand landfills. If the
Company were to exhaust its permitted capacity at a landfill, its ability to
expand internally would be limited, and the Company could be required to cap and
close that landfill and forced to dispose of collected waste at more distant
landfills or at landfills operated by its competitors. The resulting increased
costs would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Services -- Landfills."
Alternatives to Landfill Disposal; Waste Reduction Programs. Alternatives
to landfill disposal, such as recycling, composting and incineration, are
available in some areas in which the Company operates. In addition, state and
local authorities increasingly mandate recycling and waste reduction at the
source and prohibit the disposal of certain types of wastes, such as yard
wastes, at landfills. These developments may result in the volume of waste being
reduced in certain areas. For example, California has adopted plans that set
goals for percentages of certain solid waste items to be recycled, which are
being phased in over the next several years. Increased use of alternatives to
landfill disposal may have a material adverse effect on the Company's business,
financial condition and results of operations.
Potential Inadequacy of Accruals for Closure and Post-Closure
Costs. Although the Company currently owns no landfills and operates only one
landfill, it may own and/or operate additional landfills in the future. In such
case, the Company will have material financial obligations relating to closure
and post-closure costs of landfills and any disposal facilities that it owns or
operates. The Company will in the future provide accruals for future financial
obligations relating to closure and post-closure costs of its owned or operated
landfills (generally for a term of 30 years after final closure of a landfill),
based on engineering estimates of consumption of permitted landfill airspace
over the useful life of any such landfill. There can be no assurance that the
Company's financial obligations for closing or post-closing costs will not
exceed the amount accrued and reserved or amounts otherwise receivable pursuant
to funds or reserves established for such purpose. Such a circumstance could
have a material adverse effect on the Company's business, financial condition
and results of operation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Services -- Landfills."
Incurrence of Charges Related to Capitalized Expenditures. In accordance
with generally accepted accounting principles, the Company capitalizes certain
expenditures and advances relating to acquisitions, pending acquisitions and
landfill development projects. Indirect acquisition costs such as executive
salaries, general corporate overhead, public affairs and other corporate
services are expensed as incurred. The Company's policy is to charge against
earnings any unamortized capitalized expenditures and advances (net of any
portion thereof that the Company estimates will be recoverable, through sale or
otherwise) relating to any operation that is permanently shut down,
13
<PAGE> 15
any pending acquisition that is not consummated and any landfill development
project that is not expected to be completed successfully. Therefore, the
Company may be required to incur a charge against earnings in future periods,
which charge, depending on its magnitude, could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Potential Inability to Obtain Performance or Surety Bonds, Letters of
Credit or Insurance. Municipal solid waste services contracts and landfill
closure obligations may require performance or surety bonds, letters of credit,
or other means of financial assurance to secure contractual performance. Ten of
the Company's existing 29 solid waste collection and recycling contracts require
the Company to obtain performance bonds, which it has obtained. If the Company
in the future were unable to obtain performance or surety bonds or letters of
credit in sufficient amounts or at acceptable rates, it could be precluded from
entering into additional municipal solid waste services contracts or obtaining
or retaining landfill operating permits. Any future difficulty in obtaining
insurance could also impair the Company's ability to secure future contracts
conditioned on the contractor's having adequate insurance coverage. Accordingly,
the failure of the Company to obtain performance or surety bonds, letters of
credit or other means of financial assurance or to maintain adequate insurance
coverage could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Risk Management,
Insurance and Performance Bonds."
Commodity Risk Upon Resale of Recyclables. The Company provides recycling
services to some of its customers. The sale prices of and demand for recyclable
waste products, particularly wastepaper, have been, and may continue to be,
volatile and subject to changing market conditions. Accordingly, the Company's
results of operations may be affected by changing resale prices or demand for
certain recyclable waste products, particularly wastepaper. These changes may
contribute to variability in the Company's period-to-period results of
operations. See "Business -- Services -- Recycling and Other Services."
Potential Anti-Takeover Effect of Certain Charter and By-Law Provisions and
Delaware Law. The Company's Amended and Restated Certificate of Incorporation
(the "Restated Certificate of Incorporation") and Amended and Restated By-Laws
(the "Restated By-Laws") provide for the Company's Board of Directors to be
divided into three classes of directors serving staggered three-year terms. As a
result, beginning in 1998, approximately one-third of the Company's Board will
be elected each year. The classified Board is designed to ensure continuity and
stability in the Board's composition and policies in the event of a hostile
takeover attempt or proxy contest. The classification of the Board would extend
the time required to effect any changes in control of the Board and may
discourage any hostile takeover bid for the Company. The classified Board may
also make the removal of the Company's incumbent management more difficult, even
if such removal would be beneficial to stockholders generally, and therefore may
discourage certain tender offers.
The authorized capital of the Company includes 10,000,000 shares of "blank
check" Preferred Stock, of which 2,500,000 shares have been authorized and
2,499,998 shares have been issued as Series A Preferred Stock. All outstanding
shares of Series A Preferred Stock automatically convert into shares of Common
Stock on a one-for-one basis upon the closing of this offering. The Board of
Directors has the authority to issue shares of Preferred Stock and to determine
the price, designation, rights, preferences, privileges, restrictions and
conditions, including voting and dividend rights, of these shares of Preferred
Stock without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of holders of any Preferred Stock that may be issued in the future.
The issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could make
it more difficult for a third party to acquire a majority of the outstanding
voting stock of the Company. The Company has no present plans to issue any
additional Preferred Stock. See "Description of Capital Stock."
14
<PAGE> 16
The Company is subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which, subject to certain exceptions,
prohibits the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the time that
such stockholder became an interested stockholder. The application of Section
203 also could have the effect of delaying or preventing a change of control of
the Company. These provisions, and provisions of the Restated Certificate of
Incorporation and Restated By-Laws, may deter hostile takeovers or delay or
prevent changes in control or management of the Company, including transactions
in which stockholders might otherwise receive a premium for their shares over
then current market prices. In addition, these provisions may limit the ability
of stockholders to approve transactions that they may deem to be in their best
interests. See "Description of Capital Stock -- Preferred Stock" and "-- Certain
Statutory, Charter and By-Law Provisions."
Shares Eligible for Future Sale; Registration Rights. The sale of
substantial amounts of the Company's Common Stock in the public market following
this offering (including shares issued on the exercise of outstanding warrants
and stock options), or the perception that such sales could occur, could
adversely affect prevailing market prices of the Company's Common Stock. All of
the shares offered hereby will be freely saleable in the public market after
completion of this offering, unless acquired by affiliates of the Company. The
remaining 5,799,998 shares of Common Stock held by existing stockholders on
completion of this offering will be "restricted securities," as that term is
defined in Rule 144 under the Securities Act. Restricted securities may be sold
in the public market only if they are registered or if they qualify for an
exemption from registration under Rule 144 or 701 promulgated under the
Securities Act. All of the shares outstanding prior to completion of this
offering are subject to contractual restrictions that prohibit the stockholders
from selling or otherwise disposing of such shares for a period of 180 days
after the date of this Prospectus without the prior written consent of BT Alex.
Brown Incorporated. The Company has also agreed not to sell any shares of Common
Stock for 180 days after the date of this Prospectus without the prior written
consent of BT Alex. Brown Incorporated, except as consideration for business
acquisitions or upon the exercise of currently outstanding stock options or
warrants. After this 180-day period expires, 5,749,998 of the shares of Common
Stock that are either currently outstanding or will be outstanding on conversion
of the currently outstanding Series A Preferred Stock will be eligible for
resale in the public market under Rule 144 promulgated under the Securities Act.
An additional 50,000 of the currently outstanding shares of Common Stock will
become saleable in the public market ratably over three years, subject to the
restrictions of Rule 144. In addition, certain stockholders, who after the
closing of this offering will own approximately 5,799,998 shares of Common
Stock, have the right for the five years after the closing of this offering,
subject to certain conditions, to include their shares in future registration
statements relating to the Company's securities and to cause the Company to
register certain shares of Common Stock owned by them. See "Shares Eligible for
Future Sale."
After the completion of this offering, the Company intends to file a
registration statement under the Securities Act to register all shares issuable
on exercise of stock options or other awards granted or to be granted under its
existing stock plan. See "Management -- 1997 Stock Option Plan." After the
filing of such registration statement and subject to certain restrictions under
Rule 144, those shares will be freely saleable in the public market immediately
following exercise of such options.
The Company currently intends to file a shelf registration statement on
Form S-1 covering up to an additional 3,000,000 shares of Common Stock under the
Securities Act for its use in connection with future acquisitions. Such shares,
when issued, could be freely saleable in the public market 180 days after the
date of this Prospectus, or earlier on prior written approval of BT Alex. Brown
Incorporated by persons not affiliated with the Company, unless the Company
contractually restricts their resale. See "Shares Eligible for Future Sale" and
"Underwriting."
No Prior Public Market; Fluctuations in Quarterly Results; Potential Stock
Price Volatility. Prior to this offering, there has been no public market for
the Company's Common Stock, and there can be no assurance that an active trading
market will develop or be sustained after completion of
15
<PAGE> 17
this offering. The initial public offering price will be determined through
negotiations between the Company and the representatives of the Underwriters
based on several factors, and may not be indicative of the market price of the
Common Stock after completion of this offering. See "Underwriting." The Company
believes that period-to-period comparisons of its operating results should not
be relied upon as an indication of future performance. Due to a variety of
factors, including general economic conditions, government regulatory action,
acquisitions, capital expenditures and other costs related to the expansion of
operations and services, pricing changes and adverse weather conditions, it is
possible that in some future quarter, the Company's operating results will be
below the expectations of securities analysts and investors. In such event, the
price of the Company's Common Stock would likely be materially adversely
affected. The price of the Company's Common Stock may be highly volatile and is
likely to be affected by the foregoing and other factors. In addition, the stock
market has from time to time experienced significant price and volume
fluctuations that have often been unrelated to the operating performance of
companies whose securities are publicly traded. These broad market fluctuations,
however, may adversely affect the market price of the publicly traded securities
of such companies, including the Company's Common Stock. In the past, following
periods of volatility in the market price of a company's securities, securities
class action litigation has often been commenced against such company. There can
be no assurance that such litigation will not occur in the future with respect
to the Company. Litigation could result in substantial costs and divert
management's attention and resources, which could have a material adverse effect
on the Company's business, financial condition and results of operations. Any
adverse determination in any such litigation could also subject the Company to
significant liabilities.
Immediate and Substantial Dilution. Purchasers of shares of Common Stock in
this offering will incur an immediate and substantial dilution in the net
tangible book value per share of the Common Stock from the initial public
offering price. See "Dilution."
16
<PAGE> 18
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered hereby (after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company) are
estimated to be $19.3 million ($22.3 million if the Underwriters' overallotment
option is exercised in full), assuming an initial public offering price of
$11.00 per share.
The Company intends to use approximately $18.0 million of the net proceeds
to repay all outstanding indebtedness under its credit facility with BankBoston,
N.A. The Company's credit facility provides for borrowing capacity of up to
$25.0 million, presently bears interest based on either an adjusted prime rate
or the Eurodollar rate plus 2.0% to 2.75% per annum (the applicable rate was
8.44% as of the date of this Prospectus) and will mature on January 30, 2001.
The credit facility was obtained primarily to fund acquisitions and to refinance
debt incurred in connection with the acquisition the Company completed in
September 1997. The terms of the credit facility permit the Company to redraw on
the credit facility as needed for future acquisitions and capital expenditures
(subject to certain restrictions) and general corporate purposes.
The balance of the estimated net offering proceeds will be used for
acquisitions, capital expenditures and working capital. Pending specific
application of the net proceeds, the Company intends to invest unused net
proceeds in short-term, interest-bearing securities. The Company continually
evaluates potential acquisition candidates and intends to continue to pursue
acquisition opportunities that may become available. The Company is not
currently a party to any letters of intent or similar agreements with respect to
any material pending acquisitions.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock, and the
Company does not anticipate paying any cash dividends on the Common Stock in the
foreseeable future. The Company intends to retain all earnings for use in the
operation and expansion of its business. In addition, the Company's credit
facility contains restrictions on the payment of cash dividends. The Series A
Preferred Stock provides for cumulative dividends, which the Company intends to
pay in cash prior to the conversion of the Series A Preferred Stock into Common
Stock upon consummation of this offering.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth, as of December 31, 1997, (i) the long-term
debt and capitalization of the Company on an historical basis, (ii) the pro
forma long-term debt and capitalization of the Company, giving effect to the
acquisitions of Waste Connections of Idaho, Inc. and Madera and the financing of
those acquisitions as if they had occurred on December 31, 1997 and (iii) such
pro forma long-term debt and capitalization as adjusted to give effect to the
sale by the Company of the 2,000,000 shares offered hereby at an assumed initial
public offering price of $11.00 per share, after deducting underwriting
discounts and commissions and estimated offering expenses, after conversion of
all outstanding shares of Series A Preferred Stock into 2,499,998 shares of
Common Stock and after the application of a portion of the estimated net
offering proceeds to repay indebtedness as described under "Use of Proceeds."
This table should be read in conjunction with the Company's Financial Statements
and Notes thereto and the Unaudited Pro Forma Financial Statements and Notes
thereto, which are included elsewhere in this Prospectus. See "Description of
Capital Stock."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------
(IN THOUSANDS)
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED(1)
------- --------- --------------
<S> <C> <C> <C>
Long-term debt.............................................. $ 6,762 $17,182 $ --
------- ------- -------
Redeemable Convertible Preferred Stock, $.01 par value,
2,500,000 shares authorized; 2,499,998 shares issued and
outstanding actual and pro forma; no shares issued and
outstanding pro forma as adjusted......................... 7,523 7,523 --
Redeemable Common Stock, $.01 par value; no shares issued
and outstanding actual, 1,000,000 shares issued and
outstanding pro forma and no shares issued and outstanding
pro forma as adjusted(2).................................. -- 2,800 --
Stockholder's equity:
Preferred Stock, $.01 par value, 7,500,000 shares
authorized; no shares issued and outstanding, actual,
pro forma and pro forma as adjusted.................... -- -- --
Common Stock, $.01 par value, 50,000,000 shares
authorized; 2,300,000 shares issued and outstanding
actual and pro forma, 7,799,998 shares issued and
outstanding pro forma as adjusted(3)................... 23 23 78
Additional paid-in capital................................ 2,759 2,759 32,226
Stockholder notes receivable.............................. (82) (82) (82)
Accumulated deficit....................................... (3,397) (3,397) (3,397)
------- ------- -------
Total stockholders' equity (deficit)...................... (697) (697) 28,825
------- ------- -------
Total capitalization.............................. $13,588 $26,808 $28,825
======= ======= =======
</TABLE>
- ---------------
(1) A portion of the estimated net proceeds from this offering will be used to
repay all of the Company's then outstanding indebtedness.
(2) Common Stock issued in connection with the acquisition of Madera is
redeemable in certain circumstances. Upon completion of this offering, these
shares will no longer be redeemable. See Notes 2 and 9 of Notes to the
Company's Financial Statements included elsewhere herein.
(3) Excludes 2,308,800 shares issuable on the exercise of options and warrants
outstanding at March 1, 1998, at a weighted average exercise price of $3.58
per share. See "Management -- 1997 Stock Option Plan," "-- Certain
Transactions" and Note 9 of Notes to the Company's Financial Statements
included elsewhere herein.
18
<PAGE> 20
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
December 31, 1997, was $(8.8) million, or $(1.52) per share. Pro forma net
tangible book value per share represents the amount of the Company's total
tangible assets, less its total liabilities (excluding redeemable Common Stock
and redeemable Convertible Preferred Stock), after giving effect to the
acquisitions of Waste Connections of Idaho, Inc. and Madera as if they had
occurred on December 31, 1997, divided by the total number of shares of Common
Stock outstanding immediately prior to this offering.
After giving effect to the sale by the Company of 2,000,000 shares of
Common Stock in this offering at the assumed initial public offering price of
$11.00 per share (and after deduction of the underwriting discounts and
commissions and estimated offering expenses), the Company's pro forma net
tangible book value as of December 31, 1997, would have been approximately $10.4
million, or $1.33 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of approximately $2.85 per share
to existing stockholders and an immediate dilution of pro forma net tangible
book value of $9.67 per share to new investors purchasing Common Stock in this
offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma negative net tangible book value per share
prior to this offering................................ $(1.52)
Increase in pro forma net tangible book value per share
attributable to new investors......................... 2.85
------
Pro forma net tangible book value per share after this
offering.................................................. 1.33
------
Dilution in net tangible book value per share to new
investors................................................. $ 9.67
======
</TABLE>
The following table sets forth, as of December 31, 1997, on a pro forma
basis giving effect to the issuance of 1,000,000 shares of Common Stock in
connection with the Madera Acquisition as if it had occurred on December 31,
1997, the difference between existing stockholders and new investors purchasing
shares of Common Stock in this offering with respect to the number of shares
purchased from the Company (before deduction of the underwriting discounts and
commissions and estimated offering expenses), the total consideration paid and
the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 5,799,998 74.4% $ 9,823,000 30.9% $ 1.69
New investors...................... 2,000,000 25.6 22,000,000 69.1 $ 11.00
--------- ----- ----------- -----
Total.................... 7,799,998 100.0% $31,823,000 100.0%
========= ===== =========== =====
</TABLE>
As of March 1, 1998, the Company had outstanding stock options and warrants
exercisable for 2,308,800 shares of Common Stock at a weighted average exercise
price of $3.58 per share. If these options and warrants are exercised, further
dilution to new investors will occur. The Company may also issue additional
shares to effect future business acquisitions or upon exercise of stock options
granted in the future or other equity awards, which could result in additional
dilution to then existing stockholders. See "Management -- Stock Options and
Warrants."
19
<PAGE> 21
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following table presents selected historical and pro forma consolidated
statements of operations and balance sheet data of the Company and its
predecessors for the periods indicated.
The combined selected financial information of the Company's predecessors
as of December 31, 1996, and for the nine months ended September 30, 1997, and
the years ended December 31, 1995 and 1996 has been derived from audited
financial statements included elsewhere in this Prospectus. The combined
selected financial information of the Company's predecessors as of December 31,
1995, and for the years ended December 31, 1993 and 1994 has been derived from
financial statements that have not been audited. In the opinion of the Company's
management, the unaudited financial data include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for the unaudited periods. The
combined financial statements of the Company's predecessors have been prepared
to present the financial position and results of operations of Browning-Ferris
Industries of Washington, Inc. and Fibres International, Inc., and each of their
respective predecessors, related to the assets acquired and liabilities assumed
by the Company under the terms of the Purchase and Sale Agreement dated
September 29, 1997, with BFI. The combined financial data for the Company's
predecessors for the years ended December 31, 1993, 1994, 1995 and 1996 do not
purport to present the combined results of operations of the Company's
predecessors in accordance with generally accepted accounting principles.
Instead, they represent merely a summation of statements of operations data and
balance sheet data of the individual predecessor companies on an historical
basis and exclude the effects of pro forma adjustments. This data will not be
comparable to and may not be indicative of the Company's future results of
operations. In addition, the combined financial data of the predecessor
operations may not necessarily be indicative of the financial position or
results of operations that would have been realized had the predecessor
companies been operated as stand-alone entities.
The selected financial information for the Company as of December 31, 1997,
and for the period from inception (September 9, 1997) through December 31, 1997,
has been derived from audited financial statements included elsewhere in this
Prospectus. The selected financial information for Madera as of December 31,
1996 and 1997 and for the years ended December 31, 1995, 1996 and 1997 has been
derived from audited financial statements included elsewhere in this Prospectus.
The selected pro forma financial information as of and for the year ended
December 31, 1997, gives effect to this offering and the Company's acquisitions
of Waste Connections of Idaho, Inc., Madera Disposal Systems, Inc. and the
Company's predecessors as of the dates and for the periods indicated, and has
been derived from unaudited pro forma financial statements included elsewhere in
this Prospectus. The pro forma financial information does not purport to
represent what the Company's results actually would have been if such events had
occurred at the dates indicated, nor does such information purport to project
the results of the Company for any future period. The Combined Company and
Predecessor statements of operations data for the year ended December 31, 1997,
reflect the summation of the operating results of the Company's predecessors for
the nine months ended September 30, 1997, with the operating results of the
Company for the period from inception (September 9, 1997) through December 31,
1997. The combined financial data do not purport to present the combined results
of operations of the Company and its predecessors in accordance with generally
accepted accounting principles. Instead, they represent merely a summation of
statements of operations data of the Company and its predecessors on an
historical basis and exclude the effects of pro forma adjustments. This data
will not be comparable to and may not be indicative of the Company's future
results of operations.
The selected historical and pro forma financial information should be read
in conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations, the audited Financial Statements and Notes thereto of
the Company and its predecessors, the audited Financial Statements and Notes
thereto of Madera, and the Unaudited Pro Forma Financial Statements and Notes
thereto included elsewhere in this Prospectus.
20
<PAGE> 22
WASTE CONNECTIONS, INC. AND PREDECESSORS
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSORS COMBINED(1) WASTE COMBINED
----------------------------------------------------- CONNECTIONS, INC. COMPANY AND
NINE MONTHS THREE MONTHS PREDECESSORS
YEARS ENDED DECEMBER 31, ENDED ENDED YEAR ENDED
------------------------------------- SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1993 1994 1995 1996 1997 1997(2) 1997(3)
------- ------- ------- ------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.......................... $24,581 $27,613 $27,595 $22,160 $ 18,114 $ 6,237 $ 24,351
Cost of operations................ 19,512 22,730 22,573 17,594 14,753 4,703 19,456
Selling, general and
administrative.................. 4,112 3,871 4,207 3,775 3,009 619 3,628
Depreciation and amortization..... 948 1,248 1,417 1,286 1,083 354 1,437
Start-up and integration.......... -- -- -- -- -- 493 493
Stock compensation................ -- -- -- -- -- 2,484 2,484
------- ------- ------- ------- ------------- ---------- ----------
Income (loss) from operations..... 9 (236) (602) (495) (731) (2,416) (3,147)
Interest expense.................. (468) (739) (369) (237) (456) (600) (1,056)
Other income (expense), net....... 686 868 103 2,514 14 (36) (22)
------- ------- ------- ------- ------------- ---------- ----------
Income (loss) before income
taxes........................... 227 (107) (868) 1,782 (1,173) (3,052) (4,225)
Income tax (provision) benefit.... -- -- 269 (505) -- 186 186
------- ------- ------- ------- ------------- ---------- ----------
Net income (loss)................. $ 227 $ (107) $ (599) $ 1,277 $ (1,173) $ (2,866) $ (4,039)
======= ======= ======= ======= ============= ========== ==========
Redeemable convertible preferred
stock accretion................. $ (531) $ (531)
---------- ----------
Net loss applicable to common
stockholders.................... $ (3,397) $ (4,570)
========== ==========
Basic net loss per share.......... $ (1.48) $ (1.99)
========== ==========
Shares used in the per share
calculations.................... 2,300,000 2,300,000
<CAPTION>
PRO FORMA
AS ADJUSTED
YEAR ENDED
DECEMBER 31,
1997(4)
------------
<S> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.......................... $32,812
Cost of operations................ 24,338
Selling, general and
administrative.................. 3,867
Depreciation and amortization..... 1,986
Start-up and integration.......... 493
Stock compensation................ 2,484
-------
Income (loss) from operations..... (356)
Interest expense.................. --
Other income (expense), net....... 151
-------
Income (loss) before income
taxes........................... (205)
Income tax (provision) benefit.... (876)
-------
Net income (loss)................. $(1,081)
=======
Redeemable convertible preferred
stock accretion................. $ --
-------
Net loss applicable to common
stockholders.................... $(1,081)
=======
Basic net loss per share.......... $ (0.14)
=======
Shares used in the per share
calculations.................... 7,799,998
</TABLE>
<TABLE>
<CAPTION>
PREDECESSORS
COMBINED(1) WASTE CONNECTIONS, INC.
-------------------- DECEMBER 31, 1997
DECEMBER 31, --------------------------------------------
-------------------- PRO FORMA
1995 1996 ACTUAL PRO FORMA(5) AS ADJUSTED(5)(6)
------- ------- ------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and equivalents...................................... $ 1,145 $ 102 $ 820 $ 1,296 $ 3,313
Working capital........................................... 2,291 695 836 297 3,764
Property and equipment, net............................... 6,256 5,069 4,185 7,215 7,215
Total assets.............................................. 7,039 15,291 18,880 33,414 35,431
Long-term debt(7)......................................... -- 89 6,762 15,732 --
Redeemable convertible preferred stock.................... -- -- 7,523 7,523 --
Redeemable common stock(8)................................ -- -- -- 2,800 --
Total stockholders' equity (deficit)...................... (2,066) -- (697) (697) 28,825
</TABLE>
(see footnotes on following page)
21
<PAGE> 23
- ---------------
(1) The combined financial data for the Company's predecessors for the years
ended December 31, 1993, 1994, 1995 and 1996 and as of December 31, 1995
and 1996 do not purport to present the combined results of operations of
the Company's predecessors in accordance with generally accepted accounting
principles ("GAAP"). Instead, they represent merely a summation of
statement of operations data and balance sheet data of the individual
predecessor companies on an historical basis and exclude the effects of pro
forma adjustments. This data will not be comparable to and may not be
indicative of the Company's results of operations. In addition, the
combined financial data of the predecessor operations may not necessarily
be indicative of the financial position or results of operations that would
have been realized had the predecessor companies been operated as
stand-alone entities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited financial
statements of the Company and its predecessors.
(2) Represents the period from inception of the Company (September 9, 1997)
through December 31, 1997. Operations commenced October 1, 1997.
(3) Represents the results of operations of the Company's predecessors for the
nine months ended September 30, 1997, combined with the results of
operations of the Company for the three months ended December 31, 1997.
(4) Assumes the Company's acquisitions of Waste Connections of Idaho, Inc.,
Madera Disposal Systems, Inc. and the Company's predecessors occurred on
January 1, 1997, adjusted to reflect the sale of the Common Stock offered
hereby at an assumed initial public offering price of $11.00 per share, and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Unaudited Pro Forma Financial Statements."
(5) Assumes the Company's acquisitions of Waste Connections of Idaho, Inc. and
Madera Disposal Systems, Inc. occurred on December 31, 1997.
(6) Adjusted to reflect the sale of the Common Stock offered hereby at an
assumed initial public offering price of $11.00 per share, and the
application of the estimated net proceeds therefrom. See "Use of Proceeds"
and "Unaudited Pro Forma Financial Statements."
(7) Excludes redeemable convertible preferred stock.
(8) Common stock issued in connection with the acquisition of Madera is
redeemable in certain circumstances. Upon completion of this offering,
these shares will no longer be redeemable. See Notes 2 and 9 of Notes to
the Company's Financial Statements included elsewhere herein.
22
<PAGE> 24
MADERA DISPOSAL SYSTEMS, INC.
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Revenues.................................................... $ 7,008 $ 7,770 $ 7,845
Operating expenses:
Cost of operations........................................ 5,288 5,512 5,289
Selling, general and administrative....................... 996 969 1,041
Depreciation and amortization............................. 467 585 627
------- ------- -------
Income from operations...................................... 257 704 888
Interest expense............................................ (237) (259) (280)
Other income, net........................................... 68 113 173
------- ------- -------
Net income.................................................. $ 88 $ 558 $ 781
======= ======= =======
Pro forma income taxes(1)................................... $ 30 $ 208 $ 295
------- ------- -------
Pro forma net income(1)..................................... $ 58 $ 350 $ 486
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents........................................ $ 1,064 $ 1,527
Working capital............................................. 622 942
Property and equipment, net................................. 3,800 3,636
Total assets................................................ 6,004 6,297
Long-term obligations, net of current portion............... 2,194 1,894
Total shareholders' equity.................................. 2,264 2,800
</TABLE>
- ---------------
(1) Prior to its acquisition by the Company, Madera operated under Subchapter S
of the Internal Revenue Code and was not subject to corporate federal and
state income tax. The Subchapter S election was terminated upon its
acquisition by the Company. Had Madera filed federal and state income tax
returns as a regular corporation for 1995, 1996 and 1997, income tax expense
under the provisions of Financial Accounting Standards No. 109 would have
been $30, $208 and $295, respectively. See Note 7 of Notes to Madera's
Financial Statements included elsewhere herein.
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Unaudited
Pro Forma Financial Statements and Notes thereto, the audited Financial
Statements and Notes thereto of the Company and its predecessors, Madera's
audited Financial Statements and Notes thereto, and other financial information
included elsewhere in this Prospectus. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from those discussed in the forward-looking statements as
a result of various factors, including without limitation those set forth in
"Risk Factors" and the matters set forth in this Prospectus generally.
OVERVIEW
Waste Connections is a regional, integrated solid waste services company
that provides solid waste collection, transfer, disposal and recycling services
in secondary markets of the Western U.S. As of March 1, 1998, the Company served
more than 120,000 commercial, industrial and residential customers in
Washington, California and Idaho. The Company has six collection operations and
operates two transfer stations, one Subtitle D landfill and one recycling
facility.
In September 1997, the Company joined with two other parties to bid on
certain solid waste and recycling businesses offered for sale by Browning-Ferris
Industries, Inc. ("BFI"). The Company acquired the stock of Browning-Ferris
Industries of Washington, Inc., a provider of solid waste services to more than
75,000 customers through three municipal contracts and one G certificate in and
around Clark County, Washington, and the stock of its subsidiary, Fibres
International, Inc., a provider of solid waste services to more than 27,000
customers through eight municipal contracts and one G certificate in King and
Snohomish Counties, Washington. The acquired companies subsequently changed
their names to Waste Connections of Washington, Inc. and Waste Connections
International, Inc., respectively. The two other parties acquired selected BFI
solid waste collection and transportation assets and operations in Idaho, and
BFI's recycling assets and operations in Washington, Idaho and Oklahoma.
On January 30, 1998, the Company acquired the stock of Waste Connections of
Idaho, Inc., a provider of solid waste collection services to more than 12,000
customers in and around Idaho Falls and Pocatello, Idaho through subscription
agreements with residential customers and seven municipal contracts. Waste
Connections of Idaho, Inc., was formed in September 1997 by affiliates of the
Company for the purpose of acquiring certain assets of Browing-Ferris Industries
of Idaho, Inc.
Effective February 1, 1998, the Company acquired Madera, an integrated
solid waste services company operating in north central California, with 1997
revenues of approximately $7.8 million. In connection with the Madera
acquisition, the Company acquired one franchise agreement and one municipal
contract, pursuant to which it serves more than 8,000 commercial, industrial and
residential customers, and agreements to operate two transfer stations, one
Subtitle D landfill and one recycling facility.
Effective March 1, 1998, the Company acquired certain solid waste
collection assets from Hunter Enterprises, Inc., a solid waste services company
located in eastern Idaho. These assets "tuck in" to the Company's Idaho
operations and serve approximately 3,500 residential and commercial customers.
All of the foregoing acquisitions were accounted for under the purchase
method of accounting for business combinations. Accordingly, the results of
operations of these acquired businesses are included in the Company's Financial
Statements from the actual dates of acquisition.
The entities the Company acquired in September 1997 from various
subsidiaries of BFI are collectively referred to herein as the Company's
predecessors. BFI acquired the predecessor
24
<PAGE> 26
operations at various times during 1995 and 1996, and prior to being acquired by
BFI, the predecessors operated as separate stand-alone businesses.
GENERAL
The Company's revenues are attributable primarily to fees charged to
customers for solid waste collection, transfer, disposal and recycling services.
The Company derives a substantial portion of its collection revenues from
commercial, industrial and residential services, which are frequently performed
under service agreements or pursuant to franchise agreements with counties or
municipal contracts. County franchise agreements and municipal contracts
generally last from one to ten years. The Company's existing franchise agreement
and all of its existing municipal contracts give the Company the exclusive right
to provide specified waste services in the specified territory during the
contract term. Such exclusive arrangements are awarded, at least initially, on a
competitive bid basis and thereafter on a bid or negotiated basis. Some of the
Company's residential collection services are also performed on a subscription
basis with individual households. A substantial portion of the Company's
collection business in Washington is performed under G certificates awarded by
the Washington Utilities and Transportation Commission, which grant the Company
collection rights in certain areas. These rights are generally perpetual and
exclusive. See "Business -- G Certificates." Contracts with counties and
municipalities and G certificates provide relatively consistent cash flow during
the term of the contracts. Because most residential customers on a subscription
basis are billed quarterly, subscription agreements also are a stable source of
revenues for the Company. The Company's collection business also generates
revenues from the sale of recyclable commodities.
Transfer station and landfill customers are charged a tipping fee on a per
ton basis for disposing of their solid waste at the transfer stations and
disposal facility operated by the Company under contract with the County of
Madera. The majority of the Company's transfer and landfill customers are under
one to ten year disposal contracts, most of which provide for annual cost of
living increases.
The Company's prices for its solid waste services are typically determined
by the collection frequency and level of service, route density, volume, weight
and type of waste collected, type of equipment and containers furnished, the
distance to the disposal or processing facility, the cost of disposal or
processing, and prices charged by competitors for similar services. The
Company's ability to pass on price increases is sometimes limited by the terms
of its contracts. Long-term solid waste collection contracts typically contain a
formula, generally based on a predetermined published price index, for automatic
adjustment of fees to cover increases in some, but not all, operating costs.
Costs of operations include labor, fuel, equipment maintenance and tipping
fees paid to third party disposal facilities, worker's compensation and vehicle
insurance, the cost of materials purchased to be recycled, third party
transportation expense, district and state taxes, host community fees and
royalties. The Company operates two transfer stations, which reduce the
Company's costs by improving its utilization of collection personnel and
equipment and by consolidating the waste stream to gain more favorable disposal
rates.
Selling, general and administrative ("SG&A") expenses include management,
clerical and administrative compensation and overhead costs associated with the
Company's marketing and sales force, professional services and community
relations expense.
Depreciation and amortization expense includes depreciation of fixed assets
over the estimated useful life of the assets using the straight line method and
the amortization of goodwill and other intangible assets using the straight line
method.
The Company capitalizes certain third party expenditures related to pending
acquisitions or development projects, such as legal and engineering expenses.
Indirect acquisition costs, such as
25
<PAGE> 27
executive and corporate overhead, public relations and other corporate services,
are expensed as incurred. The Company's policy is to charge against net income
any unamortized capitalized expenditures and advances (net of any portion
thereof that the Company estimates to be recoverable, through sale or otherwise)
relating to any operation that is permanently shut down, any pending acquisition
that is not consummated and any landfill development project that is not
successfully completed. At December 31, 1997, the Company had recorded
approximately $20,000 in such capitalized costs, all of which related to the
Madera acquisition. The Company routinely evaluates all capitalized costs, and
expenses those related to projects the Company believes are not likely to be
successful.
Because it does not currently own any landfills, the Company does not
accrue for estimated landfill closure and post-closure maintenance costs. Under
regulations pursuant to which the permit for the Fairmead Landfill was issued,
the Company and Madera County, as operator and owner, respectively, are jointly
liable for closure and post-closure liabilities with respect to the landfill.
The Company has not accrued for such liabilities because Madera County, as
required by state law, has established a special fund, into which a designated
portion of tipping fee surcharges are deposited, to pay such liabilities.
Consequently, management of the Company does not believe Madera had any
financial obligation for closure and post-closure costs for the Fairmead
Landfill as of December 31, 1997. The Company will have material financial
obligations relating to closure and post-closure costs of any disposal
facilities it may own or operate in the future, and in such case the Company
will provide accruals for future financial obligations relating to closure and
post-closure costs of its landfills (generally for a term of 30 years after
final closure of a landfill), based on engineering estimates of consumption of
permitted landfill airspace over the useful life of any such landfill.
RESULTS OF OPERATIONS
The combined selected financial information of the Company's predecessors
for the years ended 1995 and 1996 and the combined results of operations of the
Company for the three months ended December 31, 1997 and its predecessors for
the nine months ended September 30, 1997 has been derived from audited financial
statements included in this prospectus. Such combined financial information
represents merely a summation of statement of operations data of the Company and
its predecessors on an historical basis. The information excludes the effects of
pro forma adjustments. The statements therefore do not fully reflect (i)
potential cost savings, synergies and efficiencies that may be achieved through
the integration of the businesses and operations of the Company's predecessors;
and (ii) expenses that the Company may incur as it seeks to increase the
efficiency of the predecessor operations.
Waste Connections, Inc. and Predecessors 1997 vs. Predecessors 1996
Revenue. Total revenues increased $2.2 million, or 9.9%, to $24.4 million
in 1997 from $22.2 million in 1996. This increase was primarily attributable to:
(i) increased volumes resulting from new contracts and existing G certificates,
franchise agreements and municipal contracts and (ii) to a lesser extent,
increased pricing for collection and disposal services.
Cost of Operations. Total cost of operations increased $1.9 million to
$19.5 million in 1997 from $17.6 million in 1996. The principal reason for the
increase was the addition of new customers and contracts during the year. Cost
of operations as a percent of revenue increased to 79.9% in 1997 from 79.4% in
1996. The percentage increase was the result of proportionately more growth in
lower-margin services and an increase in waste stream processing and disposal
costs.
SG&A. SG&A expenses decreased $147,000 to $3.6 million in 1997 from $3.8
million in 1996. As a percentage of revenues, SG&A decreased to 14.9% from 17.0%
in 1996 due to improved economies of scale related to the revenue increase
discussed above.
Depreciation and Amortization. Depreciation and amortization expense
increased approximately $151,000 to $1.4 million in 1997 from $1.3 million in
1996. Depreciation and
26
<PAGE> 28
amortization increased as a percentage of revenues, to 5.9% from 5.8% in 1996.
This increase was principally due to the revaluation of assets associated with
the BFI purchase of The Disposal Group in 1996 and the Company's purchase of the
BFI assets in 1997.
Interest Expense. Interest expense increased $819,000 to $1.1 million in
1997 from $237,000 in 1996. The principal reason for the increase was an
increase in financing fees and a higher level of average annual outstanding
indebtedness as a result of the purchase of the BFI operations in September
1997. In anticipation of the refinancing of all indebtedness, the Company
amortized loan fees and warrant costs associated with the financing of the
purchase of the BFI operations in the fourth quarter 1997. Interest as a
percentage of revenues increased to 4.3% in 1997 from 1.1% in 1996.
Predecessors 1996 vs. Predecessors 1995
Revenue. Total revenues decreased $5.4 million, or 19.7%, to $ 22.2 million
in 1996 from $27.6 million in 1995. The decrease was primarily attributable to
the expiration of a residential waste collection contract and to a lessor
extent, pricing associated with recycling material sales.
Cost of Operations. Total cost of operations decreased $5.0 million to
$17.6 million in 1996 from $22.6 million in 1995. The principal reason for the
decrease is related to the revenue decrease discussed above. Cost of operations
as a percentage of revenues decreased to 79.4% in 1996 from 81.8% in 1995. This
percentage decrease was the result of the loss of lower-margin services
associated with the expired residential contract.
SG&A. SG&A expenses decreased approximately $432,000 to $3.8 million in
1996 from $4.2 million in 1995. As a percentage of revenues, SG&A increased to
17.0% from 15.2% in 1995 due to reduced economies of scale in the Company's
collection operations associated with the expired residential contract.
Depreciation and amortization. Depreciation and Amortization expense
decreased approximately $131,000 to $1.3 million in 1996 compared to $1.4
million in 1995. Depreciation and amortization increased as percentage of
revenues to 5.8% from 5.1% in 1995, primarily as a result of lower revenue
associated with the expired residential contract.
Interest Expense. Interest expense decreased $132,000 to $237,000 in 1996
from $369,000 in 1995. Interest as a percentage of revenues decreased to 1.1% in
1996 from 1.3% in 1995.
Madera 1997 vs. 1996
Revenue. Total revenues increased $75,000, or 1.0%, to $ 7.8 million in
1997 from $7.8 million in 1996. Exclusive of Madera's Professional Cleaning
Division ("PCD"), which ceased operations in July, 1997, revenues increased
$667,000, or 9.5%, to $7.7 million in 1997 from $7.0 million in 1996. This
increase was primarily attributable to increased landfill and collection volumes
resulting from existing franchise contracts offset by a reduction in landfill
construction revenues.
Cost of Operations. Total cost of operations decreased $223,000, to $5.3
million in 1997 from $5.5 million in 1996. The decrease was principally due to
the elimination of PCD, which was offset by increased operating cost associated
with volume increases from existing contracts. Cost of operations as a
percentage of revenues decreased to 67.4% from 70.9% in 1996. The percentage
decrease was primarily due to the elimination of PCD.
SG&A. SG&A expenses increased approximately $72,000 to $1.0 million in 1997
from $969,000 in 1996. As a percentage of revenues, SG&A increased to 13.3% from
12.5% in 1996.
Depreciation and Amortization. Depreciation and amortization expense
increased approximately $42,000 to $627,000 in 1997 from $585,000 in 1996.
Depreciation and amortization increased as a percentage of revenues to 8.0% from
7.5%.
27
<PAGE> 29
Interest Expense. Interest expense increased approximately $21,000 to
$280,000 in 1997 from approximately $259,000 in 1996. Interest expense as a
percentage of revenues increased to 3.6% in 1997 from 3.3% in 1996.
Madera 1996 vs. 1995
Revenue. Total revenues increased $762,000, or 10.9%, to $ 7.8 million in
1996 from $7.0 million in 1995. Exclusive of PCD, revenues increased $508,000,
or 7.8%, to $7.0 million in 1996 from $6.5 million in 1995. This increase was
primarily attributable to increased landfill and collection volumes resulting
from existing franchise contracts and landfill construction revenues. This was
partially offset by decreased pricing associated with recycling material sales.
Cost of Operations. Total cost of operations increased $224,000 to $5.5
million in 1996 from $5.3 million in 1995. The principal reason for the increase
was the start up of the PCD. Cost of operations as a percentage of revenues
decreased to 70.9% from 75.5% in 1996. The decrease was primarily due to the
increased volume of proportionately higher margin services.
SG&A. SG&A expenses decreased approximately $27,000 to $969,000 in 1996
from $996,000 in 1995. As a percentage of revenues, SG&A decreased to 12.5% from
14.2% in 1996 due to improved economies of scale in the Company's landfill and
collections operations as a result of additional volumes from existing
customers.
Depreciation and Amortization. Depreciation and amortization expense
increased approximately $118,000 to $585,000 in 1996 compared to $467,000 in
1995. Depreciation and amortization increased as a percentage of revenues to
7.5% in 1996 from 6.7% in 1995.
Interest Expense. Interest expense increased approximately $22,000 to
$259,000 in 1996 from approximately $237,000 in 1995. Interest expense as a
percentage of revenues decreased to 3.3% in 1996 from 3.4% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is capital intensive. The Company's capital
requirements include acquisitions and fixed asset purchases and are expected in
the future to include capital expenditures for landfill cell construction,
landfill development and landfill closure activities. The Company plans to meet
its capital needs through various financing sources, including internally
generated funds and debt and equity financing. The Company has a $25.0 million
revolving credit facility with BankBoston, N.A., which is secured by all assets
of the Company, including the Company's interest in the equity securities of its
subsidiaries. The credit facility matures in 2001. It requires the Company to
maintain certain financial ratios and satisfy other predetermined requirements,
such as minimum net worth, net income and limits on capital expenditures. At
March 1, 1998, an aggregate of approximately $17.0 million was outstanding under
the revolving line of credit. The Company believes that, through a combination
of internally generated funds, its credit facility and the net proceeds of this
offering, it will be able to satisfy its anticipated working capital needs for
at least the next 12 months.
Net cash provided by operations for the year ended December 31, 1997 was
$794,000, compared to $2.0 million for the same period in 1996. The decrease was
primarily due to the favorable settlement of a lawsuit in the amount of $2.6
million in 1996.
Net cash used in investing activities for the year ended December 31, 1997
was $11.9 million compared to $139,000 for the same period in 1996. The increase
was primarily due to the payment of $11.5 million for the acquisition by the
Company of the predecessor companies.
Net cash provided by financing activities for the year ended December 31,
1997 was $11.9 million compared to $318,000 for the same period in 1996. The
increase was primarily due to
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borrowings under the Company's credit facility then in effect of $5.5 million
and proceeds from the sale of redeemable convertible preferred stock of $7.0
million. At December 31, 1997, the Company had approximately $6.8 million of
long-term debt outstanding.
The Company recorded an income tax benefit of $186,000 for the period from
inception (September 9, 1997) through December 31, 1997. The income tax benefit
was recognized because of the likelihood that it will be utilized through the
reversal of existing temporary differences.
INFLATION
To date, inflation has not had a significant effect on the Company's
operations. Consistent with industry practice, many of the Company's contracts
provide for a pass-through of certain costs, including increases in landfill
tipping fees and, in some cases, fuel costs. The Company believes, therefore,
that it should be able to implement price increases to offset many cost
increases resulting from inflation. However, competitive pressures may require
the Company to absorb at least part of these cost increases, particularly during
periods of high inflation.
SEASONALITY
Based on historic trends experienced by the businesses the Company has
acquired, the Company's results of operations should be expected to vary
seasonally, with revenues typically lowest in the first quarter, higher in the
second and third quarters and lower in the fourth quarter than in the second and
third quarters. This seasonality reflects the lower volume of solid waste
generated during the late fall, winter and early spring months, resulting from
decreased solid waste volume relating to construction and demolition activities
during the winter months in the Western U.S. In addition, certain of the
Company's operating costs should be expected to be generally higher in the
winter months; winter weather conditions slow waste collection activities,
resulting in higher labor costs, and greater precipitation increases the weight
of collected waste, resulting in higher disposal costs (which are calculated per
ton). Because a majority of the Company's operating expenses are expected to
remain fairly constant throughout the fiscal year, operating income should be
expected to be generally lower during the winter.
IMPACT OF YEAR 2000
The Company will need to modify or replace portions of its software so that
its computer systems will function properly with respect to dates in the year
2000 ("Year 2000") and thereafter. The Company expects to complete those
modifications and upgrades during 1999. The total Year 2000 project cost is
estimated to be approximately $100,000, which includes approximately $40,000 for
the purchase of new software that will be capitalized and approximately $60,000
that will be expensed as incurred. To date, the Company has not incurred any
costs related to the Year 2000 project. The Company does not believe that its
expenditures relating to the Year 2000 project will be material. However, if the
required Year 2000 modifications and conversions are not made or are not
completed in a timely manner, the Year 2000 issue could materially affect the
Company's operations.
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BUSINESS
INTRODUCTION
Waste Connections is a regional, integrated solid waste services company
that provides solid waste collection, transfer, disposal and recycling services
in secondary markets of the Western U.S. As of March 1, 1998, the Company served
more than 120,000 commercial, industrial and residential customers in
Washington, California and Idaho. The Company owns six collection operations and
operates two transfer stations, one Subtitle D landfill and one recycling
facility.
Waste Connections was founded in September 1997 to execute an
acquisition-based growth strategy in secondary markets of the Western U.S. The
Company has acquired five solid waste services operations since its formation
and has identified more than 300 independent operators of such businesses in the
states where is currently operates, many of which it believes may be suitable
for acquisition by the Company. In addition, the Company is currently assessing
potential acquisitions of solid waste services operations in Kansas, Montana,
Nebraska, Oklahoma, Oregon, South Dakota, Texas and Wyoming.
The Company has targeted secondary markets in the Western U.S. because it
believes that: (i) a large number of independent solid waste services companies
suitable for acquisition by the Company are located in these markets; (ii) there
is less competition in these markets from large, well-capitalized solid waste
services companies; and (iii) these markets have strong projected economic and
population growth rates. In addition, the Company's senior management team has
extensive experience acquiring and operating solid waste services businesses in
the Western U.S.
INDUSTRY OVERVIEW
According to Waste Age, an industry trade publication, the U.S. solid waste
services industry generated estimated revenues of $36.9 billion in 1997. The
solid waste services industry has undergone significant consolidation and
integration since 1990. The Company believes that, particularly in the Western
U.S., this consolidation and integration have been caused primarily by: (i)
stringent environmental regulation and enforcement, resulting in increased
capital requirements for collection companies and landfill operators; (ii) the
evolution of an industry competitive model that emphasizes integrating
collection and disposal capabilities; (iii) the ability of larger integrated
operators to achieve certain economies of scale; and (iv) the existence of a
regulatory framework that allows the acquisition of exclusive, long-term waste
collection rights through franchise agreements, municipal contracts and
governmental certificates.
Increased Regulatory Impact. Stringent industry regulations, such as the
Subtitle D regulations, have resulted in rising operating and capital costs and
have accelerated consolidation and acquisition activities in the solid waste
collection and disposal industry. Many smaller industry participants have found
these costs difficult to bear and have decided to either close their operations
or sell them to larger operators. In addition, Subtitle D requires more
stringent engineering of solid waste landfills, including liners, leachate
collection and monitoring and gas collection and monitoring. These ongoing costs
are combined with increased financial reserve requirements for solid waste
landfill operators relating to closure and post-closure monitoring. As a result,
the number of solid waste landfills is declining while the size of solid waste
landfills is increasing.
Integrating Collection and Disposal Operations. The evolution of the
industry competitive model is forcing operators to become more efficient by
establishing an integrated network of solid waste collection operations and
transfer stations, through which they secure solid waste streams for disposal.
Operators have adopted a variety of disposal strategies, including owning
landfills, establishing strategic relationships to secure access to landfills
and otherwise capturing significant waste stream volumes, to gain leverage in
negotiating lower landfill fees and securing long-term, most-favored-pricing
contracts with high capacity landfills.
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Economies of Scale. Larger integrated operators achieve economies of scale
through vertical integration of their operations. These integrated companies
have increased their acquisition activity to expand the breadth of services and
density in their market areas. Control of the waste stream in these market
areas, combined with access to significant financial resources to make
acquisitions, has allowed larger solid waste collection and disposal companies
to be more cost-effective and competitive.
Despite the considerable consolidation and integration that has occurred in
the solid waste industry since 1990, the Company believes the industry remains
primarily regional in nature and highly fragmented. Based on published industry
sources, the Company believes that approximately 27% of the total revenues of
the U.S. solid waste industry is accounted for by more than 5,000 private,
predominantly small, collection and disposal businesses, approximately 41% by
publicly traded solid waste companies and approximately 32% by municipal
governments that provide collection and disposal services. The Company expects
the current consolidation trends in the solid waste industry to continue,
because many independent landfill and collection operators lack the capital
resources, management skills and technical expertise necessary both to operate
in compliance with stringent environmental and other governmental regulations
and to compete with larger, more efficient integrated operators. The Company
believes that the fragmented nature of the industry presents substantial
consolidation and growth opportunities for companies with disciplined
acquisition programs, decentralized operating strategies and access to financial
resources.
Regulatory Framework. In the Western U.S., waste collection services are
provided largely under three types of contractual arrangements: certificates or
permits, franchise agreements and municipal contracts. Certificates or permits,
such as G certificates awarded to waste collection service providers in
unincorporated areas and electing municipalities of Washington by the Washington
Utilities and Transportation Commission, typically grant the certificate holder
the right, which is generally perpetual and exclusive, to provide specific
residential, commercial and industrial waste services in a specified area. See
"G Certificates" below. Franchise agreements typically provide an exclusive
service period of five to ten years or longer and specify the service territory,
a broad range of services to be provided, and rates for the services. They also
often give the service provider a right of first refusal to extend the term of
the agreement. Municipal contracts typically provide a shorter service period
and a more limited scope of services than franchise agreements and generally
require competitive bidding at the end of the contract term. Unless customers
within the areas covered by certain permits or certificates (including G
certificates), franchise agreements and municipal contracts elect not to receive
any waste collection services, they are required to pay collection fees to the
company providing such services in their area.
The Company operates one landfill and may acquire or operate others in the
future. The Company believes, however, that in those secondary markets of the
Western U.S. where waste collection services are provided under exclusive
certificates, franchises or contracts, or where waste disposal is municipally
funded or available from multiple sources, controlling the waste stream by
providing collection services under exclusive arrangements is often more
important to a waste services company's growth and profitability than owning or
operating landfills. Several other characteristics of secondary markets in the
Western U.S. limit the economic attractiveness of owning or operating landfills
in those markets. For example, certain state and local regulations in the
Western U.S. restrict the amount of waste that may be accepted from specific
geographic areas. In addition, the relatively expansive geographic area of many
western states increases the cost of interstate and long haul disposal, which
heightens the effects of state and local regulations limiting the type and
origin of waste that may be accepted at a landfill and makes it more difficult
for a landfill to achieve the disposal volume necessary to operate profitably,
given its capital and operating costs. The Company believes that significant
opportunities exist for a well-capitalized company operating in secondary
markets of the Western U.S., and that the highly fragmented nature of this
industry should allow the Company to consolidate existing solid waste services
businesses in this region.
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STRATEGY
The Company's objective is to build a leading integrated solid waste
services company in secondary markets of the Western U.S. The Company's strategy
for achieving this objective is to: (i) acquire collection, transfer, disposal
and recycling operations in new markets and through "tuck-in" acquisitions in
existing markets; (ii) secure additional franchises, municipal contracts and
governmental certificates; (iii) generate internal growth in existing markets by
increasing market penetration and adding services to its existing operations;
and (iv) enhance profitability by increasing operating efficiencies of existing
and acquired operations. The Company's ability to implement this strategy is
enhanced by the experience of the members of its senior management team and
their knowledge of and reputation in the solid waste services industry in the
Company's targeted markets. The Company intends to implement its strategy as
follows:
Expansion Through Acquisitions
The Company intends to expand significantly the scope of its operations by:
(i) acquiring solid waste collection, transfer, disposal and recycling
operations in new markets; and (ii) acquiring solid waste collection, transfer,
disposal and recycling operations in existing and adjacent markets through
"tuck-in" acquisitions.
The Company intends to follow a regional expansion strategy by entering new
markets through acquisitions. An initial acquisition in a new market is used as
an operating base for the Company in that area. The Company then seeks to
strengthen the acquired operation's presence in that market by providing
additional services, adding new customers and making tuck-in acquisitions. The
Company can then broaden its regional presence by adding additional operations
in markets adjacent to the new location. The Company is currently examining
opportunities to expand its presence in the Western U.S. in states other than
Washington, California and Idaho, and is assessing potential acquisitions of
solid waste services operations in Kansas, Montana, Nebraska, Oklahoma, Oregon,
South Dakota, Texas and Wyoming.
The Company believes that numerous "tuck-in" acquisition opportunities
exist within its current and targeted market areas. For example, the Company
believes that more than 300 independent entities provide collection and disposal
services in California, Washington and Idaho. The Company believes that
throughout the Western U.S., many independent entities are suitable for
acquisition by the Company and would provide the Company opportunities to
improve market share and route density.
Franchise Agreements, Municipal Contracts and Governmental Certificates
The Company intends to devote significant resources to securing additional
franchise agreements and municipal contracts through competitive bidding and
additional governmental certificates through the acquisition of other companies.
In bidding for franchises and municipal contracts and evaluating the acquisition
of companies holding governmental certificates, the Company's management team
draws on its experience in the waste industry and its knowledge of local service
areas in existing and target markets. The Company's district managers manage
relationships with local governmental officials within their respective service
areas, and sales representatives may be assigned to cover specific
municipalities. These personnel focus on maintaining, renewing and renegotiating
existing franchise agreements and municipal contracts and on securing additional
agreements, contracts and governmental certificates.
Internal Growth
To generate continued internal growth, the Company will focus on increasing
market penetration in its current and adjacent markets, soliciting new
commercial, industrial, and residential customers in markets where such
customers may elect whether or not to receive waste collection services,
marketing upgraded or additional services (such as compaction or automated
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collection) to existing customers and, where appropriate, raising prices. Where
possible, the Company intends to leverage its franchise-based platforms to
expand its customer base beyond its exclusive market territories. As customers
are added in existing markets, the Company's revenue per routed truck increases,
which generally increases the Company's collection efficiencies and
profitability. In markets in which it has exclusive contracts, franchises and
certificates, the Company expects internal growth to at least track population
and business growth.
The Company expects to use transfer stations as an important part of its
internal growth strategy, by extending the direct-haul reach of the Company and
linking disparate collection operations with Company-owned, operated or
contracted disposal capacity. The Company currently operates two transfer
stations. By operating transfer stations, the Company also engages in direct
communications with municipalities and private operators that deliver waste to
its transfer stations. This better positions the Company to gain additional
business in its markets in the event any municipality privatizes its solid waste
operations or rebids existing contracts, and it increases the Company's
opportunities to acquire private collection operations.
Operating Enhancements
The Company has developed company-wide operating standards, which are
tailored for each of its markets based on industry standards and local
conditions. Using these standards, the Company tracks collection and disposal
routing efficiency and equipment utilization. It also implements cost controls
and employee training and safety procedures, and establishes a sales and
marketing plan for each market. The Company has installed a wide area network,
implemented advanced management information systems and financial controls, and
consolidated accounting functions, customer service, productivity reporting and
dispatching systems. The Company believes that by establishing operating
standards, closely monitoring performance and streamlining certain
administrative functions, it can improve the profitability of existing
operations.
To improve an acquired business' operational productivity, administrative
efficiency and profitability, the Company applies the same operating standards,
information systems and financial controls to acquired businesses as are
employed at the Company's existing operations. Moreover, if the Company is able
to internalize the waste stream of acquired operations, it can further increase
operating efficiencies and improve capital utilization. Where not restricted by
exclusive agreements, contracts, permits or certificates, the Company also
solicits new commercial, industrial and residential customers in areas within
and surrounding the markets served by acquired collection operations, as a means
of further improving operating efficiencies and increasing the volume of solid
waste collected by the acquired operations.
ACQUISITION PROGRAM
The Company currently operates in Washington, California and Idaho and
believes that these and other markets in the Western U.S. with similar
characteristics offer significant opportunities for achieving its objective. The
Company focuses on markets that are generally characterized by: (i) a
geographically dispersed population, which the Company believes deters
competition from larger, established waste management companies; (ii) a
potential revenue base of at least $15 million; (iii) the opportunity for the
Company to acquire a significant market share; (iv) the availability of adequate
disposal capacity, either through acquisition by the Company or through
agreements with third parties; (v) a favorable regulatory environment; or (vi)
strong projected economic or population growth rates. The Company believes that
these market characteristics provide significant growth opportunities for a
well-capitalized market entrant and create economic and operational barriers to
entry by new competitors.
The Company believes that its experienced management, decentralized
operating strategy, financial strength and size make it an attractive buyer to
certain solid waste collection and disposal acquisition candidates. The Company
has developed a set of financial, geographic and management
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criteria to assist management in evaluating acquisition candidates. These
criteria evaluate a variety of factors, including, but not limited to: (i) the
candidate's historical and projected financial performance; (ii) the candidate's
internal rate of return, return on assets and return on revenue; (iii) the
experience and reputation of the candidate's management and customer service
providers, their relationships with local communities and their willingness to
continue as employees of the Company; (iv) the composition and size of the
candidate's customer base and whether the customer base is served under
franchise agreements, municipal contracts, governmental certificates or other
exclusive arrangements; (v) whether the geographic location of the candidate
will enhance or expand the Company's market area or ability to attract other
acquisition candidates; (vi) whether the acquisition will augment or increase
the Company's market share or help protect the Company's existing customer base;
(vii) any potential synergies that may be gained by combining the candidate with
the Company's existing operations; and (viii) the liabilities of the candidate.
Before completing an acquisition, the Company performs extensive
environmental, operational, engineering, legal, human resources and financial
due diligence. All acquisitions are subject to initial evaluation and approval
by the Company's management before being recommended to the Executive Committee
of the Board of Directors. The Company seeks to integrate each acquired business
promptly and to minimize disruption to the ongoing operations of both the
Company and the acquired business, and generally attempts to retain the senior
management of acquired businesses. The Company believes its senior management
team has a proven track record in integrating acquisitions.
SERVICES
Commercial, Industrial and Residential Waste Services
The Company serves more than 120,000 commercial, industrial and residential
customers. Of these, more than 49,000 are served under G certificates that grant
the Company rights, which are generally perpetual and exclusive, to provide
services within specified areas, approximately 6,600 are served under an
exclusive franchise agreement with a remaining term of 11 years, and
approximately 60,000 are served under exclusive municipal contracts with shorter
contract terms.
The Company's commercial and industrial services that are not performed
under G certificates, franchise agreements or municipal contracts are provided
under one to five year service agreements. Fees under these agreements are
determined by such factors as collection frequency, level of service, route
density, the type, volume and weight of the waste collected, type of equipment
and containers furnished, the distance to the disposal or processing facility,
the cost of disposal or processing and prices charged in its markets for similar
service. Collection of larger volumes associated with commercial and industrial
waste streams generally helps improve the Company's operating efficiencies, and
consolidation of these volumes allows the Company to negotiate more favorable
disposal prices. The Company's commercial and industrial customers use portable
containers for storage, enabling the Company to service many customers with
fewer collection vehicles. Commercial and industrial collection vehicles
normally require one operator. The Company provides one to eight cubic yard
containers to commercial customers, 10 to 50 cubic yard containers to industrial
customers, and 30 to 95 gallon carts to residential customers. For an additional
fee, stationary compactors that compact waste prior to collection are installed
on the premises of a substantial number of large volume customers. No single
commercial or industrial contract is material to the Company's results of
operations.
The Company's residential waste services that are not performed under G
certificates, franchise agreements or municipal contracts are provided under
contracts with homeowners' associations, apartment owners or mobile home park
operators, or on a subscription basis with individual households. Residential
contract fees are based primarily on route density, the frequency and level of
service, the distance to the disposal or processing facility, the cost of
disposal or processing and
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prices charged in that market for similar services. Collection fees are paid
either by the municipalities from tax revenues or directly by the residents
receiving the services.
Transfer Station Services
The Company has an active program to acquire, develop, own and operate
transfer stations in markets proximate to its operations. Currently, the Company
operates two transfer stations in California which receive, compact, and
transfer solid waste to larger Company-owned vehicles for transport to
landfills. The Company believes that the transfer stations benefit the Company
by: (i) concentrating the waste stream from a wider area, which increases the
volume of disposal at Company-operated landfills and gives the Company greater
leverage in negotiating for more favorable disposal rates at other landfills;
(ii) improving utilization of collections personnel and equipment; and (iii)
building relationships with municipalities and private operators that deliver
waste, which can lead to additional growth opportunities.
Landfills
The Company operates one Subtitle D landfill, the Fairmead Landfill, under
an operating agreement with Madera County with a remaining term of 11 years. In
fiscal 1997, approximately 45% of the solid waste disposed of at the Fairmead
Landfill was delivered by Madera. As of March 1, 1998, the Fairmead Landfill
consisted of 160 total acres, of which 20 acres were permitted for disposal. As
of that date, the Fairmead Landfill had approximately 600,000 tons of unused
permitted capacity remaining, with approximately 3.5 million additional tons of
capacity in various stages of permitting, and was estimated to have a remaining
life of 26 years. The Fairmead Landfill is currently permitted to accept up to
395 tons per day of municipal solid waste.
The Company monitors the available permitted in-place disposal capacity of
the Fairmead Landfill on an ongoing basis and evaluates whether to seek to
expand this capacity. In making this evaluation, the Company considers various
factors, including the volume of waste projected to be disposed of at the
landfill, the size of the unpermitted acreage included in the landfill, the
likelihood that the Company will be successful in obtaining the necessary
approvals and permits required for the expansion and the costs that would be
involved in developing the additional capacity. The Company also regularly
considers whether it is advisable, in light of changing market conditions and/or
regulatory requirements, to seek to expand or change the permitted waste streams
or to seek other permit modifications.
The Company is actively engaged in identifying solid waste landfill
acquisition candidates to achieve vertical integration in markets where the
economic and regulatory environment makes such acquisitions attractive. The
Company believes that in some markets, acquiring landfills would provide
opportunities to vertically integrate its collection, transfer and disposal
operations while improving operating margins. The Company evaluates landfill
candidates by determining, among other things, the amount of waste that could be
diverted to the landfill in question, whether access to the landfill is
economically feasible from the Company's existing market areas either directly
or through transfer stations, the expected life of the landfill, the potential
for expanding the landfill, and current disposal costs compared to the cost of
acquiring the landfill. Where the acquisition of a landfill is not attractive,
the Company pursues long term disposal contracts with facilities located in
proximity to its markets.
Recycling and Other Services
The Company offers municipal, commercial, industrial and residential
customers recycling services for a variety of recyclable materials, including
cardboard, office paper, plastic containers, glass bottles and ferrous and
aluminum metals. The Company operates one recycling processing facility and
sells other collected recyclable materials to third parties for processing
before resale. The profits from the Company's resale of recycled materials are
often shared between the Company
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and the other parties to its recycling contracts. For example, certain of the
Company's municipal recycling contracts in Washington and Idaho, which were
negotiated before the Company acquired those businesses, specify certain
benchmark resale prices for recycled commodities. To the extent the prices the
Company actually receives for the processed recycled commodities collected under
the contract exceed the prices specified in the contract, the Company shares the
excess with the municipality, after recovering any previous shortfalls resulting
from actual market prices falling below the prices specified in the contract. In
an effort to reduce its exposure to commodity price risk with respect to
recycled materials, the Company has adopted a pricing strategy of charging
collection and processing fees for recycling volume collected from third
parties. The Company believes that recycling will continue to be an important
component of local and state solid waste management plans, due to the public's
increasing environmental awareness and expanding regulations that mandate or
encourage recycling.
The Company also provides other waste management services, most of which
are project-based, including transporting and disposing of non-hazardous
contaminated soils and similar materials, transporting special waste products,
including asbestos, and arranging for the transportation of construction and
demolition waste and disposal of soil and special waste products.
OPERATIONS
The Company is managed on a decentralized basis, which places
decision-making authority close to the customer, enabling the Company to
identify customers' needs quickly and to address those needs in a cost-effective
manner. The Company believes that decentralization provides a low-overhead,
highly efficient operational structure that allows the Company to expand into
geographically contiguous markets and operate in relatively small communities
that larger competitors may not find attractive. The Company believes that this
structure gives the Company a strategic competitive advantage, given the
relatively rural nature of much of the Western U.S., and makes the Company an
attractive buyer to many potential acquisition candidates.
The Company currently delivers its services from seven operating locations
serving four market areas, or districts. Each district has a district manager,
who has autonomous service and decision-making authority for that district and
is responsible for maintaining service quality, promoting safety in the
district's operations, implementing marketing programs, and overseeing
day-to-day operations, including contract administration. District managers also
assist in identifying acquisition candidates. Once the Company begins the
acquisition process, business development managers, under the supervision of
district and executive managers, obtain the permits and other governmental
approvals required for the Company to operate the acquired business, including
those related to zoning, environmental and land use.
The Company's financial management, accounting, management information
systems, environmental compliance, risk management and certain personnel
functions are centralized and shared among locations to improve productivity,
lower operating costs and stimulate internal growth. The Company has installed a
Company-wide management information system that assists district personnel in
making decisions based on centralized, real-time financial, productivity,
maintenance and customer information. While district management operates with a
high degree of autonomy, the Company's senior officers monitor district
operations and require adherence to the Company's accounting, purchasing,
marketing and internal control policies, particularly with respect to financial
matters. The Company's executive officers review the performance of district
managers and operations on a regular basis.
G CERTIFICATES
A substantial portion of the Company's collection business in Washington is
performed under G certificates awarded by the Washington Utilities and
Transportation Commission (the "WUTC"). G certificates apply only to
unincorporated areas of Washington and municipalities that have elected
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to have their solid waste collection overseen by the WUTC. G certificates
typically grant the holder the perpetual right to provide specified solid waste
collection and transportation services in a specified territory. The WUTC has
repeatedly determined that, in enacting the statute authorizing G certificates,
the Washington Legislature intended to favor grants of exclusive, rather than
overlapping, service rights for conventional solid waste services. Accordingly,
most G certificates currently grant exclusive solid waste collection and
transportation rights for conventional solid waste services in their specified
territories.
G certificates have generally been construed by the WUTC and the Washington
Legislature as conferring vested property rights that may be defeated,
diminished or cancelled only upon the occurrence of specified events of default,
the demonstrated lack of fitness of the certificate holder, or municipalities'
annexation of territory covered by a certificate. Thus, a certificate holder is
entitled to due process in challenging any action that affects its rights. In
addition, legislation passed in 1997 requires a municipality that annexes
territory covered by a G certificate either to grant the certificate holder an
exclusive franchise, with a minimum term of seven years, to continue to provide
services in the affected area, or to negotiate with the certificate holder some
other compensation for the collection rights in the affected area. The statute
expressly permits the certificate holder to sue the annexing municipality for
measurable damages that exceed the value of a seven-year franchise agreement to
provide services in the affected area. Under one of the contracts with a
municipality in Washington acquired by a predecessor of the Company, the
predecessor purported to waive its rights to compensation or damages under the
statute in return for the right to service any current or prospectively annexed
areas formerly covered by its G certificate.
In addition to awarding G certificates, the WUTC is required by statute to
establish just, fair and equitable rates to customers of solid waste collection
companies. The WUTC is charged with balancing the needs of service providers to
earn fair and sufficient returns on their investments in plant and equipment
against the needs of commercial and residential customers to receive adequate
and reasonably priced services. Over the past decade, the WUTC has employed a
ratemaking methodology known as the "Lurito-Gallagher" method. This method
calculates rates based on the income statements and balance sheets of each
service provider, with the goal of establishing rates that reflect the costs of
providing service and that motivate service providers to invest in equipment
that improves operating efficiency in a cost-effective manner. The
Lurito-Gallagher rate-setting methodology was adjusted in the early 1990's to
better reflect the costs of providing recycling services, by accounting for
providers' increasing use of automated equipment and adjusting for the
cyclicality of the secondary recyclables markets. This has resulted in more
frequent rate adjustments in response to material cost shifts.
SALES AND MARKETING
In most of the Company's existing markets, waste collection, transfer and
disposal services are provided to municipalities and governmental authorities
under exclusive franchise agreements, municipal contracts and G certificates;
service providers do not contract directly with individual customers. In
addition, because the Company's growth to date has primarily been through
acquisitions, the Company has generally assumed existing franchise agreements,
municipal contracts and G certificates from the acquired companies, rather than
obtaining new contracts. For these reasons, the Company's sales and marketing
efforts to date have been narrowly focused. The Company expects to add sales and
marketing personnel as necessary to: (i) solicit new customers in markets where
it is not the exclusive provider of solid waste services; (ii) expand its
presence into areas adjacent to or contiguous with its existing markets; and
(iii) market additional services to existing customers.
The Company has a diverse customer base. Its largest single contract, with
the City of Vancouver, accounted for approximately 14.0% of the Company's
revenues during the three months ended December 31, 1997. Under this contract,
the Company serves more than 34,000 residential and commercial customers. There
are approximately nine years remaining under that contract. No
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other single contract or customer accounted for more than 5.0% of the Company's
revenues during the three-month period ended December 31, 1997.
COMPETITION
The solid waste services industry is highly competitive and fragmented and
requires substantial labor and capital resources. The industry includes five
large national waste companies: Allied Waste Industries, Inc., Browning-Ferris
Industries, Inc., Republic Industries, Inc., USA Waste Services, Inc. and Waste
Management, Inc. Several other public companies have annual revenues in excess
of $100 million, including American Disposal Services, Inc., Casella Waste
Systems, Inc., Eastern Environmental Services, Inc., Superior Services, Inc. and
Waste Industries, Inc. Certain of the markets in which the Company competes or
will likely compete are served by one or more large, national solid waste
companies, as well as by numerous regional and local solid waste companies of
varying sizes and resources, some of which have accumulated substantial goodwill
in their markets. The Company also competes with operators of alternative
disposal facilities, including incinerators, and with counties, municipalities,
and solid waste districts that maintain their own waste collection and disposal
operations. Public sector operations may have financial advantages over the
Company, because of their access to user fees and similar charges, tax revenues
and tax-exempt financing.
The Company competes for collection, transfer and disposal volume based
primarily on the price and quality of its services. From time to time,
competitors may reduce the price of their services in an effort to expand their
market shares or service areas or to win competitively bid municipal contracts.
These practices may cause the Company to reduce the price of its services or, if
it elects not to do so, to lose business. The Company provides a substantial
portion of its residential, commercial and industrial collection services under
exclusive franchise and municipal contracts and certificates, some of which are
subject to periodic competitive bidding. The balance of the Company's services
are provided under subscription agreements with individual households and one to
five year service contracts with commercial and industrial customers.
Intense competition exists not only for collection, transfer and disposal
volume, but also for acquisition candidates. The Company generally competes for
acquisition candidates with publicly owned regional and large national waste
management companies.
REGULATION
Introduction
The Company is subject to extensive and evolving federal, state and local
environmental laws and regulations, the enforcement of which has become
increasingly stringent in recent years. The environmental regulations affecting
the Company are administered by the EPA and other federal, state and local
environmental, zoning, health and safety agencies. A substantial portion of the
Company's collection business in Washington is performed under G certificates
awarded by the Washington Utilities and Transportation Commission, which grant
the Company perpetual and generally exclusive collection rights in certain
areas. The Company believes that it is currently in substantial compliance with
applicable federal, state and local environmental laws, permits, orders and
regulations, and it does not currently anticipate any material environmental
costs necessary to bring its operations into compliance (although there can be
no assurance in this regard). The Company anticipates that regulation,
legislation and regulatory enforcement actions related to the solid waste
services industry will continue to increase. The Company attempts to anticipate
future regulatory requirements and to plan in advance as necessary to comply
with them.
To transport solid waste, the Company must possess and comply with one or
more permits from state or local agencies. These permits also must be
periodically renewed and may be modified or revoked by the issuing agency.
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The principal federal, state and local statutes and regulations that apply
to the Company's operations are described below.
The Resource Conservation and Recovery Act of 1976 ("RCRA")
RCRA regulates the generation, treatment, storage, handling, transportation
and disposal of solid waste and requires states to develop programs to ensure
the safe disposal of solid waste. RCRA divides solid waste into two groups,
hazardous and nonhazardous. Wastes are generally classified as hazardous if they
either (i) are specifically included on a list of hazardous wastes, or (ii)
exhibit certain characteristics defined as hazardous. Household wastes are
specifically designated as nonhazardous. Wastes classified as hazardous under
RCRA are subject to much stricter regulation than wastes classified as
nonhazardous, and businesses that deal with hazardous waste are subject to
regulatory obligations in addition to those imposed on handlers of nonhazardous
waste.
The EPA regulations issued under Subtitle C of RCRA impose a comprehensive
"cradle to grave" system for tracking the generation, transportation, treatment,
storage and disposal of hazardous wastes. The Subtitle C Regulations impose
obligations on generators, transporters and disposers of hazardous wastes, and
require permits that are costly to obtain and maintain for sites where such
material is treated, stored or disposed. Subtitle C requirements include
detailed operating, inspection, training and emergency preparedness and response
standards, as well as requirements for manifesting, record keeping and
reporting, corrective action, facility closure, post-closure and financial
responsibility. Most states have promulgated regulations modelled on some or all
of the Subtitle C provisions issued by the EPA. Some state regulations impose
different, additional and more stringent obligations, and may regulate certain
materials as hazardous wastes that are not so regulated under the federal
Subtitle C Regulations. For the three-month period ended December 31, 1997, the
Company believes it did not transport hazardous wastes in volumes that would
subject the Company to hazardous waste regulations under RCRA.
In October 1991, the EPA adopted the Subtitle D Regulations governing solid
waste landfills. The Subtitle D Regulations, which generally became effective in
October 1993, include location restrictions, facility design standards,
operating criteria, closure and post-closure requirements, financial assurance
requirements, groundwater monitoring requirements, groundwater remediation
standards and corrective action requirements. In addition, the Subtitle D
Regulations require that new landfill sites meet more stringent liner design
criteria (typically, composite soil and synthetic liners or two or more
synthetic liners) intended to keep leachate out of groundwater and have
extensive collection systems to carry away leachate for treatment prior to
disposal. Groundwater monitoring wells must also be installed at virtually all
landfills to monitor groundwater quality and, indirectly, the effectiveness of
the leachate collection system. The Subtitle D Regulations also require, where
certain regulatory thresholds are exceeded, that facility owners or operators
control emissions of methane gas generated at landfills in a manner intended to
protect human health and the environment. Each state is required to revise its
landfill regulations to meet these requirements or such requirements will be
automatically imposed by the EPA on landfill owners and operators in that state.
Each state is also required to adopt and implement a permit program or other
appropriate system to ensure that landfills in the state comply with the
Subtitle D Regulations. Various states in which the Company operates or in which
it may operate in the future have adopted regulations or programs as stringent
as, or more stringent than, the Subtitle D Regulations.
The Federal Water Pollution Control Act of 1972, as amended
(the "Clean Water Act")
The Clean Water Act regulates the discharge of pollutants from a variety of
sources, including solid waste disposal sites and transfer stations, into waters
of the United States. If run-off from the Company's transfer stations or run-off
or collected leachate from the Company's owned or operated landfills is
discharged into streams, rivers or other surface waters, the Clean Water Act
would require the Company to apply for and obtain a discharge permit, conduct
sampling and monitoring and,
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under certain circumstances, reduce the quantity of pollutants in such
discharge. Also, virtually all landfills are required to comply with the EPA's
storm water regulations issued in November 1990, which are designed to prevent
contaminated landfill storm water runoff from flowing into surface waters. The
Company believes that its facilities comply in all material respects with the
Clean Water Act requirements. Various states in which the Company operates or in
which it may operate in the future have been delegated authority to implement
the Clean Water Act permitting requirements, and some of these states have
adopted regulations that are more stringent than the federal requirements. For
example, states often require permits for discharges to ground water as well as
surface water.
The Comprehensive Environmental Response, Compensation,
and Liability Act of 1980 ("CERCLA")
CERCLA established a regulatory and remedial program intended to provide
for the investigation and cleanup of facilities where or from which a release of
any hazardous substance into the environment has occurred or is threatened.
CERCLA's primary mechanism for remedying such problems is to impose strict joint
and several liability for cleanup of facilities on current owners and operators
of the site, former owners and operators of the site at the time of the disposal
of the hazardous substances, any person who arranges for the transportation,
disposal or treatment of the hazardous substances, and the transporters who
select the disposal and treatment facilities. CERCLA also imposes liability for
the cost of evaluating and remedying any damage to natural resources. The costs
of CERCLA investigation and cleanup can be very substantial. Liability under
CERCLA does not depend on the existence or disposal of "hazardous waste" as
defined by RCRA; it can also be based on the existence of even very small
amounts of the more than 700 "hazardous substances" listed by the EPA, many of
which can be found in household waste. In addition, the definition of "hazardous
substances" in CERCLA incorporates substances designated as hazardous or toxic
under the federal Clean Water Act, Clear Air Act and Toxic Substances Control
Act. If the Company were found to be a responsible party for a CERCLA cleanup,
the enforcing agency could hold the Company, or any other generator, transporter
or the owner or operator of the contaminated facility, responsible for all
investigative and remedial costs, even if others were also liable. CERCLA also
authorizes the imposition of a lien in favor of the United States on all real
property subject to, or affected by, a remedial action for all costs for which a
party is liable. CERCLA gives a responsible party the right to bring a
contribution action against other responsible parties for their allocable shares
of investigative and remedial costs. The Company's ability to obtain
reimbursement from others for their allocable shares of such costs would be
limited by the Company's ability to find other responsible parties and prove the
extent of their responsibility and by the financial resources of such other
parties.
The Clean Air Act
The Clean Air Act generally, through state implementation of federal
requirements, regulates emissions of air pollutants from certain landfills based
on the date of the landfill construction and volume per year of emissions of
regulated pollutants. Larger landfills and landfills located in areas that do
not comply with certain requirements of the Clean Air Act may be subject to even
more extensive air pollution controls and emission limitations. In addition, the
EPA has issued standards regulating the disposal of asbestos-containing
materials. Air permits to construct may be required for gas collection and
flaring systems, and operating permits may be required, depending on the
estimated volume of emissions.
All of the federal statutes described above contain provisions authorizing,
under certain circumstances, the institution of lawsuits by private citizens to
enforce the provisions of the statutes. In addition to a penalty award to the
United States, some of those statutes authorize an award of attorneys' fees to
parties successfully advancing such an action.
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The Occupational Safety and Health Act of 1970 (the "OSH Act")
The OSH Act is administered by the Occupational Safety and Health
Administration ("OSHA"), and in many states by state agencies whose programs
have been approved by OSHA. The OSH Act establishes employer responsibilities
for worker health and safety, including the obligation to maintain a workplace
free of recognized hazards likely to cause death or serious injury, to comply
with adopted worker protection standards, to maintain certain records, to
provide workers with required disclosures and to implement certain health and
safety training programs. Various OSHA standards may apply to the Company's
operations, including standards concerning notices of hazards, safety in
excavation and demolition work, the handling of asbestos and asbestos-containing
materials, and worker training and emergency response programs.
Flow Control/Interstate Waste Restrictions
Certain permits and approvals, as well as certain state and local
regulations, may limit a landfill to accepting waste that originates from
specified geographic areas, restrict the importation of out-of-state waste or
otherwise discriminate against out-of-state waste. These restrictions, generally
known as flow control restrictions, are controversial, and some courts have held
that some flow control schemes violate constitutional limits on state or local
regulation of interstate commerce. From time to time, federal legislation is
proposed that would allow some local flow control restrictions. Although no such
federal legislation has been enacted to date, if such federal legislation should
be enacted in the future, states in which the Company operates landfills could
act to limit or prohibit the importation of out-of-state waste or direct that
wastes be handled at specified facilities. Such state actions could adversely
affect the Company's landfills. These restrictions may also result in higher
disposal costs for the Company's collection operations. If the Company were
unable to pass such higher costs through to its customers, the Company's
business, financial condition and results of operations could be adversely
affected.
Even in the absence of federal legislation, certain state and local
jurisdictions may seek to enforce flow control restrictions through local
legislation or contractually and, in certain cases, the Company may elect not to
challenge such restrictions based on various considerations. These restrictions
could result in the volume of waste going to landfills being reduced in certain
areas, which may adversely affect the Company's ability to operate its landfills
at their full capacity and/or reduce the prices that the Company can charge for
landfill disposal services. These restrictions may also result in higher
disposal costs for the Company's collection operations. If the Company were
unable to pass such higher costs through to its customers, the Company's
business, financial condition and results of operations could be adversely
affected.
State and Local Regulation
Each state in which the Company now operates or may operate in the future
has laws and regulations governing the generation, storage, treatment, handling,
transportation and disposal of solid waste, occupational safety and health,
water and air pollution and, in most cases, the siting, design, operation,
maintenance, closure and post-closure maintenance of landfills and transfer
stations. In addition, many states have adopted statutes comparable to, and in
some cases more stringent than, CERCLA. These statutes impose requirements for
investigation and cleanup of contaminated sites and liability for costs and
damages associated with such sites, and some provide for the imposition of liens
on property owned by responsible parties. Furthermore, many municipalities also
have ordinances, local laws and regulations affecting Company operations. These
include zoning and health measures that limit solid waste management activities
to specified sites or activities, flow control provisions that direct the
delivery of solid wastes to specific facilities, laws that grant the right to
establish franchises for collection services and then put such franchises out
for bid, and bans or other restrictions on the movement of solid wastes into a
municipality.
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Permits or other land use approvals with respect to a landfill, as well as
state or local laws and regulations, may specify the quantity of waste that may
be accepted at the landfill during a given time period, and/or specify the types
of waste that may be accepted at the landfill. Once an operating permit for a
landfill is obtained, it must generally be renewed periodically.
There has been an increasing trend at the state and local level to mandate
and encourage waste reduction at the source and waste recycling, and to prohibit
or restrict the disposal of certain types of solid wastes, such as yard wastes,
leaves and tires, in landfills. The enactment of regulations reducing the volume
and types of wastes available for transport to and disposal in landfills could
affect the Company's ability to operate its facilities at their full capacity.
Some state and local authorities enforce certain federal laws in addition
to state and local laws and regulations. For example, in some states, RCRA,
OSHA, parts of the Clean Air Act and parts of the Clean Water Act are enforced
by local or state authorities instead of by the EPA, and in some states those
laws are enforced jointly by state or local and federal authorities.
Public Utility Regulation
The rates that landfill operators may charge are regulated in many states
by public authorities. The rates that the Company may charge at its Fairmead
Landfill for the disposal of municipal solid waste are regulated by the Madera
County Board of Supervisors. The adoption of rate regulation or the reduction of
current rates in states in which the Company owns or operates landfills could
have an adverse effect on the Company's business, financial condition and
results of operations.
Solid waste collection services in all unincorporated areas of Washington
and in electing municipalities in Washington are provided under G certificates
awarded by the Washington Utilities and Transportation Commission (the "WUTC").
The WUTC also sets rates for solid waste collection services in Washington.
RISK MANAGEMENT, INSURANCE AND PERFORMANCE BONDS
The Company maintains an environmental and other risk management programs
appropriate for its business. The Company's environmental risk management
program includes evaluating existing facilities and potential acquisitions for
environmental law compliance. The Company also maintains a worker safety program
that encourages safe practices in the workplace. Operating practices at all
Company operations emphasize minimizing the possibility of environmental
contamination and litigation. The Company believes that all of its facilities
comply in all material respects with applicable federal and state regulations.
The Company carries a broad range of insurance, which the Company's
management considers adequate to protect the Company's assets and operations.
The coverage includes general liability, comprehensive property damage,
workmen's compensation and other coverage customary in the industry. These
policies generally exclude coverage for damages associated with environmental
conditions. Because of the limited availability and high cost of environmental
impairment liability insurance, and in light of the Company's limited landfill
operations, the Company has not obtained such coverage. If the Company were to
incur liability for environmental cleanups, corrective action or damage, its
financial condition could be materially and adversely affected. The Company will
continue to investigate the possibility of obtaining environmental impairment
liability insurance, particularly if it acquires landfills or operates landfills
other than the Fairmead Landfill. The Company believes that most other landfill
operators do not carry such insurance.
Municipal solid waste collection contracts may require performance bonds or
other means of financial assurance to secure contractual performance. Certain
environmental regulations also require demonstrated financial assurance to meet
closure and post-closure requirements for landfills. The Company has not
experienced difficulty in obtaining performance bonds or letters of credit for
its current operations. At March 1, 1998, the Company had provided customers and
various
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regulatory authorities with bonds and letters of credit in the aggregate amount
of approximately $800,000 to secure its obligations. The Company's credit
facility provides for the issuance of letters of credit in an amount up to $5
million, but any letters of credit issued reduce the availability of borrowings
for acquisitions and other general corporate purposes. If the Company were
unable to obtain surety bonds or letters of credit in sufficient amounts or at
acceptable rates, it could be precluded from entering into additional municipal
solid waste collection contracts or obtaining or retaining landfill operating
permits.
PROPERTY AND EQUIPMENT
The Company leases the real estate, buildings and other physical properties
for its solid waste operations. These leases include a lease of approximately
5,500 square feet of office space in Roseville, California for the Company's
principal executive offices, which lease expires in November 2002. The Company
also leases real property in Issaquah, Washington under a lease expiring in 2008
and in Maltby, Washington, Idaho Falls and Pocatello, Idaho, under leases
expiring at the end of 1999. The Company subleases real property in Vancouver,
Washington under a lease expiring in 2001, with an option to extend the term for
five years. Under its agreement with the County of Madera to operate Fairmead
Landfill, the Company is permitted to maintain an equipment yard and office on
the landfill premises without charge.
At March 1, 1998, the Company owned or leased approximately 150 pieces of
equipment, including waste collection vehicles and related support vehicles, as
well as bulldozers, compactors, earth movers and related heavy equipment used in
landfill operations, and had more than 52,000 carts and containers in use, with
such carts ranging in size from 30 to 95 gallons and such containers ranging
from one to 50 cubic yards. The Company believes that its vehicles, equipment
and operating properties are well maintained and adequate for its current
operations. However, the Company expects to make substantial investments in
additional equipment and property for expansion and replacement of assets and in
connection with future acquisitions.
EMPLOYEES
At March 1, 1998, the Company employed approximately 240 full-time
employees, including approximately 25 persons classified as professionals or
managers, approximately 190 employees involved in collection, transfer, disposal
and recycling operations, and approximately 25 sales, clerical, data processing
or other administrative employees.
Approximately 55 drivers and mechanics at the Company's Vancouver,
Washington operation are represented by the Teamsters Union, with which
Browning-Ferris Industries of Washington, Inc., the Company's predecessor in
Vancouver, entered a four-year collective bargaining agreement in January 1997.
In addition, in July 1997, the employees at the Company's facility in Issaquah,
Washington, adopted a measure to select a union to represent them in labor
negotiations with management. The union and management are currently operating
under a one-year negotiating agreement, and, if those negotiations are
unsuccessful, the earliest date on which the union would be permitted to take
additional action is July 27, 1998. Such additional action includes calling a
strike or, if the Company agrees, continuing to negotiate or commencing
arbitration of the outstanding issues. The Company is not aware of any other
organizational efforts among its employees and believes that its relations with
its employees are good.
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LEGAL PROCEEDINGS
In the normal course of its business and as a result of the extensive
governmental regulation of the solid waste industry, the Company may
periodically become subject to various judicial and administrative proceedings
involving federal, state or local agencies. In these proceedings, an agency may
seek to impose fines on the Company or to revoke or deny renewal of an operating
permit held by the Company. From time to time, the Company may also be subject
to actions brought by citizens' groups or adjacent landowners or residents in
connection with the permitting and licensing of landfills and transfer stations,
or alleging environmental damage or violations of the permits and licenses
pursuant to which the Company operates.
In addition, the Company may become party to various claims and suits
pending for alleged damages to persons and property, alleged violations of
certain laws and alleged liabilities arising out of matters occurring during the
normal operation of a waste management business. However, there is no current
proceeding or litigation involving the Company that the Company believes will
have a material adverse impact on the Company's business, financial condition,
results of operations or cash flows.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the Company's
executive officers and directors as of March 1, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Ronald J. Mittelstaedt(1).............. 34 President, Chief Executive Officer and
Chairman
Steven F. Bouck........................ 41 Executive Vice President and Chief
Financial Officer
Eugene V. Dupreau...................... 50 Vice President -- Madera; Director
Charles B. Youngclaus.................. 58 Vice President -- Madera; Advisory
Director
Darrell W. Chambliss................... 33 Vice President -- Operations; Secretary
Michael R. Foos........................ 32 Vice President and Corporate Controller
Eric J. Moser.......................... 31 Treasurer and Assistant Corporate
Controller
Michael W. Harlan(1)(2)................ 37 Director
William J. Razzouk(1)(3)............... 50 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee, upon consummation of the offering.
(3) Member of the Compensation Committee, upon consummation of the offering.
Ronald J. Mittelstaedt has been President, Chief Executive Officer and a
director of the Company since it was formed, and was elected Chairman in January
1998. He also served as a consultant to the Company in August and September
1997. Mr. Mittelstaedt has more than ten years of experience in the solid waste
industry. He served as a consultant to United Waste Systems, Inc., with the
title of Executive Vice President, from January 1997 to August 1997, where he
was responsible for corporate development for all states west of Colorado. As
Regional Vice President of USA Waste Services, Inc. (including Sanifill, Inc.,
which was acquired by USA Waste Services, Inc.) from November 1993 to January
1997, he was responsible for all operations in 16 states and Canada. Mr.
Mittelstaedt held various positions at Browning-Ferris Industries, Inc. from
August 1987 to November 1993, most recently as Division Vice President in
northern California, overseeing the San Jose market. Previously he was the
District Manager responsible for BFI's operations in Sacramento and the
surrounding areas. He holds a B.S. in Finance from the University of California
at Santa Barbara.
Steven F. Bouck has been Executive Vice President and Chief Financial
Officer of the Company since February 1998. Mr. Bouck held various positions
with First Analysis Corporation from 1986 to 1998, including most recently as
Managing Director coordinating corporate finance. In that capacity, he provided
merger and acquisition advisory services to companies in the environmental
industry. Mr. Bouck was also responsible for assisting in investing venture
capital funds focussed on the environmental industry that were managed by First
Analysis. In connection with those investments, he served on the boards of
directors of several companies. While at First Analysis, Mr. Bouck also provided
analytical research coverage of a number of publicly traded environmental
services companies. Mr. Bouck holds B.S. and M.S. degrees in mechanical
engineering from Rensselaer Polytechnic Institute and an M.B.A. in Finance from
the Wharton School. He has been a Chartered Financial Analyst since 1990.
Eugene V. Dupreau has been Vice President -- Madera and a director of the
Company since February 23, 1998. Mr. Dupreau served as President and a director
of Madera Disposal Systems, Inc. beginning in 1981 and 1985, respectively, and
held both positions until the Company acquired Madera in 1998. Mr. Dupreau holds
a B.S. in Business Administration from Fresno State University
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and has completed advanced coursework in waste management. He serves as a
director of several civic and charitable organizations in Madera County.
Charles B. Youngclaus has been Vice President -- Madera and an advisory
director of the Company since February 23, 1998. Mr. Youngclaus founded Madera
Disposal Systems, Inc. in 1981 and was its Chief Operating Officer and Vice
President before its acquisition by the Company in 1998. Mr. Youngclaus owned
and operated Madera's predecessor company, Madera County Disposal, from 1965 to
1981. Mr. Youngclaus holds a B.S. from Fresno State University and has completed
advanced coursework in waste management, including certification in clay liner
construction by the University of Texas in 1992. Mr. Youngclaus is a Board
Member of the California Refuse Removal Council and is incoming Treasurer of the
Northern California chapter.
Darrell W. Chambliss has been Vice President -- Operations and Secretary of
the Company since October 1, 1997. Mr. Chambliss held various management
positions at USA Waste Services, Inc. (including Sanifill, Inc. and United
Waste, Inc., both of which were acquired by USA Waste Services, Inc.) from April
1995 to September 1997, including most recently Division Manager in Corning,
California, where he was responsible for the operations of 19 operating
companies as well as supervising and integrating acquisitions. From July 1989 to
April 1995, he held various management positions with Browning-Ferris
Industries, Inc., including serving as Assistant District Manager in San Jose,
California, where he was responsible for a significant hauling operation, and
serving as District Manager in Tucson, Arizona for more than three years. Mr.
Chambliss holds a B.S. in Business Administration from the University of
Arkansas.
Michael R. Foos has been Vice President and Corporate Controller of the
Company since October 1, 1997. Mr. Foos served as Division Controller of USA
Waste Services, Inc. (including Sanifill, Inc., which was acquired by USA Waste
Services, Inc.) from October 1996 to September 1997, where he was responsible
for financial compilation and reporting and acquisition due diligence for a
seven-state region. Mr. Foos served as Assistant Regional Controller at USA
Waste Services, Inc. from August 1995 to September 1996, where he was
responsible for internal financial reporting for operations in six states and
Canada. Mr. Foos also served as District Controller for Waste Management, Inc.
from February 1990 to July 1995, and was a member of the audit staff of Deloitte
& Touche from 1987 to 1990. Mr. Foos holds a B.S. in Accounting from Ferris
State University.
Eric J. Moser has been the Company's Treasurer and Assistant Corporate
Controller since October 1, 1997. From August 1995 to September 1997, Mr. Moser
held various finance positions at USA Waste Services, Inc. (including Sanifill,
Inc., which was acquired by USA Waste Services, Inc.), most recently as
Controller of the Ohio Division, where he was responsible for internal financial
compilation and reporting and acquisition due diligence. Previously Mr. Moser
was Controller of the Michigan Division of USA Waste Services, Inc., where he
was responsible for internal financial reporting. Mr. Moser served as Controller
for Waste Management, Inc. from June 1993 to August 1995, where he was
responsible for internal financial reporting for a hauling company, landfill and
transfer station. Mr. Moser holds a B.S. in Accounting from Illinois State
University.
Michael W. Harlan has been a director of the Company since January 30,
1998. From November 1997 to January 30, 1998, Mr. Harlan served as a consultant
to the Company on various financial matters. Since March 1997, Mr. Harlan has
been Vice President and Chief Financial Officer of Apple Orthodontix, Inc., a
publicly traded company that provides practice management services to
orthodontic practices in the U.S. and Canada. From April 1991 to December 1996,
Mr. Harlan held various positions in the finance and acquisition departments of
USA Waste Services, Inc. (including Sanifill, Inc., which was acquired by USA
Waste Services, Inc.), including serving as Treasurer and Assistant Secretary
beginning in September 1993. From May 1982 to April 1991, Mr. Harlan held
various positions in the tax and corporate financial consulting services
division of Arthur Andersen LLP, where he was a Manager since July 1986. Mr.
Harlan is a Certified Public Accountant and holds a B.A. from the University of
Mississippi.
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William J. Razzouk has been a director of the Company since January 30,
1998. Since September 1997, Mr. Razzouk has been the President, Chief Operating
Officer and a director of Storage USA, Inc., a publicly traded real estate
investment trust that owns and operates more than 350 mini storage warehouses.
He also owns a management consulting business and an investment company that
focuses on identifying strategic acquisitions. He served as the President and
Chief Operating Officer of America Online from February 1996 to June 1996. From
1983 to 1996, Mr. Razzouk held various management positions at Federal Express
Corporation, most recently as Executive Vice President, World Wide Customer
Operations, with full worldwide profit and loss responsibility. Mr. Razzouk
previously held management positions at ROLM Corporation, Philips Electronics
and Xerox Corporation. He is a member of the Board of Directors of La Quinta
Motor Inns and Fritz Companies, Inc. and previously was a director of Sanifill,
Inc. and Cordis Corp. He holds a Bachelor of Journalism degree from the
University of Georgia.
CLASSIFICATION OF BOARD OF DIRECTORS
The Board of Directors is divided into three classes. The term of office of
the first class (currently comprised of Eugene V. Dupreau) will expire at the
annual meeting of stockholders following the fiscal year ending December 31,
1998, the term of office of the second class (currently comprised of Michael W.
Harlan and William J. Razzouk) will expire at the annual meeting of stockholders
following the fiscal year ending December 31, 1999, and the term of office of
the third class (currently comprised of Ronald J. Mittelstaedt) will expire at
the annual meeting of stockholders following the fiscal year ending December 31,
2000. At each annual meeting of stockholders, successors to directors of the
class whose term expires at such meeting will be elected to serve for three-year
terms and until their successors are elected and qualified. See "Description of
Capital Stock -- Certain Charter and By-Law Provisions -- Classified Board of
Directors."
COMMITTEES OF THE BOARD
The Board of Directors has established an Executive Committee and has
authorized an Audit Committee and a Compensation Committee to become operative
upon the closing of this offering. A majority of the members of the Executive
Committee are, and both members of each of the Audit and Compensation Committees
will be, independent directors who are not employees of the Company or one of
its subsidiaries.
COMPENSATION OF DIRECTORS
Directors do not currently receive any compensation for attending meetings
of the Board of Directors. After completion of this offering, each independent
director will receive a fee of $1,500 for attendance at each Board meeting and
each committee meeting (unless held on the same day as the full Board meeting),
in addition to reimbursement of reasonable expenses.
Each independent director who has not been an employee of the Company at
any time during the 12 months preceding his initial election and appointment to
the Board is granted an option to purchase 15,000 shares of the Company's Common
Stock at the time of his or her initial election or appointment. The Company has
granted to each of Messrs. Harlan and Razzouk options to purchase 15,000 shares
of Common Stock at $3.00 per share, exercisable on October 1, 1998.
Commencing in 1999, the Company will grant each independent director, on
February 1 of each year during which such person serves on the Board, an option
to purchase 7,500 shares of the Company's Common Stock. All such options will
have an exercise price equal to the fair market value of the Common Stock on the
grant date, will vest in full on the grant date, and will expire upon the
earlier to occur of ten years after the grant date or one year after the
director ceases to be a member of the Board.
47
<PAGE> 49
EXECUTIVE COMPENSATION
Summary Compensation Information
The Company was incorporated in September 1997. The following table sets
forth information with respect to the annual and long-term compensation earned
in 1997 by the Chief Executive Officer. The Chief Executive Officer has been
compensated in accordance with the terms of his Employment Agreement described
below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
SHARES
ANNUAL COMPENSATION UNDERLYING
---------------------------- RESTRICTED OPTIONS/ WARRANTS ALL OTHER
SALARY(1) BONUS(1) OTHER STOCK GRANTED(2) COMPENSATION(3)
--------- -------- ----- ---------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ronald J. Mittelstaedt.. $39,903 $30,000 -- $0 200,000 $10,000
</TABLE>
- ---------------
(1) Salary and bonus figures reflect employment from October 1, 1997 through
December 31, 1997. Bonus figure reflects portion earned during 1997; such
bonus is payable in 1998.
(2) See "Option and Warrant Grants" below.
(3) Consists of consulting fees for services rendered prior to the Company's
formation.
Stock Options and Warrants
Option and Warrant Grants. The following table contains information
concerning the grant of options and warrants to purchase shares of the Company's
Common Stock to the Company's Chief Executive Officer during the period from
inception (September 9, 1997) through December 31, 1997:
1997 OPTION AND WARRANT GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
NUMBER OF ANNUAL RATES OF
SHARES % OF TOTAL STOCK PRICE
UNDERLYING OPTIONS AND APPRECIATION FOR
OPTIONS WARRANT OPTION/WARRANT
AND GRANTED TO TERM(2)
NAME OF WARRANT EMPLOYEES IN EXERCISE PRICE -----------------------
BENEFICIAL OWNER GRANTED 1997 PER SHARE(1) EXPIRATION DATE 5% 10%
---------------- ---------- ------------ -------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald J. Mittelstaedt.. 100,000(3) 15.9% $2.80 Dec. 14, 2007 $1,512,000 $2,573,000
100,000(4) 15.9% $2.80 Dec. 14, 2007 $1,512,000 $2,573,000
</TABLE>
- ---------------
(1) The options and warrant were granted at or above fair market value as
determined by the Board of Directors on the date of grant.
(2) Amounts reported in these columns represent amounts that may be realized on
exercise of options and warrant immediately prior to the expiration of their
term assuming the specified assumed rates of stock price appreciation (5%
and 10%) on the Company's Common Stock over the term of the options and
warrant, assuming an initial public offering price of $11.00 per share. The
potential realizable values set forth above do not take into account
applicable tax and expense payments that may be associated with such
exercises. Actual realizable value, if any, will depend on the future price
of the Common Stock on the actual date of exercise, which may be earlier
than the stated expiration date. The 5% and 10% assumed annualized rates of
stock price appreciation over the exercise period of the options and
warrants used in the table above are mandated by the rules of the Securities
and Exchange Commission (the "Commission") and do not represent the
Company's estimate or projection of the future price of the Common Stock on
any date. There is no representation, either express or implied, that
48
<PAGE> 50
the stock price appreciation rates for the Common Stock assumed for purposes
of this table will actually be achieved.
(3) Warrant vested immediately on date of grant.
(4) Options vest 33% on October 1, 1998, 33% on October 1, 1999, and 34% on
October 1, 2000.
Option and Warrant Values. The following table sets forth information for
the Chief Executive Officer with respect to the value of unexercised options and
warrants outstanding as of December 31, 1997. The Chief Executive Officer did
not exercise any options or warrants during 1997.
1997 OPTION AND WARRANT VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AND IN-THE-MONEY OPTIONS AND
WARRANT AT WARRANT AT
DECEMBER 31, 1997 DECEMBER 31, 1997 (1)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald J. Mittelstaedt............... 100,000 100,000 -- --
</TABLE>
- ---------------
(1) There was no public trading market for the Company's Common Stock at
December 31, 1997. Accordingly, as permitted by the rules of the Commission,
these values have been calculated based on the fair market value of the
Company's Common Stock as of December 31, 1997, of $2.02 per share, as
determined by the Board of Directors based on an independent valuation, less
the aggregate exercise price.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Steven F. Bouck,
Eugene V. Dupreau, Charles B. Youngclaus, Darrell W. Chambliss, Michael R. Foos
and Eric J. Moser. Each agreement has a three-year term.
The Company entered into an employment agreement with Ronald J.
Mittelstaedt, the President and the Chief Executive Officer, on October 1, 1997.
The initial annual base salary is $170,000. If this offering is consummated by
October 1, 1998, Mr. Mittelstaedt's base salary will be adjusted to at least
$250,000. The agreement provides for a minimum bonus of $125,000 for the
15-month period ending December 31, 1998, if the Company achieves certain
acquisition and financial targets.
The agreement provides for an initial five-year term, at the end of which
the agreement automatically renews for additional successive one-year terms
unless terminated earlier upon written notice of either Mr. Mittelstaedt or the
Company or extended further by the Board. The Company or Mr. Mittelstaedt may at
any time terminate the agreement, with or without cause, provided that if the
Company terminates the agreement without cause (as defined in the agreement) or
if Mr. Mittelstaedt terminates the agreement for good reason (as defined in the
agreement), the Company is required to make certain severance payments, and all
of Mr. Mittelstaedt's unvested options, warrants and rights relating to capital
stock of the Company will immediately vest. The agreement also provides that a
change of control of the Company (as defined in the agreement) will be deemed a
termination of Mr. Mittelstaedt without cause, unless Mr. Mittelstaedt waives
that provision.
Pursuant to the employment agreement, the Company sold Mr. Mittelstaedt
617,500 shares of the Company's Common Stock for $0.01 per share and 357,143
shares of the Company's Series A Preferred Stock for $1,000,000. Mr.
Mittelstaedt may recommend nominees for election to the Company's Board of
Directors. If the Board consists of five or fewer members, Mr. Mittelstaedt may
recommend two nominees, and if it consists of more than five members, he may
recommend three nominees.
49
<PAGE> 51
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The full Board of Directors served as the compensation committee of the
Board during 1997. At the time the employment agreement with Mr. Mittelstaedt
was approved by the Board of Directors, Mr. Mittelstaedt was one of three
members of the Board of Directors. No executive officer of the Company served as
a director or member of the compensation committee of another entity, one of
whose executive officers served as a director or member of the Compensation
Committee of the Company.
1997 STOCK OPTION PLAN
The 1997 Stock Option Plan (the "Stock Option Plan") was adopted by the
Board of Directors effective as of October 1, 1997, and was approved by the
stockholders on March 12, 1998. the Stock Option Plan is intended to provide
employees, consultants and directors with additional incentives by increasing
their proprietary interests in the Company. Under the Stock Option Plan, the
Company may grant options with respect to a maximum of 1,200,000 shares of
Common Stock. As of March 1, 1998, the Company had granted options to purchase
857,800 shares of Common Stock at a weighted average exercise price of $5.23 per
share.
The Stock Option Plan is currently administered by the Board of Directors.
Upon consummation of the offering, the Compensation Committee will administer
the Stock Option Plan. The administrator of the Stock Option Plan has the
authority to determine the employees, consultants and directors to whom options
are granted (the "Optionees"), the type, size and term of the options, the grant
date, the expiration date, the vesting schedule and other terms and conditions
of the options.
The Stock Option Plan provides for the grant of incentive stock options
("ISOs") as defined in section 422 of the Internal Revenue Code, as amended, and
nonqualified stock options. Only employees of the Company may receive ISOs. The
aggregate fair market value, as of the grant date, of the Common Stock subject
to ISOs that become exercisable by any employee during any calendar year may not
exceed $100,000. Options generally become exercisable in installments pursuant
to a vesting schedule set forth in the option agreement. no option shall be
granted after September 30, 2007. No option will remain exercisable later than
10 years after the grant date (or five years in the case of ISOs granted to
Optionees owning more than 10% of the total combined voting power of all classes
of the Company's outstanding capital stock (a "Ten Percent Stockholder")). The
exercise price of ISOs granted under the Stock Option Plan may be no less than
the fair market value of a share of Common Stock on the grant date (or 110% of
such fair market value, in the case of ISOs granted to Ten Percent
Stockholders).
If an Optionee with outstanding options retires or becomes disabled and
does not die within the three months following retirement or disability, the
Optionee may exercise his or her options, but only within the period ending,
subject to the discretion of the administrator of the Stock Option Plan, on the
earlier of: (i) six months after retirement or disability; or (ii) the
expiration of the option set forth in the option agreement. If the Optionee does
not exercise his or her options within that time period, the options will
terminate, and the shares of Common Stock subject to the options will become
available for issuance under the Stock Option Plan. If the Optionee ceases to be
an employee, consultant or director of the Company other than because of
retirement, death or disability, his or her options terminate on the date such
relationship terminates, subject to the discretion of the administrator of the
Stock Option Plan, and the shares of Common Stock subject to the options will
become available for issuance under the Stock Option Plan. Each option agreement
may include the right of the Company to repurchase any and all shares acquired
by an Optionee under the Stock Option Plan upon termination of the Optionee,
whether voluntary or involuntary or with or without cause.
50
<PAGE> 52
CERTAIN TRANSACTIONS
INITIAL FUNDING
In September and October 1997, the Company sold an aggregate of 2,300,000
shares of Common Stock at a price of $0.01 per share and 2,499,998 shares of
Series A Preferred Stock at a price of $2.80 per share to 19 accredited
investors, including certain officers and directors of the Company, in a private
placement. Such sales were made in accordance with Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). The
investors included the following officers and directors of the Company, their
immediate family members, and entities controlled by them:
Mittelstaedt Family Trust dated 6/18/97 (trustee is Ronald J.
Mittelstaedt, President, Chief Executive Officer and Chairman): 357,143
shares of Series A Preferred for $1,000,000 and 617,500 shares of Common
Stock for $6,175;
J. Bradford Bishop (former director; resigned January 30, 1998):
678,750 shares of Common Stock for $6,787.50;
James N. Cutler, Jr. (former director; resigned January 30, 1998):
678,750 shares of Common Stock for $6,787.50;
Bishop-Cutler L.L.C. (controlled by former directors J. Bradford
Bishop and James N. Cutler, Jr.): 339,285 shares of Series A Preferred
Stock for $950,000;
Frank W. Cutler (brother of former director James N. Cutler, Jr.):
142,857 shares of Series A Preferred Stock for $400,000 and 275,000 shares
of Common Stock for $2,750;
Darrell W. Chambliss (Vice President -- Operations): 20,000 shares of
Common Stock for $200;
Michael R. Foos (Vice President and Corporate Controller): 20,000
shares of Common Stock for $200;
Eric J. Moser (Treasurer and Assistant Corporate Controller): 10,000
shares of Common Stock for $100.
OPTIONS AND WARRANTS TO MANAGEMENT GROUP
On October 1, 1997, Darrell W. Chambliss, Michael R. Foos and Eric J. Moser
were granted options to purchase 150,000, 150,000 and 85,000 shares,
respectively, of Common Stock, pursuant to their respective employment
agreements with the Company.
On December 15, 1997, each of then directors James N. Cutler and J.
Bradford Bishop and Board consultant Frank W. Cutler was granted a warrant to
purchase 247,000 shares of Common Stock at an exercise price of $2.80 per share.
Messrs. Cutler and Bishop resigned as directors on January 30, 1998, and Frank
W. Cutler's consulting relationship with the Board terminated on that date. On
December 15, 1997, Ronald J. Mittelstaedt was granted a warrant to purchase
100,000 shares of Common Stock at an exercise price of $2.80 per share and an
option to purchase 100,000 shares of Common Stock at an exercise price of $2.80
per share. All of the above warrants and options are currently exercisable,
except for the option to purchase 100,000 shares granted to Mr. Mittelstaedt,
one-third of which becomes exercisable on each of October 1, 1998, October 1,
1999, and October 1, 2000.
On December 15, 1997, Michael W. Harlan was granted a warrant to purchase
5,000 shares of Common Stock at an exercise price of $2.80 per share,
exercisable on October 1, 1998. On January 30, 1998, Mr. Harlan and William J.
Razzouk were each granted an option to purchase 15,000 shares of Common Stock at
an exercise price of $3.00 per share, exercisable on October 1, 1998.
51
<PAGE> 53
On February 1, 1998, Steven F. Bouck was granted options to purchase
230,000 shares of Common Stock, pursuant to his employment agreement with the
Company. These options include an option to purchase 100,000 shares at an
exercise price of $2.80 per share, of which one-third is exercisable on each of
October 1, 1998, October 1, 1999, and October 1, 2000. Of Mr. Bouck's remaining
options, an option to purchase 50,000 shares has an exercise price of $9.50 per
share, and an option to purchase 50,000 shares has an exercise price of $12.50
per share; one-third of each of these options vests on each of October 1, 1998,
October 1, 1999, and October 1, 2000. Mr. Bouck also received an option to
purchase 30,000 shares of Common Stock at an exercise price of $2.80 per share,
which vests ratably on October 1, 1998, 1999 and 2000 if certain events occur.
On February 1, 1998, Mr. Bouck was granted an immediately exercisable warrant to
purchase 50,000 shares of Common Stock at an exercise price of $2.80 per share.
On February 23, 1998, Eugene V. Dupreau and Charles B. Youngclaus were
granted warrants in connection with the Company's acquisition of Madera. See
"Purchase of Madera Disposal Systems, Inc." below.
PURCHASE OF WASTE CONNECTIONS OF IDAHO, INC.
On January 30, 1998, the Company purchased all of the outstanding stock of
Waste Connections of Idaho, Inc. ("Waste Connections Idaho") from Ronald J.
Mittelstaedt, J. Bradford Bishop and James N. Cutler, Jr., the sole shareholders
of Waste Connections Idaho. The aggregate purchase price was $3,000, which was
the aggregate price paid initially by Messrs. Mittelstaedt, Bishop and Cutler
for such shares. Messrs. Mittelstaedt, Bishop and Cutler formed Waste
Connections Idaho in September 1997 for the purpose of acquiring certain assets
from Browning-Ferris Industries of Idaho, Inc.
PURCHASE OF MADERA DISPOSAL SYSTEMS, INC.
Eugene V. Dupreau was President and a 16.7% shareholder of Madera Disposal
Systems, Inc. before it was acquired by the Company on February 23, 1998.
Charles B. Youngclaus was Chief Operating Officer and a 16.7% shareholder of
Madera before it was acquired by the Company. For their shares of Madera's
common stock, each of Messrs. Dupreau and Youngclaus received $630,662 in cash,
333,333 shares of the Company's Common Stock and warrants to purchase 66,667
shares of the Company's Common Stock at an exercise price of $4.00 per share.
Each of Messrs. Dupreau and Youngclaus has been engaged by the Company as Vice
President -- Madera. Mr. Dupreau was appointed a director of the Company,
effective February 23, 1998.
In addition, the Company is required to pay contingent consideration to
certain former Madera shareholders, subject to their involvement in the events
that give rise to the consideration, if the Company enters into certain
specified business transactions by February 3, 2001. These shareholders may
include Messrs. Dupreau and Youngclaus.
OTHER TRANSACTIONS.
The Company has entered into certain transactions with Continental Paper,
LLC, an Oregon limited liability company doing business as Fibres International
("Fibres"). J. Bradford Bishop and James N. Cutler, Jr. own 60% of the
membership interests in Fibres, were directors of the Company when some of these
transactions occurred and may be deemed promoters of the Company. In markets
where Fibres has processing facilities (which include three of the Company's
four current markets), the Company delivers to Fibres' processing facilities all
of the Company's collected recyclable materials for which Fibres pays the market
rate (adjusted to reflect the Company's costs of transporting the materials to
Fibres or another processor) otherwise obtainable by the Company for such
materials. The gross revenues received by the Company from Fibres from the
Company's inception through December 31, 1997, were approximately $222,701. The
net amount retained by the Company, after deducting the fees the Company paid to
Fibres for the right to collect the recyclables, was approximately $10,860 for
such period.
52
<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of March 1, 1998, and after the
sale of the shares of Common Stock offered hereby and the automatic conversion
to Common Stock of all outstanding shares of Series A Preferred Stock, by: (i)
each person or entity known to the Company to beneficially own more than 5% of
the Company's Common Stock; (ii) Mr. Mittelstaedt and each director of the
Company; and (iii) all current directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
OWNED AS OF MARCH 1, TO BE OWNED AFTER
1998 THE OFFERING
NAME OF ----------------------- -----------------------
BENEFICIAL OWNER(1) NUMBER PERCENTAGE NUMBER PERCENTAGE
------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
James N. Cutler, Jr.(2)(3)................ 923,750 28.0% 959,465 12.3%
J. Bradford Bishop(2)(3).................. 905,750 27.5 923,607 11.8
Ronald J. Mittelstaedt(2)(4)(5)........... 717,500 21.7 1,074,643 13.8
Frank W. Cutler(2)(3)(4).................. 522,000 15.8 672,246 8.6
Eugene V. Dupreau(2)(6)................... 400,000 12.1 400,000 5.1
Charles B. Youngclaus(2)(6)............... 400,000 12.1 400,000 5.1
Melvin G. Dias(2)(7)...................... 400,000 12.1 400,000 5.1
Imperial Bank(2)(8)....................... 200,000 6.1 200,000 2.6
Kieckhefer Partnership 84-1(2)(4)......... -- -- 562,104 7.2
Michael W. Harlan(2)...................... -- -- -- --
William J. Razzouk(2)..................... -- -- -- --
Eugene P. Polk(2)(9)...................... -- -- 468,418 6.0
All executive officers and directors as a
group (9 persons)(4)(5)................. 1,617,500 49.0% 2,010,358 25.8%
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Commission, and includes generally voting power and/or investment power with
respect to securities. Shares of Common Stock subject to options and/or
warrants currently exercisable or exercisable within 60 days of the date
hereof are deemed outstanding for computing the percentage beneficially
owned by the person holding such options but are not deemed outstanding for
computing the percentage beneficially owned by any other person. Except as
otherwise indicated by footnote, the Company believes that the persons named
in this table, based on information provided by such persons, have sole
voting and investment power with respect to the shares of Common Stock
shown.
(2) The address of Mr. Mittelstaedt is 2260 Douglas Boulevard, Suite 280,
Roseville, California 95661. The address of J. Bradford Bishop and James N.
Cutler, Jr. is 6950 S.W. Hampton Street, Suite 200, Portland, Oregon 97223.
The address of Kieckhefer Partnership 84-1 and Eugene P. Polk is P.O. Box
1151, Prescott, Arizona 86302. The address of Frank W. Cutler is 711 North
Bayfront, Newport Beach, California 92662. The address of Eugene V. Dupreau,
Charles B. Youngclaus and Melvin G. Dias is Madera Disposal Systems, Inc.,
21739 Road 19, Chowchilla, California 93610. The address of Michael W.
Harlan is 2777 Allen Parkway, Suite 700, Houston, Texas 77019. The address
of William J. Razzouk is 165 Madison Avenue, Suite 1300, Memphis, Tennessee
38103. The address of Imperial Bank is 777 108th Avenue NE, Suite 1670,
Bellevue, Washington 98004.
(3) Includes 247,000 shares purchasable under currently exercisable warrants.
(4) As of March 1, 1998, the Mittelstaedt Family Trust, J. Bradford Bishop,
James N. Cutler, Jr., Kieckhefer Partnership 84-1, Kieckhefer Trust
Partnership 61-1 and Frank W. Cutler beneficially owned 357,143, 17,857,
35,715, 562,104, 281,052 and 7,389 shares, respectively, of Series A
Preferred Stock. Those shares automatically convert to the same number of
shares of Common Stock on the closing of the offering.
53
<PAGE> 55
(5) Includes 100,000 shares purchasable under currently exercisable warrants.
Also includes 567,900 shares held by the Mittelstaedt Family Trust dated
6/18/97, of which Mr. Mittelstaedt is the Trustee.
(6) Includes 66,667 shares purchasable under immediately exercisable warrants.
(7) Includes 66,666 shares purchasable under immediately exercisable warrants.
(8) Shares purchasable under currently exercisable warrants.
(9) As of March 1, 1998, Eugene Polk beneficially owned 468,418 shares of Series
A Preferred Stock: 285,713 through three trusts for which he serves as a
trustee (190,562 shares -- Eugene P. Polk and Barbara J. Polk Revocable
Trust U/A 11/18/68; 53,571 shares -- Margaret T. Morris Trust U/A 5/1/67;
and 53,571 shares -- Margaret T. Morris Trust U/A 4/19/69) and 170,714
shares through the Polk Investment Partnership 93-1, for which he serves as
a Manager. Those shares automatically convert to the same number of shares
of Common Stock on the closing of the offering.
54
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"). As of the date of this
Prospectus, there are 3,300,000 shares of Common Stock outstanding and 2,499,998
shares of Series A Preferred Stock outstanding. The Series A Preferred shares
will automatically convert to 2,499,998 shares of Common Stock upon the
consummation of this offering. After giving effect to this offering, there will
be 7,799,998 shares of Common Stock outstanding (8,099,998 if the Underwriters'
over-allotment option is exercised in full).
The following description of the Company's capital stock is a summary of
the material terms of such stock. The following does not purport to be complete
and is subject in all respects to applicable Delaware law and to the provisions
of the Company's Amended and Restated Certificate of Incorporation and Amended
and Restated By-laws.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote per share
held on all matters submitted to a vote at a meeting of stockholders. Cumulative
voting for the election of directors is not permitted. Subject to such
preferences to which holders of shares of Preferred Stock, if any, may be
entitled, the holders of outstanding shares of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. In the event of
a liquidation, dissolution or winding up of the Company, the holders of
outstanding shares of Common Stock are entitled to share ratably in all assets
of the Company which are legally available for distribution to stockholders,
subject to the prior rights on liquidation of creditors and to preferences, if
any, to which holders of shares of Preferred Stock, if any, may be entitled. In
connection with the acquisition of Madera, the Company issued 1,000,000 shares
of Common Stock, which was redeemable under certain circumstances. Upon the
consummation of this offering, those shares will no longer be redeemable. The
holders of outstanding shares of Common Stock do not have any preemptive,
subscription, redemption, conversion or sinking fund rights. The outstanding
shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
The Company is authorized by its Amended and Restated Certificate of
Incorporation to issue a maximum of 10,000,000 shares of Preferred Stock, in one
or more series and containing such rights, privileges and limitations, including
dividend rights, voting rights, conversion privileges, redemption rights,
liquidation rights and/or sinking fund rights, as may from time to time be
determined by the Board of Directors of the Company. The Company has issued
2,499,998 shares of Series A Preferred Stock, which on the closing of this
offering will convert automatically to 2,499,998 shares of Common Stock. The
Series A Preferred Stock provides for cumulative dividends, which if not paid in
cash prior to the Preferred Stock's conversion into Common Stock are to be paid
in additional shares of Common Stock. The Company intends to pay any such
accumulated dividends in cash prior to conversion. Additional Preferred Stock
may be issued in the future in connection with acquisitions, financings or such
other matters as the Board of Directors deems to be appropriate. The effect of
having such Preferred Stock authorized is that the Company's Board of Directors
alone, within the bounds and subject to the federal securities laws and the
Delaware General Corporation Law (the "Delaware Law"), may be able to authorize
the issuance of Preferred Stock, which may adversely affect the voting and other
rights of holders of Common Stock. The issuance of Preferred Stock may also have
the effect of delaying, deferring or preventing a change in control of the
Company.
55
<PAGE> 57
CERTAIN STATUTORY, CHARTER AND BY-LAW PROVISIONS
The following brief description of certain provisions of the Delaware Law
and the Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate") and Amended and Restated By-laws (the "Restated
By-laws") does not purport to be complete and is subject in all respects to the
provisions of the Delaware Law, the Restated Certificate and the Restated
By-laws, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
Classified Board of Directors. The Restated Certificate provides that the
Board shall be divided into three classes and that the number of directors in
each class shall be as nearly equal as is possible based on the number of
directors constituting the entire Board. The Restated Certificate effectively
provides that the term of office of the first class will expire at the annual
meeting of stockholders following December 31, 1998, the term of office of the
second class will expire at the annual meeting of stockholders following
December 31, 1999, and the term of office of the third class will expire at the
annual meeting of stockholders following December 31, 2000. At each annual
meeting of stockholders, successors to directors of the class whose term expires
at such meeting will be elected to serve for three-year terms and until their
successors are elected and qualified.
The classification of directors has the effect of making it more difficult
for stockholders to change the composition of the Board. At least two annual
meetings of stockholders, instead of one, will generally be required to effect a
change in a majority of the Board. Such a delay may help ensure that the
Company's directors, if confronted by a third party attempting to force a proxy
contest, a tender or exchange offer or other extraordinary corporate
transaction, would have sufficient time to review the proposal as well as any
available alternatives to the proposal and to act in what they believe to be the
best interests of the stockholders. However, such classification provisions
could also have the effect of discouraging a third party from initiating a proxy
contest, making a tender offer or otherwise attempting to obtain control of the
Company, even though such an attempt might be beneficial to the Company and its
stockholders. The classification of the Board could thus increase the likelihood
that incumbent directors will retain their positions.
Number of Directors; Removal; Filling Vacancies. The Restated Certificate
provides that, subject to any rights of holders of Preferred Stock to elect
additional directors under specified circumstances, the number of directors
comprising the entire Board will be fixed from time to time by action of not
less than a majority of the directors then in office. In no event shall such
number be less than three or more than nine, unless approved by action of not
less than two-thirds of the directors then in office. In addition, the Restated
Certificate provides that, subject to any rights of holders of Preferred Stock,
newly created directorships resulting from an increase in the authorized number
of director, vacancies on the Board resulting from death, resignation,
retirement, disqualification or removal of directors or any other cause may be
filled only by the Board (and not by the stockholders unless there are no
directors in office), provided that a quorum is then in office and present, or
by a majority of the directors then in office, if less than a quorum is then in
office, or by the sole remaining director. Accordingly, the Board could prevent
any stockholder from enlarging the Board and filling the new directorships with
such stockholder's own nominees.
Under the Delaware Law, unless otherwise provided in the certificate of
incorporation, directors serving on a classified board may only be removed by
the stockholders for cause. The Restated Certificate provides that following the
offering, directors may be removed only for cause and only on the affirmative
vote of holders of at least 66 2/3% of the voting power of all the then
outstanding shares of stock entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class.
The provisions of the Restated Certificate governing the number of
directors, their removal and the filling of vacancies may have the effect of
discouraging a third party from initiating a proxy contest, making a tender
offer or otherwise attempting to gain control of the Company, or of attempting
to change the composition or policies of the Board, even though such attempts
might be
56
<PAGE> 58
beneficial to the Company or its stockholders. These provisions of the Restated
Certificate could thus increase the likelihood that incumbent directors retain
their positions.
Limitation on Special Meetings; No Stockholder Action by Written
Consent. The Restated Certificate and the Restated By-laws provide that (subject
to the rights, if any, of holders of any class or series of Preferred Stock then
outstanding): (i) only a majority of the Board of Directors or the President or
Chairman of the Board will be able to call a special meeting of stockholders;
(ii) the business permitted to be conducted at a special meeting of stockholders
shall be limited to matters stated in the notice of meeting or properly brought
before the meeting by or at the direction of the Board of Directors; and (iii)
following the offering, stockholder action may be taken only at a duly called
and convened annual or special meeting of stockholders and may not be taken by
written consent. These provisions, taken together, prevent stockholders from
forcing consideration by the stockholders of stockholder proposals over the
opposition of the Board, except at an annual meeting.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals. The Restated By-laws establish an advance notice procedure for
stockholders to make nominations of candidates for election as director, or to
bring other business before an annual meeting of stockholders of the Company
(the "Stockholder Notice Procedure").
The Stockholder Notice Procedure provides that, subject to the rights of
any holders of Preferred Stock, only persons who are nominated by or at the
direction of the Board, any committee appointed by the Board, or by a
stockholder who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedure provides
that at an annual meeting, only such business may be conducted as has been
brought before the meeting by, or at the direction of, the Board, any committee
appointed by the Board, or by a stockholder who has given timely written notice
to the Secretary of the Company of such stockholder's intention to bring such
business before such meeting. Under the Stockholder Notice Procedure, to be
timely, notice of stockholder nominations or proposals to be made at an annual
or special meeting must be received by the Company not less than 60 days nor
more than 90 days prior to the scheduled date of the meeting (or, if less than
70 days' notice or prior public disclosure of the date of the meeting is given,
then the 15th day following the earlier of: (i) the day such notice was mailed;
or (ii) the day such public disclosure was made).
Under the Stockholder Notice Procedure, a stockholder's notice to the
Company proposing to nominate a person for election as director must contain
certain information about the nominating stockholder and the proposed nominee,
and a stockholder's notice relating to the conduct of business other than the
nomination of directors must contain certain information about such business and
about the proposing stockholder. If the Chairman or other officer presiding at a
meeting determines that a person was not nominated, or other business was not
brought before the meeting, in accordance with the Stockholder Notice Procedure,
such person will not be eligible for election as a director, or such business
will not be conducted at such meeting, as the case may be.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure affords the Board an opportunity to consider the qualifications
of the proposed nominees and, to the extent deemed necessary or desirable by the
Board, to inform stockholders about such qualifications. By requiring advance
notice of other proposed business, the Stockholder Notice Procedure also
provides a more orderly procedure for conducting annual meetings of stockholders
and, to the extent deemed necessary or desirable by the Board, provides the
Board with an opportunity to inform stockholders, prior to such meetings, of any
business proposed to be conducted at such meetings, together with any
recommendations as to the Board's position regarding action to be taken with
respect to such business, so that stockholders can better decide whether to
attend such a meeting or to grant a proxy regarding the disposition of any such
business.
57
<PAGE> 59
Although the Restated By-laws do not give the Board any power to approve or
disapprove stockholder nominations for the election of directors or proposals
for action, the forgoing provisions may have the effect of precluding a contest
for the election of directors or the consideration of stockholder proposals and
of discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposal, if
the proper advance notice procedures are not followed, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to
the Company and its stockholders.
Certain Provisions Relating to Potential Change of Control. The Restated
Certificate authorizes the Board and any committee of the Board to take such
action as it may determine to be reasonably necessary or desirable to encourage
any person or entity to enter into negotiations with the Board and management
regarding any transaction which may result in a change of control of the
Company, or to contest or oppose any such transaction which the Board determines
to be unfair, abusive or otherwise undesirable to the Company, its business,
assets, properties or stockholders. The Board or any such committee is
specifically authorized to adopt plans or to issue securities of the Company
including plans, rights, options, capital stock, notes, debentures or other debt
securities, which securities may be exchangeable or convertible into cash or
other securities on such terms and conditions as the Board or any such committee
determines. In addition, the Board or such committee of the Board may provide
that any holder or class of holders of such designated securities will be
treated differently than, and unequally to, all other security holders in
respect of the terms, conditions, provisions and rights of such securities.
The existence of this authority or the actions which may be taken by the
Board pursuant thereto are intended to give the Board flexibility in order to
act in the best interests of stockholders in the event of a potential change of
control transaction. Such provisions may, however, deter potential acquirors
from proposing unsolicited transactions not approved by the Board and might
enable the Board to hinder or frustrate such a transaction if proposed.
Limitation of Liability of Directors. The Restated Certificate provides
that a director will not be personally liable to the Company or its stockholders
for monetary damages for any breach of fiduciary duty as a director, except for
liability: (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware Law, which concerns unlawful payments of dividends,
stock purchases or redemptions; or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware Law is
subsequently amended to permit further limitation of the personal liability of
directors, the liability of a director of the Company will be eliminated or
limited to the fullest extent permitted by the Delaware Law as so amended.
Amendment of the Certificate of Incorporation and By-laws. The Restated
Certificate contains provisions requiring the affirmative vote of the holders of
at least 66 2/3% of the voting power of the Voting Stock to amend certain
provisions of the Restated Certificate (including the provisions discussed above
relating to the size and classification of the Board, replacement and/or removal
of Board members, action by written consent, special stockholder meetings, the
authorization for the Board to take steps to encourage or oppose, as the case
may be, transactions which may result in a change of control of the Company, and
limitation of the liability of directors) or to amend any provision of the
Restated By-laws by action of stockholders following the offering. These
provisions make it more difficult for stockholders to make changes in the
Restated Certificate and the Restated By-laws, including changes designed to
facilitate the exercise of control over the Company.
Business Combination Provisions of Delaware Law. The Company is a Delaware
corporation and is subject to section 203 of the Delaware Law. In general,
section 203 prevents a Delaware corporation from engaging in a "business
combination" (as defined) with an "interested stockholder" (defined generally as
a person owning 15% or more of a corporation's outstanding voting stock or
affiliate or associate) for three years following the time such stockholder
became an
58
<PAGE> 60
interested stockholder, unless: (i) before such person became an interested
stockholder, the board of directors of the corporation approved the business
combination or the transaction in which the interested stockholder became an
interested stockholder; (ii) upon consummation of the transaction that resulted
in the interested stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) at or subsequent to the time such person became an interested
stockholder, the business combination was approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder. Under section 203, the
restrictions described above also do not apply to certain business combinations
proposed by an interested stockholder following the announcement or notification
of one of certain extraordinary transactions involving the corporation and a
person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the corporation's directors, if such extraordinary transaction is approved or
not opposed by a majority of the directors who were directors prior to any
person becoming an interested stockholder during the previous three years or
were recommended for election or elected to succeed such directors by a majority
of such directors.
TRANSFER AGENT AND REGISTRAR
BankBoston, N.A., c/o Boston EquiServe, L.P., will serve as transfer agent
and registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 7,799,998 shares of
Common Stock outstanding. All of the shares offered hereby will be freely
saleable in the public market after completion of this offering, unless acquired
by affiliates of the Company. All of the shares outstanding prior to completion
of this offering are subject to contractual restrictions that prohibit the
stockholder from selling or otherwise disposing of shares for a period of 180
days after the date of this Prospectus without the prior written consent of BT
Alex. Brown Incorporated. After this 180-day period expires, 7,749,998 of the
currently outstanding shares will be eligible for resale in the public market
under Rule 144 promulgated under the Securities Act, and an additional 50,000 of
the currently outstanding shares will become eligible for resale in the public
market ratably over three years, subject to the restrictions of Rule 144. Shares
of Common Stock held by affiliates of the Company will be subject to certain
volume and other limitations discussed below under Rule 144.
The Company has agreed not to sell, contract to sell or otherwise dispose
of any shares of Common Stock for a period of 180 days after the date of this
Prospectus, except as consideration for business acquisitions or upon exercise
of currently outstanding stock options or warrants, without the prior written
consent of BT Alex. Brown Incorporated.
In general, under Rule 144, a person (or persons whose shares are
aggregated), including persons who may be deemed affiliates of the Company, who
has beneficially owned his or her shares for at least one year is entitled to
sell within any three-month period that number of shares which does not exceed
the greater of 1% of the outstanding shares of the Common Stock (78,000 shares
after completion of this offering) or the average weekly trading volume during
the four calendar weeks preceding each such sale. Sales under Rule 144 also are
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. Under Rule 144(k),
a person (or persons whose shares are aggregated) who is not or has not been
deemed an "affiliate" of the Company for at least three months and who has
beneficially
59
<PAGE> 61
owned his or her shares for at least two years would be entitled to sell such
shares under Rule 144 without regard to the limitations discussed above.
There has been no public market for the Common Stock prior to this offering
and no assurance can be given that an active public market for the Common stock
will develop or be sustained after completion of this offering. Sales of
substantial amounts of the Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market price of the Common Stock
and could impair the Company's ability to raise capital or effect acquisitions
through the issuance of Common Stock.
After the completion of this offering, the Company intends to file a
registration statement under the Securities Act to register all shares issuable
on exercise of stock options or other awards granted or to be granted under its
Stock Option Plan. After the filing of such registration statement and subject
to certain restrictions under Rule 144, those shares will be freely saleable in
the public market immediately following exercise of such options. The Company
currently intends to file a shelf registration statement on Form S-1 covering up
to an additional 3,000,000 shares of Common Stock under the Securities Act, for
its use in connection with acquisitions that may be made by the Company. Such
shares, when issued, could be freely saleable in the public market 180 days
after the date of this Prospectus, or earlier on prior approval of BT Alex.
Brown Incorporated by persons not affiliated with the Company, unless the
Company contractually restricts their resale. See "Underwriting."
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<PAGE> 62
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives, BT
Alex. Brown Incorporated and CIBC Oppenheimer Corp., have severally agreed to
purchase from the Company the following respective number of shares of Common
Stock at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------------
<S> <C>
BT Alex. Brown Incorporated.................................
CIBC Oppenheimer Corp.......................................
Total............................................. 2,000,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of Common Stock offered hereby if
any of such shares are purchased.
The Company has been advised by the Representatives of the Underwriters
that the Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such 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 to certain other
dealers. After commencement of the initial public offering, the offering price
and other selling terms may be changed by the Representatives of the
Underwriters.
The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to the total number of shares offered by the
Company hereunder, and the Company will be obligated, pursuant to the option, to
sell such shares to the Underwriters. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the Common
Stock offered hereby. If purchased, such additional shares will be offered by
the Underwriters on the same terms as those on which the 2,000,000 shares are
being offered.
To facilitate the offering of the Common Stock, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Specifically, the Underwriters may over-allot shares of the
Common Stock in connection with the offering, thereby creating a short position
in the Underwriters' syndicate account. Additionally, to cover such over-
allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of the Common Stock in the open
market. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time. The
Representatives, on behalf of the syndicate of Underwriters, also may reclaim
selling concessions allowed to an Underwriter or dealer, if the syndicate
repurchases shares distributed by that Underwriter or dealer.
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<PAGE> 63
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed not to sell, contract to sell or otherwise dispose
of any shares of Common Stock for a period of 180 days after the date of this
Prospectus, except as consideration for business acquisitions or upon exercise
of currently outstanding stock options or warrants, without the prior written
consent of BT Alex. Brown Incorporated. All stockholders, directors and officers
of the Company have agreed not to sell, contract to sell or otherwise dispose of
any shares of Common Stock for a period of 180 days without the prior written
consent of BT Alex. Brown Incorporated.
The Representatives of the Underwriters have advised the Company that they
do not intend to confirm sales to any account over which they exercise
discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price will be
determined by negotiations between the Company and the Representatives of the
Underwriters. Among the factors to be considered in such negotiations are
prevailing market conditions, the results of operations of the Company in recent
periods, the market capitalizations and stages of development of other companies
that the Company and the Representatives believe to be comparable to the
Company, estimates of the business potential of the Company, the present state
of the Company's development and other factors deemed relevant.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Shartsis, Friese & Ginsburg LLP, San
Francisco, California. Certain legal matters related to this offering will be
passed upon for the Underwriters by Piper & Marbury L.L.P., Baltimore, Maryland.
The statements pertaining to the Company's G certificates awarded by the WUTC
under "Risk Factors -- Highly Competitive Industry," "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Results of
Operations -- General," "Business -- Western U.S. Markets," and "Business -- G
Certificates" will be passed upon for the Company by Williams, Kastner & Gibbs
PLLC, Seattle, Washington.
EXPERTS
The financial statements of Waste Connections, Inc. and Predecessors as of
December 31, 1996 and 1997, and for each of the three years in the period ended
December 31, 1997, and the Financial Statements of Madera Disposal Systems, Inc.
at December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere in this Prospectus and Registration
Statement. Such financial statements have been included in this Prospectus in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (of
which the Prospectus is a part) on Form S-1 (together with all amendments
thereto, the "Registration Statement"), under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits and
schedules filed therewith, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements contained
in this Prospectus regarding the contents of any contract or other document
filed as an exhibit to the Registration Statement are not necessarily complete
and, in each instance, reference is made to the copy of such contract or other
document
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<PAGE> 64
filed as an exhibit to the Registration Statement, each such statement being
deemed to be qualified in its entirety by such reference. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and to the exhibits and
schedules filed therewith. The Registration Statement, including all exhibits
and schedules thereto, may be inspected without charge at the principal office
of the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following regional offices of the Commission: Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Room 1204, Washington, D.C. 20549, at prescribed rates.
The Commission maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's web-site is
http:\\www.sec.gov.
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<PAGE> 65
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WASTE CONNECTIONS, INC. UNAUDITED PRO FORMA FINANCIAL
STATEMENTS
Introduction to Unaudited Pro Forma Consolidated Financial
Statements............................................. F-2
Unaudited Pro Forma Consolidated Statements of Operations
for the year ended December 31, 1997................... F-3
Notes to Unaudited Pro Forma Consolidated Statements of
Operations............................................. F-4
Unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 1997...................................... F-6
Notes to Unaudited Pro Forma Consolidated Balance Sheet... F-7
WASTE CONNECTIONS, INC. AND PREDECESSORS
Report of Ernst & Young LLP, Independent Auditors......... F-8
Combined Balance Sheet of Predecessors as of December 31,
1996................................................... F-9
Consolidated Balance Sheet of Waste Connections, Inc. as
of December 31, 1997................................... F-9
Combined Statement of Operations of Predecessors for the
nine months ended September 30, 1997................... F-10
Consolidated Statement of Operations of Waste Connections,
Inc. for the period from inception (September 9, 1997)
through December 31, 1997.............................. F-10
Combined Statement of Operations of The Disposal Group for
the period from January 1, 1996 through July 31,
1996................................................... F-11
Combined Statement of Operations of Predecessors for the
period ended December 31, 1996......................... F-11
Combined Statement of Operations of The Disposal Group for
the year ended December 31, 1995....................... F-12
Statement of Operations of Fibres International, Inc. for
the period from January 1, 1995 through November 30,
1995................................................... F-12
Statement of Operations of Predecessors for the one month
ended December 31, 1995................................ F-12
Consolidated Statement of Redeemable Convertible Preferred
Stock and Stockholders' Equity (Deficit) of Waste
Connections, Inc. for the period from inception
(September 9, 1997) through December 31, 1997.......... F-13
Combined Statement of Cash Flows of Predecessors for the
nine months ended September 30, 1997................... F-14
Consolidated Statement of Cash Flows of Waste Connections,
Inc. for the period from inception (September 9, 1997)
through December 31, 1997.............................. F-14
Combined Statement of Cash Flows of The Disposal Group for
the period from January 1, 1996 through July 31,
1996................................................... F-15
Combined Statement of Cash Flows of Predecessors for the
period ended December 31, 1996......................... F-15
Combined Statement of Cash Flows of The Disposal Group for
the year ended December 31, 1995....................... F-16
Statement of Cash Flows of Fibres International, Inc. for
the period from January 1, 1995 through November 30,
1995................................................... F-16
Statement of Cash Flows of Predecessors for the one month
ended December 31, 1995................................ F-16
Notes to Financial Statements............................. F-17
MADERA DISPOSAL SYSTEMS, INC.
Report of Ernst & Young LLP, Independent Auditors......... F-34
Balance sheets as of December 31, 1996 and 1997........... F-35
Statements of income and retained earnings for the years
ended December 31, 1995, 1996 and 1997................. F-36
Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997.................................... F-37
Notes to Financial Statements............................. F-38
</TABLE>
F-1
<PAGE> 66
WASTE CONNECTIONS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Balance Sheet as of December
31, 1997, and the Unaudited Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1997, give effect to this offering and the business
combinations involving Waste Connections, Inc., (the "Company"), its
predecessors, Waste Connections of Idaho, Inc. ("WCII") and Madera Disposal
Systems, Inc. ("Madera"). Such combinations were accounted for using the
purchase method of accounting. The Unaudited Pro Forma Consolidated Balance
Sheet is presented as if this offering and the Company's acquisitions of WCII
and Madera had occurred on December 31, 1997, and the Pro Forma Consolidated
Statements of Operations is presented as if this offering and the Company's
acquisitions of its predecessors and Madera had occurred as of January 1, 1997
and its acquisition of WCII occurred on September 30, 1997, the date of
inception of WCII.
The Company has preliminarily analyzed the savings that it expects to be
realized by consolidating certain operational and general and administrative
functions. The Company has not and cannot quantify all of these savings due to
the short period of time since the predecessor, Madera and WCII acquisitions
occurred. It is anticipated that these savings will be partially offset by the
costs of being a publicly held company and the incremental increase in costs
related to the Company's corporate management. However, these costs, like the
savings they offset, cannot be quantified accurately. Neither the anticipated
savings nor the anticipated costs have been included in the Unaudited Pro Forma
Consolidated Financial Statements.
The Unaudited Pro Forma Consolidated Financial Statements include certain
adjustments to the historical combined financial statements of the predecessors,
including adjusting depreciation expense to reflect purchase price allocations,
reducing interest expense to reflect retirement of the outstanding
acquisition-related debt with the proceeds of this offering and the related
income tax effects of these adjustments.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The Unaudited Pro Forma Consolidated 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 to project the Company's financial position or results of
operations for any future period. Because the Company, the predecessors, Madera
and WCII were not under common control or management for all periods, historical
combined results may not be comparable to, or indicative of, future performance.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the other financial statements and notes thereto included
elsewhere 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> 67
WASTE CONNECTIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTED
WASTE
WASTE CONNECTIONS, WASTE
CONNECTIONS, PRO FORMA INC. AND MADERA CONNECTIONS
INC. PREDECESSORS ADJUSTMENTS PREDECESSORS DISPOSAL OF IDAHO, INC.
THREE MONTHS COMBINED NINE TO COMBINE WASTE COMBINED SYSTEMS, INC. THREE MONTHS
ENDED MONTHS ENDED CONNECTIONS, YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30, INC. AND DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 PREDECESSORS 1997 1997 1997
------------ ------------- ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............... $ 6,237 $18,114 $ -- $24,351 $7,845 $764
Operating expenses:
Cost of operations.... 4,703 14,753 (146)(a) 18,880 5,289 433
(195)(b)
(100)(c)
(135)(d)
Selling, general and
administrative...... 619 3,009 (570)(e) 2,926 1,041 56
(132)(f)
Depreciation and
amortization........ 354 1,083 81(g) 1,416 627 94
(102)(h)
Start-up and
integration......... 493 -- -- 493 -- --
Stock compensation.... 2,484 -- -- 2,484 -- --
--------- ------- ------ ------- ------ ----
Income (loss) from
operations............ (2,416) (731) 1,299 (1,848) 888 181
Interest expense....... (600) (456) 456(i) (818) (280) (50)
(218)(i)
Other income (expense),
net................... (36) 14 -- (22) 173 --
--------- ------- ------ ------- ------ ----
Income (loss) before
(provision) benefit
for income taxes...... (3,052) (1,173) 1,537 (2,688) 781 131
(Provision) benefit for
income taxes.......... 186 -- (615)(j) 40 -- (52)
469(k)
--------- ------- ------ ------- ------ ----
Net income (loss)...... $ (2,866) $(1,173) $1,391 $(2,648) $ 781 $ 79
========= ======= ====== ======= ====== ====
Redeemable convertible
preferred stock
accretion............. (531)
---------
Net loss applicable to
common stockholders... $ (3,397)
=========
Basic net loss per
common share.......... $ (1.48)
=========
Shares used in the per
share calculation..... 2,300,000
=========
<CAPTION>
PRO FORMA
PRO FORMA COMBINED
ADJUSTMENTS AS ADJUSTED
----------- -----------
<S> <C> <C>
Revenues............... $ (148)(l) $ 32,812
Operating expenses:
Cost of operations.... (264)(l) 24,338
Selling, general and
administrative...... (73)(l) 3,867
(83)(m)
Depreciation and
amortization........ (377)(n) 1,986
226(o)
Start-up and
integration......... -- 493
Stock compensation.... -- 2,484
-------- ---------
Income (loss) from
operations............ 423 (356)
Interest expense....... 280(p)
(897)(q) --
1,765(r)
Other income (expense),
net................... -- 151
-------- ---------
Income (loss) before
(provision) benefit
for income taxes...... 1,571 (205)
(Provision) benefit for
income taxes.......... (236)(s) (876)
(628)(j)
-------- ---------
Net income (loss)...... $ 707 $ (1,081)
======== =========
Redeemable convertible
preferred stock
accretion............. --
---------
Net loss applicable to
common stockholders... $ (1,081)
=========
Basic net loss per
common share.......... $ (0.14)
=========
Shares used in the per
share calculation..... 7,799,998
=========
</TABLE>
F-3
<PAGE> 68
WASTE CONNECTIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
ASSUMPTIONS. The unaudited pro forma consolidated statements of operations
for the year ended December 31, 1997, are presented as if the acquisitions of
the predecessors, WCII and Madera had occurred on January 1, 1997.
The following adjustments have been made to the unaudited pro forma
consolidated statements of operations:
(a) To eliminate BFI corporate environmental accrual related to landfill
closure costs.
(b) To record amortization of loss contract accrual.
(c) To adjust facilities lease expense.
(d) To reduce franchise fees based upon renegotiated amounts.
(e) To reduce BFI corporate overhead allocation to corporate overhead
amounts for the Company.
(f) To eliminate consulting expense related to BFI's acquisition of The
Disposal Group.
(g) To increase depreciation for the increase of property, plant and
equipment's carrying value to fair value.
(h) To adjust amortization of goodwill.
(i) To eliminate the predecessors' interest expense and record interest
expense on the debt obligations incurred by the Company in connection
with the acquisitions of the predecessors.
(j) To record the estimated 40% tax provision associated with the pro forma
adjustments.
(k) To record income tax benefit for the net operating loss incurred by the
predecessors for the nine months ended September 30, 1997.
(l) To reverse revenues and expenses associated with the Professional
Cleaning Division of Madera which ceased operating in July 1997.
(m) To adjust officers' salaries.
(n) To reduce depreciation for the reduction of property, plant and
equipment's carrying value to fair value.
(o) To record amortization of goodwill.
(p) To eliminate interest expense associated with the outstanding debt
obligations of Madera.
(q) To record interest expense on the long-term debt obligation incurred by
the Company in connection with the Madera acquisition.
(r) To eliminate interest expense, as the offering proceeds will be used to
pay off all outstanding debt obligations.
(s) To record income taxes for Madera, which was a subchapter S corporation
prior to its acquisition by the Company.
F-4
<PAGE> 69
PRO FORMA PER SHARE DATA. The shares used in computing the unaudited pro
forma net loss per share for the year ended December 31, 1997, are based upon
the pro forma historical weighted average common shares outstanding as
summarized in the table below. See Note 1 of the Company's Notes to Financial
Statements included elsewhere herein for information concerning the computation
of basic net loss per share.
<TABLE>
<S> <C>
Company weighted average shares outstanding................. 2,300,000
Shares issued in connection with acquisition of Madera...... 1,000,000
Shares issuable upon conversion of redeemable Convertible
Preferred Stock........................................... 2,499,998
Shares issuable in connection with the offering............. 2,000,000
---------
7,799,998
=========
</TABLE>
ACQUISITION COSTS. It is expected that the Company will incur costs of $150
related to the Madera acquisition, which have been factored into the purchase
price. Costs incurred by Madera were expensed as incurred.
F-5
<PAGE> 70
WASTE CONNECTIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
WASTE MADERA WASTE
CONNECTIONS, DISPOSAL CONNECTIONS PRO FORMA PRO FORMA
INC. SYSTEMS, INC. OF IDAHO, INC. ADJUSTMENTS AS ADJUSTED
------------ ------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................... $ 820 $1,527 $ 1 $ (7,566)(1) $ 3,313
(2,456)(5)
8,970(6)
19,260(9)
(61)(9)
(17,182)(9)
Accounts receivable, net................ 3,940 691 899 (168)(2) 5,362
Prepaid expenses and other current
assets................................ 358 327 -- -- 685
------- ------ ------ -------- -------
Total current assets............. 5,118 2,545 900 797 9,360
Property and equipment, net............... 4,185 3,636 1,073 (1,679)(3) 7,215
Goodwill, net............................. 9,408 -- -- 9,163(4) 18,571
Other assets.............................. 169 116 -- 285
------- ------ ------ -------- -------
$18,880 $6,297 $1,973 $ 8,281 $35,431
======= ====== ====== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................ $ 2,609 $ 644 $ 57 $ (168)(2) $ 3,142
Deferred revenue........................ 597 219 246 -- 1,062
Accrued liabilities..................... 825 178 138 -- 1,141
Current portion of accrued losses on
acquired contracts.................... 251 -- -- -- 251
Notes payable........................... -- -- 1,450 (1,450)(9) --
Current portion of capital
lease obligations..................... -- 274 -- (274)(5) --
Current portion of long-term debt....... -- 288 -- (288)(5) --
------- ------ ------ -------- -------
Total current liabilities........ 4,282 1,603 1,891 (2,180) 5,596
Accrued losses on acquired contracts...... 702 -- -- -- 702
Capital lease obligations................. -- 1,565 -- (1,565)(5) --
Long-term debt, net....................... 6,762 329 -- (329)(5) --
8,970(6)
(15,732)(9)
Deferred income taxes..................... 308 -- -- -- 308
Redeemable convertible preferred stock.... 7,523 -- -- (61)(9) --
(7,462)(9)
Redeemable common stock................... -- -- -- 2,800(7) --
(2,800)(9)
Stockholders' equity (deficit):
Common stock............................ 23 50 3 (53)(8) 78
20(9)
25(9)
10(9)
Additional paid-in capital.............. 2,759 -- -- 19,240(9) 32,226
7,437(9)
2,790(9)
Stockholder notes receivable............ (82) -- -- -- (82)
Retained earnings (accumulated
deficit).............................. (3,397) 2,750 79 (2,829)(8) (3,397)
------- ------ ------ -------- -------
Total stockholders'
equity (deficit)............... (697) 2,800 82 26,640 28,825
------- ------ ------ -------- -------
$18,880 $6,297 $1,973 $ 8,281 $35,431
======= ====== ====== ======== =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 71
WASTE CONNECTIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSUMPTIONS. The unaudited pro forma consolidated balance sheet as of
December 31, 1997 is presented as if the WCII and Madera acquisitions and the
Company's initial public offering had occurred on December 31, 1997. The
acquisitions will be accounted for under the purchase method of accounting for
business combinations. The estimated purchase prices of WCII and Madera consist
of the following:
<TABLE>
<CAPTION>
WCII MADERA
---- -------
<S> <C> <C>
Cash paid to shareholders................................... $3 $ 7,413
Common stock issued......................................... -- 2,800
Pay-off of long-term debt and capital lease obligations..... -- 2,456
Acquisition costs........................................... -- 150
-- -------
$3 $12,819
== =======
</TABLE>
The Company has preliminarily allocated the purchase prices as follows:
<TABLE>
<CAPTION>
WCII MADERA
------- --------
<S> <C> <C>
Tangible assets purchased............................... $ 1,894 $ 4,697
Goodwill................................................ -- 9,163
Liabilities assumed..................................... (1,891) (1,041)
------- --------
$ 3 $(12,819)
======= ========
</TABLE>
PRO FORMA ADJUSTMENTS. The following adjustments have been made to the
unaudited pro forma consolidated balance sheet:
(1) Cash payments to the former shareholders of Madera ($7,413) and WCII
($3) and payment of acquisition costs ($150).
(2) To eliminate accounts receivable and accounts payable between the
Company and WCII.
(3) To reduce the property, plant and equipment acquired from Madera
($1,600) and WCII ($79) to fair value.
(4) To record the excess of the purchase price over the net assets acquired
from Madera of $9,163.
(5) To pay off the outstanding debt obligations of Madera.
(6) To record additional long-term debt borrowings relative to the
acquisition of Madera.
(7) To record redeemable common stock issued to the Madera shareholders.
(8) To eliminate the equity accounts of Madera and WCII.
(9) To reflect the following related to the Company's initial public
offering:
- Issuance of 2,000,000 shares of Common Stock with estimated net
proceeds of $19,260
- Pay-off of all outstanding debt obligations of the Company ($17,182)
and accumulated preferred stock dividends ($61)
- Conversion of 2,499,998 shares of Series A Preferred Stock into
2,499,998 shares of Common Stock
- Reclassification of 1,000,000 shares of redeemable Common Stock to
Common Stock since the Company's initial public offering will cause
the redemption feature to be cancelled.
F-7
<PAGE> 72
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Stockholders
Waste Connections, Inc.
We have audited the accompanying financial statements of Waste Connections,
Inc. and Predecessors as of December 31, 1996 and 1997, and for each of the
three years in the period ended December 31, 1997 as listed in the accompanying
Index to Financial Statements. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Waste Connections, Inc. and
Predecessors at December 31, 1996 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Sacramento, California
March 6, 1998
F-8
<PAGE> 73
WASTE CONNECTIONS, INC. AND PREDECESSORS
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WASTE CONNECTIONS, INC.
CONSOLIDATED
------------------------------------
PRO FORMA
REDEEMABLE
CONVERTIBLE PREFERRED
PREDECESSORS STOCK AND
COMBINED STOCKHOLDERS' EQUITY
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 (NOTE 1) 1997 1997 (NOTE 14)
------------- ------------ ---------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 102 $ 820
Accounts receivable, less allowance for doubtful
accounts of $19 ($81 in 1996).................. 2,650 3,940
Prepaid expenses and other current assets......... 339 358
------- -------
Total current assets...................... 3,091 5,118
Property and equipment, net......................... 5,069 4,185
Goodwill, net....................................... 6,762 9,408
Other assets........................................ 369 169
------- -------
$15,291 $18,880
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................. $ 1,025 $ 2,609
Deferred revenue.................................. 564 597
Accrued liabilities............................... 634 825
Current portion of accrued losses on acquired
contracts...................................... 119 251
Current portion of long-term debt................. 54 --
------- -------
Total current liabilities................. 2,396 4,282
Accrued losses on acquired contracts................ -- 702
Long-term debt...................................... 89 6,762
Deferred income taxes............................... -- 308
Commitments and contingencies (Note 7)
Redeemable convertible preferred stock: $.01 par
value; 2,500,000 shares authorized; 2,499,998
shares issued and outstanding (aggregate
liquidation preference of $10,500 at December 31,
1997)............................................. -- 7,523 $ --
=======
Net intercompany balance............................ 12,806 -- --
Stockholders' equity (deficit):
Preferred stock: $.01 par value; 7,500,000 shares
authorized; none issued........................ -- -- --
Common stock: $.01 par value; 50,000,000 shares
authorized; 2,300,000 shares issued and
outstanding.................................... -- 23 48
Additional paid-in capital........................ -- 2,759 10,257
Stockholder notes receivable...................... -- (82) (82)
Accumulated deficit............................... -- (3,397) (3,397)
------- ------- -------
Total stockholders' equity (deficit)...... -- (697) $ 6,826
------- ------- =======
$15,291 $18,880
======= =======
</TABLE>
See accompanying notes.
F-9
<PAGE> 74
WASTE CONNECTIONS, INC. AND PREDECESSORS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WASTE
CONNECTIONS, INC.
PREDECESSORS CONSOLIDATED
COMBINED PERIOD FROM
NINE MONTHS INCEPTION
ENDED (SEPTEMBER 9, 1997)
SEPTEMBER 30, THROUGH
1997 (NOTE 1) DECEMBER 31, 1997
------------- -------------------
<S> <C> <C>
- ------------------------------------------------------------
Revenues.................................................... $18,114 $ 6,237
Operating expenses:
Cost of operations........................................ 14,753 4,703
Selling, general and administrative....................... 3,009 619
Depreciation and amortization............................. 1,083 354
Start-up and integration.................................. -- 493
Stock compensation........................................ -- 2,484
------- ----------
Loss from operations........................................ (731) (2,416)
Interest expense............................................ (456) (600)
Other income (expense), net................................. 14 (36)
------- ----------
Loss before income taxes.................................... (1,173) (3,052)
Income tax benefit.......................................... -- 186
------- ----------
Net loss.................................................... $(1,173) (2,866)
=======
Redeemable convertible preferred stock accretion............ (531)
----------
Net loss applicable to common stockholders.................. $ (3,397)
==========
Basic net loss per share.................................... $ (1.48)
Shares used in calculating basic net loss per share......... 2,300,000
Pro forma basic net loss per share.......................... $ (0.60)
Shares used in calculating pro forma basic net loss per
share..................................................... 4,799,998
- ------------------------------------------------------------
</TABLE>
See accompanying notes.
F-10
<PAGE> 75
WASTE CONNECTIONS, INC. AND PREDECESSORS
STATEMENTS OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSORS
------------------------------------
THE DISPOSAL
GROUP
COMBINED PREDECESSORS
PERIOD FROM COMBINED PERIOD
JANUARY 1, 1996 ENDED
THROUGH DECEMBER 31, 1996
JULY 31, 1996 (NOTE 1)
--------------- -----------------
<S> <C> <C>
Revenues.................................................. $8,738 $13,422
Operating expenses:
Cost of operations...................................... 6,174 11,420
Selling, general and administrative..................... 2,126 1,649
Depreciation and amortization........................... 324 962
------ -------
Income (loss) from operations............................. 114 (609)
Interest expense.......................................... (12) (225)
Other income (expense), net............................... 2,661 (147)
------ -------
Income (loss) before income taxes......................... 2,763 (981)
Income tax (provision) benefit............................ (505) --
------ -------
Net income (loss)......................................... $2,258 $ (981)
====== =======
</TABLE>
See accompanying notes.
F-11
<PAGE> 76
WASTE CONNECTIONS, INC. AND PREDECESSORS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSORS
----------------------------------------------------
THE DISPOSAL FIBRES
GROUP INTERNATIONAL, INC. PREDECESSORS
COMBINED PERIOD FROM ONE MONTH
YEAR ENDED JANUARY 1, 1995 ENDED
DECEMBER 31, THROUGH DECEMBER 31,
1995 NOVEMBER 30, 1995 1995(NOTE 1)
------------ -------------------- ------------
<S> <C> <C> <C>
Revenues.............................. $19,660 $7,340 $595
Operating expenses:
Cost of operations.................. 16,393 5,653 527
Selling, general and
administrative................... 3,312 823 72
Depreciation and amortization....... 628 715 74
------- ------ ----
Income (loss) from operations......... (673) 149 (78)
Interest expense...................... (206) (162) (1)
Other income, net..................... -- 98 5
------- ------ ----
Income (loss) before income taxes..... (879) 85 (74)
Income tax (provision) benefit........ 298 (29) --
------- ------ ----
Net income (loss)..................... $ (581) $ 56 $(74)
======= ====== ====
</TABLE>
See accompanying notes.
F-12
<PAGE> 77
WASTE CONNECTIONS, INC. AND PREDECESSORS
CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM INCEPTION (SEPTEMBER 9, 1997) THROUGH DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
WASTE CONNECTIONS, INC. CONSOLIDATED
---------------------------------------------------------------------
REDEEMABLE STOCKHOLDERS' EQUITY (DEFICIT)
CONVERTIBLE ---------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDER
------------------ ------------------ PAID-IN NOTES ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
--------- ------ --------- ------ ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
inception............ -- $ -- -- $-- $ -- $ -- $ -- $ --
Sale of common stock... -- -- 2,300,000 23 2,484 -- -- 2,507
Sale of redeemable
convertible preferred
stock................ 2,499,998 6,992 -- -- -- -- -- --
Issuance of common
stock warrants....... -- -- -- -- 275 -- -- 275
Issuance of stockholder
notes receivable..... -- -- -- -- -- (82) -- (82)
Accretion of redeemable
convertible preferred
stock................ -- 531 -- -- -- -- (531) (531)
Net loss............... -- -- -- -- -- -- (2,866) (2,866)
--------- ------ --------- --- ------ ---- ------- -------
Balances at December
31, 1997............. 2,499,998 $7,523 2,300,000 $23 $2,759 $(82) $(3,397) $ (697)
========= ====== ========= === ====== ==== ======= =======
</TABLE>
See accompanying notes.
F-13
<PAGE> 78
WASTE CONNECTIONS, INC. AND PREDECESSORS
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
WASTE
PREDECESSORS CONNECTIONS, INC.
COMBINED CONSOLIDATED PERIOD
NINE MONTHS FROM INCEPTION
ENDED (SEPTEMBER 9, 1997)
SEPTEMBER 30, 1997 THROUGH
(NOTE 1) DECEMBER 31, 1997
------------------ -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(1,173) $ (2,866)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Gain on sale of assets.................................. (4) --
Depreciation and amortization........................... 863 354
Deferred income taxes................................... -- (223)
Amortization of debt issuance costs, debt guarantee fees
and accretion of discount on long-term debt........... -- 425
Stock compensation...................................... -- 2,484
Changes in operating assets and liabilities, net of
effects from acquisitions:
Accounts receivable, net.............................. (604) (1,021)
Prepaid expenses and other current assets............. (74) (71)
Accounts payable...................................... (221) 2,607
Deferred revenue...................................... (137) 169
Accrued liabilities................................... (450) 801
Accrued losses on acquired contracts.................. -- (65)
------- --------
Net cash provided by (used in) operating activities....... (1,800) 2,594
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.............. 188 --
Payments for acquisitions................................. -- (11,493)
Capital expenditures for property and equipment........... (285) (264)
Decrease (increase) in other assets....................... 22 (19)
Issuance of stockholder notes receivable.................. -- (82)
------- --------
Net cash used in investing activities....................... (75) (11,858)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net intercompany balance.................................. 1,912 --
Proceeds from short-term borrowings....................... -- 600
Proceeds from long-term debt.............................. -- 5,500
Principal payments on notes payable....................... (38) (2,724)
Principal payments on long-term debt...................... -- (157)
Proceeds from sale of redeemable convertible preferred
stock................................................... -- 6,992
Proceeds from sale of common stock........................ -- 23
Debt issuance costs....................................... -- (150)
------- --------
Net cash provided by financing activities................... 1,874 10,084
------- --------
Net increase (decrease) in cash............................. (1) 820
Cash at beginning of period................................. 102 --
------- --------
Cash at end of period....................................... $ 101 $ 820
======= ========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION AND NON-
CASH TRANSACTIONS:
Cash paid for income taxes................................ $ -- $ --
======= ========
Cash paid for interest.................................... $ -- $ 183
======= ========
Redeemable convertible preferred stock accretion.......... $ 531
========
In connection with the BFI related acquisitions (Note 2),
the Company assumed liabilities as follows:
Fair value of assets acquired........................... $ 17,040
Cash paid for acquisitions (including acquisition
costs)................................................ (11,493)
--------
Liabilities assumed and notes payable to seller......... $ 5,547
========
</TABLE>
See accompanying notes.
F-14
<PAGE> 79
WASTE CONNECTIONS, INC. AND PREDECESSORS
STATEMENTS OF CASH FLOWS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSORS
-------------------------------
THE DISPOSAL
GROUP COMBINED PREDECESSORS
PERIOD FROM COMBINED
JANUARY 1, PERIOD ENDED
1996 THROUGH DECEMBER 31,
JULY 31, 1996 1996 (NOTE 1)
--------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $2,258 $ (981)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 324 962
Deferred income taxes.................................. 298 --
Changes in operating assets and liabilities, net of
effects from acquisitions:
Accounts receivable, net............................. 1,201 (1,992)
Prepaid expenses and other current assets............ (2) (104)
Accounts payable..................................... (45) 713
Deferred revenue..................................... (522) 421
Accrued liabilities.................................. (987) 428
------ ------
Net cash provided by (used in) operating activities....... 2,525 (553)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.............. -- 117
Capital expenditures for property and equipment........... (7) (282)
Decrease in other assets.................................. -- 33
------ ------
Net cash used in investing activities....................... (7) (132)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net intercompany balance.................................. -- 642
Proceeds from long-term debt.............................. 142 --
Principal payments on long-term debt...................... (427) --
Principal payments on notes payable....................... -- (39)
------ ------
Net cash provided by (used in) financing activities......... (285) 603
------ ------
Net increase (decrease) in cash............................. 2,233 (82)
Cash at beginning of period................................. 961 184
------ ------
Cash at end of period....................................... $3,194 $ 102
====== ======
</TABLE>
See accompanying notes.
F-15
<PAGE> 80
WASTE CONNECTIONS, INC. AND PREDECESSORS
STATEMENTS OF CASH FLOWS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSORS
-----------------------------------
THE DISPOSAL FIBRES
GROUP INTERNATIONAL, INC. PREDECESSORS
COMBINED PERIOD FROM ONE MONTH
YEAR ENDED JANUARY 1, 1995 ENDED
DECEMBER 31, THROUGH DECEMBER 31,
1995 NOVEMBER 30, 1995 1995 (NOTE 1)
------------ ------------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................... $ (581) $ 56 $ (74)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
(Gain) loss on sale of assets.......... 18 -- --
Depreciation and amortization.......... 628 778 74
Deferred income taxes.................. (298) -- --
Changes in operating assets and
liabilities, net of effects from
acquisitions:
Accounts receivable, net............. 592 59 10
Prepaid expenses and other current
assets............................ (18) -- (30)
Accounts payable..................... (49) 53 (30)
Deferred revenue..................... 65 30 (26)
Accrued liabilities.................. 2,218 47 20
------- ----- -----
Net cash provided by (used in) operating
activities............................. 2,575 1,023 (56)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and
equipment.............................. (87) (827) --
Decrease in other assets.................. -- 3 10
------- ----- -----
Net cash provided by (used in) investing
activities................................ (87) (824) 10
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............. 306 -- --
Principal payments on long-term debt...... (2,037) (288) --
Principal payments on notes payable....... -- -- (2)
------- ----- -----
Net cash used in financing activities..... (1,731) (288) (2)
------- ----- -----
Net increase (decrease) in cash............. 757 (89) (48)
Cash at beginning of period................. 204 321 232
------- ----- -----
Cash at end of period....................... $ 961 $ 232 $ 184
======= ===== =====
</TABLE>
See accompanying notes.
F-16
<PAGE> 81
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Waste Connections, Inc. ("WCI" or "the Company") was incorporated in
Delaware on September 9, 1997 and commenced its operations on October 1, 1997
through the purchase of certain solid waste operations in Washington, as more
fully described below and in Note 2. The Company is a regional, integrated,
non-hazardous solid waste services company that provides collection, transfer,
disposal and recycling services to commercial, industrial and residential
customers.
Basis of Presentation
The consolidated financial statements of the Company include the accounts
of WCI and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
The entities the Company acquired in September 1997 from Browning-Ferris
Industries, Inc. ("BFI") are collectively referred to herein as the Company's
predecessors. BFI acquired the predecessor operations at various times during
1995 and 1996, and prior to being acquired by BFI, the predecessors operated as
separate stand-alone businesses.
During the periods in which the Company's predecessors operated as wholly
owned subsidiaries of BFI, they maintained noninterest-bearing intercompany
accounts with BFI for recording intercompany charges for costs and expenses,
intercompany purchases of equipment and additions under capital leases and
intercompany transfers of cash, among other transactions. It is not feasible to
ascertain the amount of related interest expense that would have been recorded
in the historical financial statements had the predecessors been operated as
stand-alone entities. Accordingly, the historical financial statements for the
predecessors during these periods do not include interest expenses directly
related to predecessor intercompany accounts with BFI. Moreover, the financial
position and results of operations of the predecessors during this period may
not necessarily be indicative of the financial position or results of operations
that would have been realized had the predecessors been operated as stand-alone
entities. For the periods in which the predecessors operated as wholly owned
subsidiaries of BFI, the statements of operations include amounts allocated by
BFI to the predecessors for selling, general and administrative expenses based
on certain allocation methodologies.
During the periods prior to their acquisition by BFI, the Company's
predecessors operated as separate stand-alone businesses. The acquisitions of
the predecessors by BFI were accounted for using the purchase method of
accounting, and the respective purchase prices were allocated to the fair values
of the assets acquired and liabilities assumed. Similarly, the Company's
acquisitions of the predecessors from BFI in September 1997 were accounted for
using the purchase method of accounting, and the purchase price was allocated to
the fair value of the assets acquired and liabilities assumed. Consequently, the
amounts of depreciation and amortization included in the statements of
operations for the periods presented reflect the changes in basis of the
underlying assets that were made as a result of the changes in ownership that
occurred during the periods presented. In addition, because the predecessor
companies operated independently and were not under common control or management
during these periods, and because different tax strategies may have influenced
their results of operations, the data may not be comparable to or indicative of
their operating results after their acquisition by BFI.
F-17
<PAGE> 82
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Due to the manner in which BFI intercompany transactions were recorded, it
is not feasible to present a detailed analysis of transactions reflected in the
net intercompany balance with BFI. The change in the predecessors' combined
intercompany balance with BFI (net of income (loss) and initial investment in
the acquired companies) was $642 and $1,912 during the period ended December 31,
1996 and the nine months ended September 30, 1997, respectively.
The accompanying statements of operations and cash flows for the Company
and its predecessors for the years ended December 31, 1995, 1996 and 1997 are
comprised of the following entities for the periods indicated:
<TABLE>
<S> <C>
YEAR ENDED DECEMBER 31, 1995:
The Disposal Group Combined Year ended December 31, 1995
Fibres International, Inc. January 1, 1995 through November 30, 1995
(BFI acquisition date)
Predecessors One month ended December 31, 1995 (represents the
results of operations of Fibres International,
Inc. subsequent to the BFI acquisition date)
YEAR ENDED DECEMBER 31, 1996:
The Disposal Group Combined January 1, 1996 through July 31, 1996
(BFI acquisition date)
Predecessors Combined Period ended December 31, 1996 (represents the
combined results of operations of The Disposal
Group subsequent to the BFI acquisition date and
the operations for the year ended December 31,
1996 of Fibres International, Inc. which was
acquired by BFI in 1995)
YEAR ENDED DECEMBER 31, 1997:
Predecessors Combined Nine months ended September 30, 1997 (represents
the combined results of operations for the nine
month period of the entities acquired by BFI in
1995 and 1996 described above)
Waste Connections, Inc. Period from inception (September 9, 1997) through
December 31, 1997
</TABLE>
The Disposal Group Combined consists of three entities that were under
common control prior to their acquisition by BFI: Diamond Fab and Welding
Service, Inc., Buchmann Sanitary Service, Inc., and The Disposal Group.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-18
<PAGE> 83
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Common Stock Valuation
In connection with the Company's organization and initial capitalization in
September 1997, the Company sold 2.3 million shares of common stock for $.01 per
share to certain directors, consultants, and management. As a result, the
Company recorded a non-recurring, non-cash stock compensation charge of $2,484
in the accompanying consolidated statement of operations, representing the
difference between the amount paid for the shares and the estimated fair value
of the shares of $1.09 per share on the date of sale. The estimated fair value
of the common shares was determined by the Company based on an independent
valuation of the common stock.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risks consist primarily of accounts receivable. Credit
risk on accounts receivable is minimized as a result of the large and diverse
nature of the Company's customer base. The Company maintains an allowance for
losses based on the expected collectibility of accounts receivable. Credit
losses have been within management's expectations.
Property and Equipment
Property and equipment are stated at cost. Improvements or betterments
which significantly extend the life of an asset are capitalized. Expenditures
for maintenance and repair costs are charged to operations as incurred. The cost
of assets retired or otherwise disposed of and the related accumulated
depreciation are eliminated from the accounts in the year of disposal. Gains and
losses resulting from property disposals are included in other income (expense).
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets.
The estimated useful lives are as follows:
<TABLE>
<S> <C>
Machinery and equipment........ 3 - 10 years
Rolling stock.................. 10 years
Containers..................... 5 - 12 years
Furniture and fixtures......... 3 - 6 years
</TABLE>
In connection with the BFI acquisitions (Note 2) the Company acquired
certain used property and equipment. This used property and equipment is being
depreciated using the straight-line method over its estimated remaining useful
lives, which range from one to nine years.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of
the net assets of the acquired entities (Note 2), and is amortized on a
straight-line basis over the period of expected benefit of 40 years. Accumulated
amortization amounted to $279 and $64 as of December 31, 1996 and 1997,
respectively.
Fair Value of Financial Instruments
The carrying values of the line of credit (Note 5) and other long-term debt
(Note 6) approximate their fair values as of December 31, 1997, based on current
incremental borrowing rates for similar types of borrowing arrangements.
F-19
<PAGE> 84
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Income Taxes
The Company, The Disposal Group, and Fibres International, Inc., use the
liability method to account for income taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
During the periods in which the predecessors were owned by BFI, their
operations were included in the consolidated income tax returns of BFI, and no
allocations of income taxes were reflected in the historical statements of
operations. For purposes of the combined predecessor financial statements,
current and deferred income taxes have been provided on a separate income tax
return basis.
Revenue Recognition
Revenues are recognized as services are provided. Certain customers are
billed in advance and, accordingly, recognition of the related revenues is
deferred until the services are provided.
Start-Up and Integration Expenses
During the period from inception (September 9, 1997) through December 31,
1997, the Company incurred certain start-up expenses relating to the formation
of the Company, primarily for legal and other professional services, and the
costs associated with recruiting the Company's initial management team. In
addition, the Company incurred certain integration expenses relating to the
Acquisitions (Note 2). These start-up and integration expenses have been charged
to operations as incurred.
As described in Note 9, the Company issued warrants during the period from
inception (September 9, 1997) through December 31, 1997 to a bank in connection
with a line of credit and term loan payable, and to certain directors and
stockholders of the Company in connection with their guarantee of certain of the
Company's debt obligations. The fair value of these warrants is being amortized
into interest expense. During the period from inception (September 9, 1997)
through December 31, 1997, $275 relating to these warrants is included in
interest expense in the accompanying statement of operations of the Company.
Stock-Based Compensation
As permitted under the provisions of Financial Accounting Standards No. 123
"Accounting for Stock Based Compensation" ("SFAS 123"), the Company has elected
to account for stock-based compensation using the intrinsic value method
prescribed by Accounting Principles Board's Opinion No. 25 "Accounting for Stock
Issued to Employees" ("APB 25"). Under the intrinsic value method, compensation
cost is the excess, if any, of the quoted market price or fair value of the
stock at the grant date or other measurement date over the amount an employee
must pay to acquire the stock. None of the predecessor entities awarded
stock-based compensation to employees. Consequently, the related disclosures in
the accompanying financial statements and notes relate solely to the Company.
F-20
<PAGE> 85
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Per Share Information
In 1997, the Financial Accounting Standards Board ("FASB")issued Statement
No. 128, Earnings per Share. Statement 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts have been presented on the
basis set forth in Statement 128 (Note 11). Earnings per share data have not
been presented for the predecessor operations because such data is not
meaningful.
Pro-forma basic net loss per share is computed by dividing the net loss by
the sum of the weighted average number of shares of common stock outstanding and
common shares issuable upon the conversion of all outstanding shares of
Redeemable Convertible Preferred Stock (Note 8) as though such conversion
occurred at the beginning of the period.
Closure and Post-Closure Costs
Because it does not currently own any landfills, the Company does not
accrue for estimated landfill closure and post-closure maintenance costs. The
Company may have material financial obligations relating to closure and
post-closure costs of any disposal facilities it may own or operate in the
future, and in such case the Company will provide accruals for future financial
obligations relating to closure and post-closure costs of its landfills
(generally for a term of 30 years after final closure of a landfill), based on
engineering estimates of consumption of permitted landfill airspace over the
useful life of any such landfill.
New Accounting Pronouncements
In February 1997, the FASB issued Statement No. 129, Disclosure of
Information about Capital Structure, which is effective for financial statements
for periods ending after December 15, 1997. This statement establishes standards
for disclosing information about an entity's capital structure. Adoption of
Statement 129 will have no impact on the Company's existing disclosures.
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income. Statement 130 establishes standards for reporting and disclosure of
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general-purpose financial statements. Statement 130, which is
effective for fiscal years beginning after December 15, 1997, requires
reclassification of financial statements for earlier periods to be provided for
comparative purposes. The Company anticipates that implementing the provisions
of Statement 130 will not have a significant impact on the Company's existing
disclosures.
In June 1997, the FASB issued Statement No. 131, Disclosure About Segments
of an Enterprise and Related Information. Statement 131 establishes standards
for the way that public business enterprises report information about operating
segments. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. Statement 131 is effective
for fiscal years beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years must be restated. The
Company anticipates that implementing the provisions of Statement 131 will not
have a significant impact on the Company's existing disclosures.
F-21
<PAGE> 86
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. ACQUISITIONS
Browning-Ferris Industries Related
On September 29, 1997, the Company purchased all of the outstanding stock
of Browning-Ferris Industries of Washington, Inc. and Fibres International, Inc.
from BFI (collectively the "Acquisitions"). The total purchase price for the
Acquisitions was approximately $15,036, comprised principally of $11,493 in cash
and promissory notes payable to BFI totaling $3,543. Of the combined $15,036
purchase price, $9,578 was recorded as goodwill and $150 was assigned to a
non-competition agreement. The Acquisitions were accounted for in accordance
with the purchase method of accounting and, accordingly, the net assets acquired
were included in the Company's consolidated balance sheet based upon their
estimated fair values on the date of the Acquisitions. The Company's
consolidated statement of operations includes the revenues and expenses of the
acquired businesses after the effective date of the transaction.
Certain items affecting the purchase price and the allocation are
preliminary. A summary of the preliminary purchase price allocation for the
Acquisitions is as follows:
<TABLE>
<S> <C>
Acquired assets:
Accounts receivable................................... $ 2,919
Prepaid expenses and other current assets............. 287
Property and equipment................................ 4,106
Goodwill.............................................. 9,578
Non-competition agreement............................. 150
Assumed liabilities:
Deferred revenue...................................... (428)
Accounts payable and accrued liabilities.............. (26)
Accrued losses on acquired contracts.................. (1,018)
Deferred income taxes................................. (532)
-------
$15,036
=======
</TABLE>
Waste Connections of Idaho, Inc.
On January 30, 1998, the Company acquired all of the outstanding stock of
Waste Connections of Idaho, Inc. ("WCII") for $3. WCII was owned by affiliates
of the Company and commenced operations in September 1997 through the purchase
of certain solid waste collection assets located in Eastern Idaho from
Browning-Ferris of Idaho, Inc. The acquisition will be accounted for in
accordance with the purchase method of accounting.
Madera Disposal Systems, Inc.
On February 23, 1998, the Company purchased all of the outstanding stock of
Madera Disposal Systems, Inc. ("Madera") effective February 1, 1998, pursuant to
a Stock Purchase Agreement (the "Agreement"). The Agreement requires the Company
to pay to the shareholders of Madera $9,869 in cash (a portion of which was used
to repay Madera outstanding debt on the date of acquisition and which is subject
to other adjustments as specified in the Agreement), 1,000,000 shares of the
Company's common stock (the "Stock"), warrants to purchase 200,000 shares of the
Company's common stock at $4.00 per share (the "Warrants") and other contingent
consideration. The Agreement provides that in the event the Company does not
complete an initial public offering
F-22
<PAGE> 87
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
("IPO") of its stock by March 31, 1999, with aggregate gross proceeds of at
least $5,000, the Company may be required to repurchase the Stock and the
Warrants from the former shareholders of Madera for $2,800 in cash if certain
other conditions are also met.
The Madera acquisition will be accounted for in accordance with the
purchase method of accounting. The total purchase price and the excess of the
purchase price over the fair value of the net assets acquired in the Madera
acquisition are estimated to be approximately $12,819 and $9,163, respectively.
Predecessor Acquisitions
As described in Note 1, BFI acquired for cash and debt Fibres
International, Inc. on November 30, 1995 and The Disposal Group Combined on July
31, 1996 in transactions that were accounted for as purchases. Accordingly, the
respective purchase prices were allocated to the fair values of the assets
acquired and liabilities assumed. The following presents purchase price
information for these acquisitions:
<TABLE>
<CAPTION>
THE
FIBRES DISPOSAL
INTERNATIONAL, GROUP
INC. COMBINED
-------------- ---------
<S> <C> <C>
Tangible assets acquired................... $5,076 $2,076
Goodwill................................... 4,187 2,671
Assumed liabilities........................ (969) (33)
------ ------
$8,294 $4,714
====== ======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
PREDECESSORS
COMBINED COMPANY
1996 1997
------------ -------
<S> <C> <C>
Land and buildings............................ $2,314 $ --
Machinery and equipment....................... 146 60
Rolling stock................................. 2,068 2,353
Containers.................................... 1,084 1,995
Furniture and fixtures........................ 137 67
------ ------
5,749 4,475
Less accumulated depreciation................. (680) (290)
------ ------
$5,069 $4,185
====== ======
</TABLE>
Combined depreciation expense for the predecessor operations was $1,304,
$1,101, and $789 for the years ended December 31, 1995 and 1996, and the nine
months ended September 30, 1997, respectively. The Company's depreciation
expense for the period from inception (September 9, 1997) through December 31,
1997 was $290.
F-23
<PAGE> 88
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. OTHER ASSETS
Other assets as of December 31, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
PREDECESSORS
COMBINED COMPANY
1996 1997
------------ -------
<S> <C> <C>
Non-competition agreement, net................ $ -- $ 142
Other......................................... 369 27
------ ------
$ 369 $ 169
====== ======
</TABLE>
Related to the Acquisitions (Note 2), the Company entered into a
non-competition agreement with BFI. The estimated fair value of the
non-competition agreement was determined by management based on the discounted
adjusted operating income stream that would have otherwise been subject to
competition. The amount assigned to the non-competition agreement ($150) is
being amortized on a straight-line method over the term of the agreement (five
years). Accumulated amortization amounted to $8 as of December 31, 1997.
5. LINE OF CREDIT
On September 30, 1997, the Company obtained a revolving line of credit (the
"Line") from a bank (the "Bank"). The maximum amount available under the terms
of the Line was $2,000 and borrowings bore interest based on the prime rate plus
1.5% (aggregating 10.0% at December 31, 1997). Interest was payable monthly and
the Line was to expire on September 29, 1998. Borrowings under the Line were
secured by substantially all of the Company's assets and were subordinate to the
notes payable to BFI (Note 6) with respect to certain specified assets. The Line
was personally guaranteed by certain officers and stockholders of the Company
(Note 9). As of December 31, 1997, $600 was outstanding under the Line.
Management used borrowings from a new credit facility obtained in January
1998 (Note 12) to pay off amounts outstanding under the Line, and as such, these
amounts have been included in long-term debt as of December 31, 1997.
F-24
<PAGE> 89
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. OTHER LONG-TERM DEBT
Other long-term debt consists of the following as of December 31, 1997:
<TABLE>
<S> <C>
Term loan payable to the Bank bearing interest at the Bank's
prime rate plus 2.0% (aggregating 10.5% as of December 31,
1997); monthly principal payments of $76 plus interest
beginning October 1997 through August 2002; all
outstanding principal and interest are due September 2002;
secured by substantially all of the Company's assets;
subordinate to the notes payable to BFI with respect to
certain specified assets.................................. $5,343
Note payable to BFI bearing interest at 6.0%; all
outstanding principal and interest are due December 1997;
secured by substantially all of the Company's accounts
receivable................................................ 319
Note payable to BFI bearing interest at 10.0%; quarterly
payments of interest beginning December 1997; all
outstanding principal and interest are due March 1998;
secured by substantially all of WCII's assets............. 500
------
$6,162
======
</TABLE>
The term loan payable to the Bank and the notes payable to BFI were
personally guaranteed by certain officers and stockholders of the Company (Note
9).
As of December 31, 1997, aggregate contractual future principal payments by
calendar year on long-term debt are due as follows:
<TABLE>
<S> <C>
1998................................ $1,736
1999................................ 917
2000................................ 917
2001................................ 917
2002................................ 917
Thereafter.......................... 758
------
$6,162
======
</TABLE>
Management used borrowings from a new credit facility obtained in January
1998 (Note 12) to pay off all amounts outstanding under the term loan payable to
the Bank and all notes payable to BFI, and as such, these amounts have been
classified as long-term debt as of December 31, 1997.
7. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Leases
The Company leases its facilities and certain equipment under
non-cancelable operating leases for periods ranging from one to five years.
Combined rent expense for the predecessor operations was $398, $412, and $441
for the years ended December 31, 1995 and 1996, and the nine months ended
September 30, 1997, respectively. The Company's rent expense under operating
leases during the period from inception (September 9, 1997) through December 31,
1997 amounted to $52.
F-25
<PAGE> 90
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
As of December 31, 1997, future minimum lease payments under these leases,
by calendar year, are as follows:
<TABLE>
<S> <C>
1998................................. $206
1999................................. 196
2000................................. 192
2001................................. 140
2002................................. 10
----
$744
====
</TABLE>
Performance Bonds and Letters of Credit
Municipal solid waste collection contracts may require performance bonds or
other means of financial assurance to secure contractual performance. As of
December 31, 1997, the Company had provided customers and various regulatory
authorities with bonds and letters of credit of approximately $800 to secure its
obligations. The Company's new credit facility (Note 12) provides for the
issuance of letters of credit in an amount up to $5,000, but any letters of
credit issued reduce the availability of borrowings for acquisitions or other
general corporate purposes. If the Company were unable to obtain surety bonds or
letters of credit in sufficient amounts or at acceptable rates, it could be
precluded from entering into additional municipal solid waste collection
contracts or obtaining or retaining landfill operating permits.
CONTINGENCIES
Environmental Risks
The Company is subject to liability for any environmental damage that its
solid waste facilities may cause to neighboring landowners or residents,
particularly as a result of the contamination of soil, groundwater or surface
water, and especially drinking water, including damage resulting from conditions
existing prior to the acquisition of such facilities by the Company. The Company
may also be subject to liability for any off-site environmental contamination
caused by pollutants or hazardous substances whose transportation, treatment or
disposal was arranged by the Company or its predecessors. Any substantial
liability for environmental damage incurred by the Company could have a material
adverse effect on the Company's financial condition, results of operations or
cash flows. As of December 31, 1997, the Company is not aware of any such
environmental liabilities.
Legal Proceedings
In the normal course of its business and as a result of the extensive
governmental regulation of the solid waste industry, the Company may
periodically become subject to various judicial and administrative proceedings
involving federal, state or local agencies. In these proceedings, an agency may
seek to impose fines on the Company or to revoke or deny renewal of an operating
permit held by the Company. From time to time the Company may also be subject to
actions brought by citizens' groups or adjacent landowners or residents in
connection with the permitting and licensing of landfills and transfer stations,
or alleging environmental damage or violations of the permits and licenses
pursuant to which the Company operates.
In addition, the Company may become party to various claims and suits
pending for alleged damages to persons and property, alleged violations of
certain laws and alleged liabilities arising out of matters occurring during the
normal operation of the waste management business. However, as of
F-26
<PAGE> 91
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
December 31, 1997 there is no current proceeding or litigation involving the
Company that the Company believes will have a material adverse impact on the
Company's business, financial condition, results of operations or cash flows.
During the period from January 1, 1996 through July 31, 1996, The Disposal
Group won a lawsuit against the city of Vancouver, Washington relating to the
city's annexation of certain territories served by The Disposal Group. The
Disposal Group received approximately $2.6 million from the lawsuit, which is
included in other income in the accompanying statement of operations.
Employees
Approximately 55 drivers and mechanics at the Company's Vancouver,
Washington operation are represented by the Teamsters Union, with which
Browning-Ferris Industries of Washington, Inc., the Company's predecessor in
Vancouver, entered a four-year collective bargaining agreement in January 1997.
In addition, in July 1997, the employees at the Company's facility in Issaquah,
Washington, adopted a measure to select a union to represent them in labor
negotiations with management. The union and management are currently operating
under a one-year negotiating agreement, and, if those negotiations are
unsuccessful, the earlier date on which the union would be permitted to take
additional action is July 27, 1998. Such additional action includes calling a
strike or, if the Company agrees, continuing to negotiate or commencing
arbitration of the outstanding issues. The Company is not aware of any other
organizational efforts among its employees and believes that its relations with
its employees are good.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
In September 1997, the Company received net proceeds of $6,992 from the
sale of 2,499,998 shares of redeemable convertible preferred stock (the
"Preferred Stock"). The Preferred Stock accrues cumulative dividends at the rate
of $.098 per share annually. Accumulated and unpaid dividends on Preferred Stock
amounted to $61 as of December 31, 1997. The Preferred Stock and any accumulated
and unpaid dividends are convertible at the holder's option into shares of the
Company's common stock at the calculated rate of $2.80 per share divided by the
"Conversion Price" subject to certain anti-dilution adjustments. As of December
31, 1997, the Conversion Price was $2.80 per share. Each share will
automatically be converted into common stock immediately upon the closing of a
registered public offering of the Company's common stock with proceeds to the
Company of at least $5.00 per share and aggregate proceeds of at least $5,000.
Each share of Preferred Stock is redeemable, at the holder's option, during
the period from April 1, 1999 through October 1, 1999 for $4.20 per share plus
any accumulated and unpaid dividends. The difference between the carrying value
of the Preferred Stock and the redemption value (including accumulated
dividends) is being accreted using the interest method through the earliest
redemption date. The redemption of the Preferred Stock is not mandatory if it
would cause the Company to incur additional indebtedness or if it is prohibited
under any of the Company's then existing debt agreements.
The preferred stockholders are entitled to one vote for each share of
common stock into which such shares can be converted, and are also entitled to
liquidation preferences equal to the greater of the initial purchase price per
share ($2.80) plus any accumulated and unpaid dividends, plus the greater of
$4.20 per share or an amount which equals an internal rate of return of 50% to
the investor. After receiving such preference, the holders of the preferred
stock share remaining proceeds with the common stockholders on an as converted
basis.
F-27
<PAGE> 92
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. STOCKHOLDERS' EQUITY
Common Stock
Of the 47,700,000 shares of common stock authorized but unissued as of
December 31, 1997, the following shares were reserved for issuance:
<TABLE>
<S> <C>
Preferred Stock.................................. 2,521,874
Madera acquisition (Note 2)...................... 1,200,000
Stock option plan................................ 1,200,000
Stock purchase warrants.......................... 1,056,000
---------
5,977,874
=========
</TABLE>
Stockholder Notes Receivable
In December 1997, the Company provided loans in the aggregate amount of $82
to certain employees, who are also common stockholders, for the purchase of
shares of the Company's Preferred Stock. The notes bear interest at 8%, are due
on January 1, 1999 and are secured by the Preferred Stock purchased and common
stock owned by the employees.
Stock Options
In November 1997, the Company's Board of Directors adopted a stock option
plan in which all officers, employees, directors and consultants may participate
(the "Option Plan"). Options granted under the Option Plan may either be
incentive stock options or nonqualified stock options (the "Options") and they
will generally have a term of 10 years from the date of grant and will vest over
periods determined at the date of grant. The exercise prices of the options are
determined by the Company's Board of Directors and will be at least 100% or 110%
of the fair market value of the Company's common stock on the date of grant as
provided for in the Option Plan.
In connection with the Option Plan, the Company's Board of Directors
approved the reservation of 1,200,000 shares of common stock for issuance
thereunder. As of December 31, 1997, no options to purchase common stock were
exercisable under the Option Plan. In addition, as of December 31, 1997, options
for 671,500 shares of common stock were available for future grants under the
Option Plan.
A summary of the Company's stock option activity and related information
during the period from inception (September 9, 1997) through December 31, 1997
is presented below:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES (OPTIONS) EXERCISE PRICE
---------------- ----------------
<S> <C> <C>
Outstanding at beginning of
period.......................... -- $ --
Granted........................... 528,500 4.92
Forfeited......................... -- --
Exercised......................... -- --
------- -----
Outstanding at end of period...... 528,500 4.92
======= =====
Exercisable at end of period...... -- $ --
======= =====
</TABLE>
F-28
<PAGE> 93
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table summarizes information about stock options outstanding
as of December 31, 1997:
<TABLE>
<CAPTION>
EXERCISE PRICES NUMBER
--------------- -------
<S> <C>
$ 2.80.................................. 376,000
$ 5.00.................................. 9,500
$10.50.................................. 143,000
-------
528,500
=======
</TABLE>
The weighted average remaining contractual life of stock options
outstanding as of December 31, 1997, was 10 years.
Pro Forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for the period from inception (September 9, 1997) through December
31, 1997: risk-free interest rate of 6%; dividend yield of zero; volatility
factor of the expected market price of the Company's common stock of .40; and a
weighted-average expected life of the option of 4 years.
The Black-Scholes option valuation model was developed for us in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma net loss and pro forma basic net loss per share for the period from
inception (September 9, 1997) through December 31, 1997 were $(2,870) and
$(1.48) per share, respectively.
Stock Purchase Warrants
In September 1997, the Company issued a warrant to purchase 200,000 shares
of the Company's common stock to the Bank that provided the Line and term loan
payable (Notes 5 and 6). The exercise price of the warrant is $.01 per share.
The warrant was valued at $216 on its date of issuance using the Black-Scholes
pricing model with an assumed stock price volatility of .40, risk-free interest
rate of 6.0%, estimated fair value of the common stock of $1.09 per share and an
expected life of 7 years. The value assigned to the warrant was reflected as a
discount on long-term debt. The discount was fully accreted to interest expense
using the straight-line method over the expected term of the debt agreements
(approximately three months).
In connection with their guarantee of certain of the Company's debt
obligations (Notes 5 and 6), the Company issued warrants to purchase 841,000
shares of the Company's common stock to certain directors and stockholders of
the Company. The exercise price of the warrants is $2.80 per share. The warrants
were valued at $59 on their date of issuance using the Black-Scholes pricing
model with an assumed stock price volatility of .40, risk-free interest rate of
6.0%, estimated fair value of the common stock of $1.09 per share and expected
lives of 3 years. The value assigned to
F-29
<PAGE> 94
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
these warrants was fully amortized to interest expense over the expected term of
the debt agreements (approximately three months).
In December 1997, the Company issued to consultants warrants to purchase
15,000 shares of the Company's common stock. Warrants to purchase 10,000 and
5,000 shares of common stock had exercise prices of $5.00 per share and $2.80
per share, respectively.
Initial Public Offering
In December 1997, the Company's board of directors authorized the filing of
a registration statement with the Securities and Exchange Commission permitting
the Company to sell up to an aggregate of 2,300,000 shares of common stock
(including the underwriters' over-allotment option) to the public. Under the
terms of the offering currently contemplated, the Preferred Stock will be
converted into common stock, prior to or concurrently with the completion of the
offering, and the redemption provisions of the common stock issued in connection
with the Madera acquisition (Note 2) will expire.
10. INCOME TAXES
The provision (benefit) for income taxes for the periods ended December 31,
1995 and 1996, the nine months ended September 30, 1997 and for the period from
inception (September 9, 1997) through December 31, 1997 consists of the
following:
<TABLE>
<CAPTION>
PREDECESSORS
-------------------------------------------------------------
FIBRES THE DISPOSAL GROUP WASTE CONNECTIONS, INC.
INTERNATIONAL, INC. COMBINED CONSOLIDATED
THE DISPOSAL GROUP PERIOD FROM PERIOD FROM PERIOD FROM INCEPTION
COMBINED JANUARY 1, 1995 JANUARY 1, 1996 (SEPTEMBER 9, 1997)
YEAR ENDED THROUGH THROUGH THROUGH
DECEMBER 31, 1995 NOVEMBER 30, 1995 JULY 31, 1996 DECEMBER 31, 1997
------------------ ------------------- ------------------ -----------------------
<S> <C> <C> <C> <C>
Current:
Federal............ $ -- $ 29 $207 $ 38
State.............. -- -- -- --
Deferred:
Federal............ (298) -- 298 (224)
State.............. -- -- -- --
----- ---- ---- -----
$(298) $ 29 $505 $(186)
===== ==== ==== =====
</TABLE>
F-30
<PAGE> 95
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Significant components of the Company's deferred income tax assets and
liability were as follows as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
PREDECESSORS
COMBINED COMPANY
1996 1997
------------ -------
<S> <C> <C>
Deferred income tax assets:
Accounts receivable reserves...................... $ 32 $ 8
Amortization...................................... -- 144
Accrued expenses.................................. 4 --
Vacation accrual.................................. 2 15
Net operating losses.............................. 208 54
------ ------
Total deferred income tax assets.................... 246 221
Deferred income tax liability:
Depreciation...................................... -- (529)
------ ------
Net deferred income tax asset (liability)........... 246 (308)
Less valuation allowance............................ (246) --
------ ------
$ -- $ (308)
====== ======
</TABLE>
The differences between the Company's provision (benefit) for income taxes
as presented in the accompanying statements of operations and benefit for income
taxes computed at the federal statutory rate is comprised of the items shown in
the following table as a percentage of pre-tax income (loss):
<TABLE>
<CAPTION>
PREDECESSORS
-------------------------------------------------------------------------------
THE DISPOSAL
FIBRES GROUP
THE DISPOSAL INTERNATIONAL, INC. COMBINED
GROUP PERIOD FROM PERIOD FROM
COMBINED JANUARY 1, 1995 PREDECESSORS JANUARY 1, 1996
YEAR ENDED THROUGH ONE MONTH ENDED THROUGH
DECEMBER 31, 1995 NOVEMBER 30, 1995 DECEMBER 31, 1995 JULY 31, 1996
----------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Income tax provision
(benefit) at the
statutory rate....... (34.0%) 34.0% 34.0% 34.0%
Effect of valuation
allowance............ -- -- (34.0%) (16.0%)
------- ------- ------- --------
(34.0%) 34.0% -- 18.0%
======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
PREDECESSORS
-------------------------------------
PREDECESSORS WASTE CONNECTIONS, INC.
COMBINED CONSOLIDATED
PREDECESSORS NINE MONTHS PERIOD FROM INCEPTION
COMBINED ENDED (SEPTEMBER 9, 1997)
PERIOD ENDED SEPTEMBER 30, THROUGH
DECEMBER 31, 1996 1997 DECEMBER 31, 1997
----------------- ----------------- -----------------------
<S> <C> <C> <C>
Income tax benefit at the statutory
rate.............................. (34.0%) (34.0%) (34.0%)
Effect of valuation allowance....... 34.0% 34.0% --
Stock compensation expense.......... -- -- 28.0%
-------- -------- --------
-- -- (6.0%)
======== ======== ========
</TABLE>
F-31
<PAGE> 96
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
11. NET LOSS PER SHARE INFORMATION
The following table sets forth the computation of basic net loss per share
and pro forma basic net loss per share for the period from inception (September
9, 1997) through December 31, 1997:
<TABLE>
<CAPTION>
PRO FORMA
BASIC NET LOSS BASIC NET LOSS
PER SHARE PER SHARE
-------------- --------------
<S> <C> <C>
Numerator:
Net loss...................................... $ (2,866) $ (2,866)
Redeemable convertible preferred stock
accretion.................................. (531) --
--------- ---------
$ (3,397) $ (2,866)
========= =========
Denominator:
Weighted average common shares outstanding.... 2,300,000 2,300,000
Common shares issuable upon conversion of
preferred stock............................ -- 2,499,998
--------- ---------
2,300,000 4,799,998
========= =========
$ (1.48) $ (0.60)
========= =========
</TABLE>
As of December 31, 1997, outstanding options to purchase 528,500 shares of
common stock (with exercise prices ranging from $2.80 to $10.50), outstanding
warrants to purchase 1,056,000 shares of common stock (with exercise prices from
$0.01 to $5.00), and the outstanding Redeemable Convertible Preferred Stock
could potentially dilute basic earnings per share in the future and have not
been included in the computation of diluted net loss per share because to do so
would have been antidilutive for the period presented.
Subsequent to December 31, 1997 and through March 6, 1998, the Company had
the following equity related transactions:
- In connection with the Madera acquisition (Note 2) the Company issued
1,000,000 shares of common stock and issued warrants to purchase 200,000
shares of common stock.
- Options to purchase an aggregate of 329,300 shares of common stock at
exercise prices ranging from $2.80 to $12.50 per share, which includes
30,000 options to purchase common stock at $2.80 per share which vest
ratably over 3 years if certain events occur, and warrants to purchase
an aggregate of 195,000 shares of common stock at exercise prices
ranging from $2.80 to $5.00 per share were granted.
12. NEW CREDIT FACILITY
On January 30, 1998, the Company obtained a new revolving credit facility from
BankBoston (the "Credit Facility"). The maximum amount available under the
Credit Facility is $25,000 including stand-by letters-of-credit and the
borrowings will bear interest at various fixed and/or variable rates at the
Company's option. The Credit Facility allows for the Company to issue up to
$5,000 in stand-by letters-of-credit. The Credit Facility requires quarterly
payments of interest and it matures in January 2001. Borrowings under the Credit
Facility are secured by all of the Company's assets. The borrowings are further
secured by the shares of the Company's common and preferred stock owned by the
Company's President and Chief Executive Officer. The Credit Facility requires
the Company to pay an annual commitment fee equal to 0.5% of the unused portion
of the Credit Facility. The
F-32
<PAGE> 97
WASTE CONNECTIONS, INC. AND PREDECESSORS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Credit Facility places certain business, financial and operating restrictions on
the Company and it's subsidiaries including among other things, the incurrence
of additional indebtedness, investments, acquisitions, asset sales, mergers,
dividends, distributions and repurchases and redemptions of capital stock. The
Credit Facility also requires that specified financial ratios and balances be
maintained. In connection with the Credit Facility the Company granted to an
affiliate of BankBoston a warrant to purchase 140,000 shares of the Company's
common stock with an exercise price of $2.80 per share and an expiration date of
January 29, 2008.
13. RELATED PARTY TRANSACTIONS
The Company has entered into certain transactions with Continental Paper,
LLC ("Continental"), in which the Company delivers to Continental all of the
Company's collected recyclable materials in areas in which Continental has
processing facilities and Continental pays the Company market rates for the
recyclable materials. Certain of the Company's stockholders are the majority
owners of Continental. During the period from inception (September 9, 1997)
through December 31, 1997, the Company received approximately $223 from
Continental in these transactions.
14. UNAUDITED PRO FORMA REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS'
EQUITY
The Company's unaudited pro forma redeemable convertible preferred stock
and stockholders' equity as of December 31, 1997, gives effect to the conversion
of the Preferred Stock into 2,499,998 shares of common stock. The conversion of
the Preferred Stock into common stock will occur prior to or concurrently with
the completion of the Company's initial public offering (Note 9). In addition,
the redemption provisions of the common stock issued in connection with the
Madera acquisition (Note 2) will expire upon completion of the initial public
offering.
F-33
<PAGE> 98
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Madera Disposal Systems, Inc.
We have audited the accompanying balance sheets of Madera Disposal Systems,
Inc. as of December 31, 1996 and 1997, and the related statements of income and
retained earnings, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Madera Disposal Systems,
Inc. at December 31, 1996 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Sacramento, California
February 20, 1998
F-34
<PAGE> 99
MADERA DISPOSAL SYSTEMS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents................................... $1,064 $1,527
Accounts receivable, less allowance for doubtful
accounts of $111 ($90 in 1996)........................ 788 691
Receivables from shareholders.......................... 100 113
Prepaid expenses and other current assets.............. 216 214
------ ------
Total current assets................................... 2,168 2,545
Property and equipment, net................................. 3,800 3,636
Assets held for sale........................................ -- 77
Other assets................................................ 36 39
------ ------
$6,004 $6,297
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable....................................... $ 750 $ 644
Deferred revenue....................................... 208 219
Accrued liabilities.................................... 193 178
Current portion of capital lease obligations........... 218 274
Current portion of long-term debt...................... 177 288
------ ------
Total current liabilities................................... 1,546 1,603
Long-term portion of capital lease obligations.............. 1,557 1,565
Long-term debt.............................................. 637 329
Commitments and contingencies (Note 4)
Shareholders' equity:
Common stock: $100 par value; 1,000,000 shares
authorized; 500 shares issued and outstanding......... 50 50
Retained earnings...................................... 2,214 2,750
------ ------
Total shareholders' equity.................................. 2,264 2,800
------ ------
$6,004 $6,297
====== ======
</TABLE>
See accompanying notes.
F-35
<PAGE> 100
MADERA DISPOSAL SYSTEMS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Revenues.................................................... $7,008 $7,770 $7,845
Operating expenses:
Cost of operations..................................... 5,288 5,512 5,289
Selling, general and administrative.................... 996 969 1,041
Depreciation and amortization.......................... 467 585 627
------ ------ ------
Income from operations...................................... 257 704 888
Interest expense............................................ (237) (259) (280)
Other income, net........................................... 68 113 173
------ ------ ------
Net income.................................................. 88 558 781
Retained earnings, beginning of year........................ 1,863 1,656 2,214
Distributions to shareholders............................... (295) -- (245)
------ ------ ------
Retained earnings, end of year.............................. $1,656 $2,214 $2,750
====== ====== ======
Pro forma income taxes (unaudited -- Note 7)................ $ 30 $ 208 $ 295
------ ------ ------
Pro forma net income (unaudited -- Note 7).................. $ 58 $ 350 $ 486
====== ====== ======
</TABLE>
See accompanying notes.
F-36
<PAGE> 101
MADERA DISPOSAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1995 1996 1997
----- ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 88 $ 558 $ 781
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 467 585 627
Gain on sale of property & equipment................... (13) (37) (71)
Changes in operating assets and liabilities:
Accounts receivable, net............................. (252) (23) 97
Receivables from shareholders........................ (21) (33) (13)
Prepaid expenses and other assets.................... -- (52) 2
Other assets......................................... (2) (9) (3)
Accounts payable..................................... 265 (29) (106)
Deferred revenue..................................... 4 16 11
Accrued liabilities.................................. 105 44 (15)
----- ------ ------
Net cash provided by operating activities:.................. 641 1,020 1,310
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment........... (274) (902) (183)
Proceeds from sale of assets.............................. 13 97 140
----- ------ ------
Net cash used in investing activities....................... (261) (805) (43)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............................. 265 591 --
Principal payments on long-term debt and capital lease
obligations............................................ (576) (351) (559)
Cash distributions made to shareholders................... (295) -- (245)
----- ------ ------
Net cash provided by (used in) financing activities......... (606) 240 (804)
----- ------ ------
Net increase (decrease) in cash and equivalents............. (226) 455 463
Cash and equivalents:
Beginning of year......................................... 835 609 1,064
----- ------ ------
End of year............................................... $ 609 $1,064 $1,527
===== ====== ======
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION AND
NON-CASH TRANSACTIONS:
Cash paid for interest...................................... $ 237 $ 237 $ 279
===== ====== ======
Capital lease obligations and long-term debt incurred for
the purchase of property and equipment.................... $ 854 $ -- $ 426
===== ====== ======
</TABLE>
See accompanying notes.
F-37
<PAGE> 102
MADERA DISPOSAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(IN THOUSANDS)
1. ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Madera Disposal Systems, Inc. ("Madera") is a regional, integrated,
non-hazardous solid waste services company that provides collection, transfer
disposal and recycling services to residential, commercial and industrial
customers. Madera Landfill is contracted by the County of Madera to operate the
Fairmead, the North Fork Transfer Station and the materials recovery facility
(aka, Mammoth Recycling Facility), all of which are located in the County of
Madera, State of California. Madera also holds an exclusive contract with the
County of Madera to collect solid waste within the unincorporated areas of the
County of Madera. The contracts continue in force and effect until August 2004,
and will automatically be extended for one five year period unless Madera is
then in material breach or default of its obligations under the materials
recovery facility contract. All contracts may be extended for additional periods
and upon terms as the County of Madera and Madera may mutually agree upon.
On November 9, 1993, Madera entered into an agreement with the County of
Madera, whereby Madera was to design, permit, finance, construct, equip, staff,
operate and maintain a materials recovery facility (the "Facility") at the
County's Fairmead Landfill for the purpose of providing the County of Madera
with a guaranteed reduction in the quantity of municipal solid waste requiring
landfill disposal. The Facility was to be designed, constructed and operated to
receive all municipal solid waste from the Cities of Madera and Chowchilla and
the unincorporated areas of the County of Madera. It was also to meet the
twenty-five percent (25%) waste reduction requirements of Assembly Bill 939
(Chapter 1095 of the Statutes of 1989) for the Cities of Madera and Chowchilla
and the County of Madera by January 11, 1995, through the recycling of recovered
material, and work toward the waste reduction requirements of fifty percent
(50%) that each jurisdiction must achieve by January 1, 2000. The Facility
became operational on August 15, 1994.
The County of Madera will compensate Madera for its capital costs incurred
in designing, permitting, financing, constructing and equipping the Facility.
These costs were $1,661 and are included in property and equipment in the
accompanying balance sheets. The County of Madera will reimburse Madera for the
equipment and interest costs over a ten year operational period. The County of
Madera will also reimburse Madera for its other operational costs incurred in
connection with the staffing, maintaining and operating of the materials
recovery facility. All of the aforementioned costs are reimbursed to Madera
through receipt of a specified portion of waste disposal fees collected by
Madera on behalf of the County of Madera for landfill operations.
At the termination of the contracts described above, the improvements made
by Madera become the sole and exclusive property of the County of Madera,
subject only to the County of Madera's continuing obligation to pay or reimburse
the Company for any remaining unamortized capital costs of the Facility.
In 1995, Madera started a new line of business which provided clean-up and
waste removal services to residential and commercial construction businesses.
Due to continued losses, in July 1997 Madera ceased operations in this line of
business. The estimated fair value of the remaining assets of the business is
reflected in the accompanying balance sheets as assets held for sale at December
31, 1997. For the years ended December 31, 1995, 1996, and 1997, this business
had revenues of $531, $785 and $193, respectively, and had operating losses of
$290, $397, and $215, respectively.
F-38
<PAGE> 103
MADERA DISPOSAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS)
Madera entered into an exclusive franchise agreement with the City of
Chowchilla on April 8, 1996, whereby Madera was granted the exclusive right and
franchise to collect, haul, and dispose of all solid waste, recyclable solid
waste, and green waste within the city limits of the City of Chowchilla. The
term of this franchise shall continue in force and effect for a period of seven
years, and the City of Chowchilla may renew and extend the franchise for an
additional period of five years or more.
SALE OF THE COMPANY
Effective February 1, 1998, Madera's shareholders entered into an agreement
to sell their stock to Waste Connections, Inc. ("WCI") for cash and stock in
WCI.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
Madera considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject Madera to concentrations of
credit risks consist primarily of accounts receivable. Credit risk on accounts
receivable is minimized as a result of the large and diverse nature of Madera's
customer base. Madera maintains an allowance for losses based on the expected
collectibility of accounts receivable. Credit losses have been within
management's expectations.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Improvements or betterments
which significantly extend the life of an asset are capitalized. Expenditures
for maintenance and repair costs are charged to operations as incurred. The cost
of assets retired or otherwise disposed of and the related accumulated
depreciation are eliminated from the accounts in the year of disposal. Gains and
losses resulting from property disposals are included in other income (expense).
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets or lease term, whichever is shorter.
The estimated useful lives are as follows:
<TABLE>
<S> <C>
Machinery and equipment............................... 6 - 10 years
Leasehold improvements................................ 10 - 40 years
Furniture and fixtures................................ 6 - 10 years
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and equivalents approximate their fair values
as of December 31, 1996 and 1997. The carrying values of the long-term debt and
capital lease obligations (Notes 3 and
F-39
<PAGE> 104
MADERA DISPOSAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS)
4) approximate their fair values as of December 31, 1996 and 1997, based on
current incremental borrowing rates for similar types of borrowing arrangements.
REVENUE RECOGNITION
Madera recognizes revenues as services are provided. Certain customers are
billed in advance and, accordingly, recognition of the related revenues is
deferred until the services are provided.
INCOME TAXES
Madera operates under Subchapter S of the Internal Revenue Code for federal
and state income tax reporting purposes. Consequently, all of the income tax
attributes and liabilities of the Madera's operations flow through to the
individual shareholders.
CLOSURE AND POST-CLOSURE COSTS
Under regulations pursuant to which the permit for the Fairmead Landfill
was issued, Madera and Madera County, as operator and owner, respectively, are
jointly liable for closure and post-closure liabilities with respect to the
landfill. Madera has not accrued for such liabilities because Madera County, as
required by state law, has established a special fund, into which a designated
portion of tipping fee surcharges are deposited, to pay such liabilities.
Consequently, management of Madera does not believe Madera has any financial
obligation for closure and post-closure costs for the Fairmead Landfill as of
December 31, 1997.
2. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Machinery and equipment..................................... $5,480 $5,777
Leasehold improvements...................................... 498 500
Furniture and fixtures...................................... 137 133
------ ------
6,115 6,410
Less accumulated depreciation and amortization.............. 2,315 2,774
------ ------
$3,800 $3,636
====== ======
</TABLE>
F-40
<PAGE> 105
MADERA DISPOSAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS)
3. LONG-TERM DEBT
Long-term debt as of December 31, 1996 and 1997 consists of the following:
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Equipment financing notes payable bearing interest at
various fixed and variable rates (ranging from 6.0% to 12.9%
at December 31, 1997); monthly payments of principal and
interest aggregating $16; maturing at various dates through
August 31, 2001; secured by equipment with net book values
aggregating $522 at December 31, 1997....................... $664 $467
Notes payable to related parties bearing interest at 10.0%;
monthly payments of interest; maturing December 1, 1998..... 150 150
---- ----
814 617
Less: Current portion....................................... 177 288
---- ----
Long-term debt.............................................. $637 $329
==== ====
</TABLE>
One of the equipment financing notes, with an outstanding balance of $236
at December 31, 1997, contains certain restrictive covenants, which among other
things require that specified financial balances and ratios be maintained,
restrict the payment of dividends and prohibit the incurrence of additional
indebtedness. As of December 31, 1997, Madera was in compliance with the
covenants.
As of December 31, 1997, aggregate contractual future principal payments by
calendar year on long-term debt are due as follows:
<TABLE>
<S> <C>
1998........................................................ $288
1999........................................................ 149
2000........................................................ 122
2001........................................................ 58
----
$617
====
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Capital Leases
Madera leases certain equipment under capital leases. As of December 31,
1996 and 1997, the following amounts are included in property and equipment as
assets under these capital leases:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Cost..................................................... $2,235 $2,605
Less: accumulated amortization........................... 527 780
------ ------
Net assets under capital leases.......................... $1,708 $1,825
====== ======
</TABLE>
F-41
<PAGE> 106
MADERA DISPOSAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS)
The future minimum lease payments under these capital leases along with the
present value of the minimum lease payments as of December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
MINIMUM LEASE PAYMENTS
YEAR ENDING DECEMBER 31:
------------------------
<S> <C>
1998.............................................. $ 448
1999.............................................. 489
2000.............................................. 427
2001.............................................. 352
2002.............................................. 294
Thereafter........................................ 494
------
Total minimum lease payments................................ 2,504
Less amount representing interest........................... 665
------
Present value of minimum lease payments..................... 1,839
Less current portion........................................ 274
------
Long-term portion........................................... $1,565
======
</TABLE>
OPERATING LEASES
Madera leases its facilities and certain equipment under cancelable
operating leases for periods of one year or less. Rent expense under all
operating leases during the years ended December 31, 1995, 1996 and 1997
amounted to $47, $41 and $33, respectively.
PERFORMANCE BONDS AND LETTERS OF CREDIT
Municipal solid waste collection contracts may require performance bonds to
secure contractual performance. At December 31, 1997, Madera had provided
customers and various regulatory authorities with bonds of approximately $200 to
secure its obligations. If Madera were unable to obtain surety bonds in
sufficient amounts or at acceptable rates, it could be precluded from entering
into additional municipal solid waste collection contracts or obtaining or
retaining landfill operating permits.
ENVIRONMENTAL RISKS
Madera is subject to liability for any environmental damage that its solid
waste facilities may cause to neighboring landowners, particularly as a result
of the contamination of drinking water sources or soil, including damage
resulting from conditions existing prior to the acquisition of such facilities
by Madera. Madera may also be subject to liability for any off-site
environmental contamination caused by pollutants or hazardous substances whose
transportation, treatment or disposal was arranged by Madera or its
predecessors. Any substantial liability for environmental damage incurred by
Madera could have a material adverse effect on Madera's financial condition,
results of operations or cash flows.
LEGAL PROCEEDINGS
In the normal course of its business and as a result of the extensive
governmental regulation of the solid waste industry, Madera may periodically
become subject to various judicial and administrative proceeding involving
federal, state or local agencies. In these proceedings, an agency may seek to
impose fines on Madera or to revoke or deny renewal of an operating permit held
by
F-42
<PAGE> 107
MADERA DISPOSAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS)
Madera. From time to time Madera may also be subject to actions brought by
citizens' groups or adjacent landowners in connection with the permitting and
licensing of landfills and transfer stations, or alleging environmental damage
or violations of the permits and licenses pursuant to which Madera operates.
In addition, Madera may become party to various claims and suits pending
for alleged damages to persons and property, alleged violations of certain laws
and alleged liabilities arising out of matters occurring during the normal
operation of the waste management business. However, as of December 31, 1997,
there is no current proceeding or litigation involving Madera that Madera
believes will have a material adverse impact on Madera's business, financial
condition, results of operations or cash flows.
5. RELATED PARTY TRANSACTIONS
Madera performs repair services on equipment owned and operated by
shareholders of Madera. Revenues relating to these activities were $41, $60 and
$51 for the years ended December 31, 1995, 1996 and 1997, respectively. As of
December 31, 1996 and 1997, Madera has receivables of $100 and $113,
respectively, relating to these activities.
6. 401(K) PLAN
Madera has a voluntary savings and investment plan (the "401(k) Plan"). The
401(k) Plan is available to all eligible employees of Madera. Under the 401(k)
Plan Madera is required to match 100% of employees' contributions up to a
maximum of 3% of the employees' wages. During the years ended December 31, 1995,
1996 and 1997, Madera's 401(k) Plan expenses were approximately $78, $107 and
$108, respectively.
F-43
<PAGE> 108
MADERA DISPOSAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
(IN THOUSANDS)
7. PRO FORMA INCOME TAX INFORMATION (UNAUDITED)
The following unaudited pro forma information reflects income tax expense
(benefit) as if Madera had been subject to federal and state income taxes:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current:
Federal........................................... $(16) $(19) $197
State............................................. -- 12 57
Deferred:
Federal........................................... 32 188 33
State............................................. 14 27 8
---- ---- ----
Pro forma income taxes.............................. $ 30 $208 $295
==== ==== ====
</TABLE>
The pro forma provisions for income taxes for the years ended December 31,
1995, 1996 and 1997 differ from the amounts computed by applying the applicable
statutory federal income tax rate (34%) to income before income taxes due to
state franchise taxes, certain non-deductible expenses and refundable tax
credits.
Madera's pro forma deferred income tax asset of approximately $20 and $54
at December 31, 1996 and 1997, respectively, relates principally to differences
in the recognition of bad debt expenses, state franchise taxes and certain other
temporary differences. Madera also has pro forma deferred tax liabilities at
December 31, 1996 and 1997 of approximately $534 and $570, respectively, which
relate to differences between tax and financial methods of depreciation.
8. SUBSEQUENT EVENTS
On January 12, 1998, Madera distributed $131 to its shareholders.
F-44
<PAGE> 109
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 8
Use of Proceeds...................... 17
Dividend Policy...................... 17
Capitalization....................... 18
Dilution............................. 19
Selected Historical and Pro Forma
Financial and Operating Data....... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 24
Business............................. 30
Management........................... 45
Certain Transactions................. 51
Principal Stockholders............... 53
Description of Capital Stock......... 55
Shares Eligible for Future Sale...... 59
Underwriting......................... 61
Legal Matters........................ 62
Experts.............................. 62
Available Information................ 62
Index to Financial Statements........ F-1
- -------------------------------------------
UNTIL , 1998 (25 DAYS AFTER
THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK
OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
===========================================
</TABLE>
======================================================
2,000,000 SHARES
[LOGO]
WASTE CONNECTIONS, INC.
COMMON STOCK
-------------------
PROSPECTUS
-------------------
BT ALEX. BROWN
CIBC OPPENHEIMER
, 1988
======================================================
<PAGE> 110
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $
Listing Fee*................................................ $
NASD Filing Fee............................................. $
Accounting Fees and Expenses*............................... $
Printing and Engraving Expenses*............................ $
Legal Fees and Expenses*.................................... $
Transfer Agent and Registrar Fees*.......................... $
Director and Officer Insurance Premiums..................... $18,900
Miscellaneous Expenses*..................................... $
Total*...................................................... $
</TABLE>
- ---------------
* Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Certificate of Incorporation (the "Restated
Certificate") of the Company provides that a director will not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law (the "Delaware Law"), which concerns unlawful payments of
dividends, stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit. If the Delaware Law is
subsequently amended to permit further limitation of the personal liability of
directors, the liability of a director of the Company will be eliminated or
limited to the fullest extent permitted by the Delaware Law as amended.
Section 145(a) of the Delaware Law provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of non contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 145(b) of the Delaware Law states that a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suite by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the
II-1
<PAGE> 111
request or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit is brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 145(c) of the Delaware Law provides that to the extent that a
director, officer, employee or agent of a corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 145(d) of the Delaware Law states that any indemnification under
subsections (a) and (b) of section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made (i) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
Section 145(e) of the Delaware Law provides that expenses (including
attorneys' fees) incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in section 145. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 145(f) of the Delaware Law states that the indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of section 145 shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
Section 145(g) of the Delaware Law provides that a corporation shall have
the power to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of section 145.
Section 145(j) of the Delaware Law states that the indemnification and
advancement of expenses provided by, or granted pursuant to, section 145 shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent, and shall inure to
the benefit of the heirs, executors and administrators of such a person.
II-2
<PAGE> 112
Pursuant to Section 145 of the Delaware Law, the Registrant has purchased
insurance on behalf of its present and former directors and officers against any
liability asserted against or incurred by them in such capacity or arising out
of their status as such. The Company has entered into indemnification agreements
with each of its directors and officers providing for mandatory indemnification
and advancement of expenses to the maximum extent permitted by the Delaware Law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth below is a listing of all sales by the Company of unregistered
securities since the Company was incorporated on September 9, 1997. All such
sales were exempt from registration under the Securities Act, pursuant to
Section 4(2) of the Securities Act (and, as noted below, Regulation D or Rule
701 thereunder), as they were transactions not involving a public offering. The
Company believes that each of the issuances made pursuant to Section 4(2) was
made to a sophisticated investor, who had the financial resources to bear the
risk of the investment and who had the means and opportunity to obtain
information concerning the Company. The consideration paid to the Company in
respect of each issuance was cash, unless otherwise indicated. All sales
described below were made by the Company without the assistance of any
underwriters.
1. In September and October 1997, the Company in a private placement
sold an aggregate of 2,300,000 shares of Common Stock at a price of $0.01
per share and 2,499,998 shares of Series A Preferred Stock at a price of
$2.80 per share to 19 accredited investors, including certain officers and
directors of the Company. Such sales were made in accordance with
Regulation D promulgated under the Securities Act.
2. In September 1997, the Company issued warrants to purchase 200,000
shares of Common Stock, with an exercise price of $0.01 per share, to
Imperial Bank in connection with the credit facility with Imperial Bank
entered into by the Company. Such warrants were issued pursuant to
Regulation D under the Securities Act.
3. In October and November 1997, the Company issued options to purchase
428,500 shares of Common Stock to employees of the Company. Such options
have exercise prices ranging from $2.80 per share to $10.50 per share and a
weighted average exercise price of $5.42 per share. Some of such options
were issued pursuant to Regulation D under the Securities Act and others
were issued pursuant to Rule 701 under the Securities Act.
4. In December 1997, the Company issued warrants to purchase an
aggregate of 841,000 shares of Common Stock to the Company's directors and
options to purchase 100,000 shares of Common Stock to Ronald J.
Mittelstaedt. Such warrants and options have an exercise price of $2.80 per
share and were issued pursuant to Regulation D under the Securities Act.
5. In December 1997 and January 1998, the Company issued warrants to
purchase an aggregate of 15,000 shares of Common Stock to three
consultants, with an exercise price of $5.00 per share, and warrants to
purchase 5,000 shares of Common Stock to a fourth consultant, with an
exercise price of $2.80 per share. Such warrants were issued pursuant to
Rule 701 under the Securities Act.
6. In January 1998, the Company issued warrants to purchase 140,000
shares of Common Stock to BankBoston, N.A., at an exercise price of $2.80
per share, in connection with the Company's credit facility with
BankBoston, N.A. Such warrants were issued pursuant to Regulation D under
the Securities Act.
7. In January and February 1998, the Company issued options to
purchase 104,300 shares of Common Stock to various employees of the
Company, at exercise prices ranging from $2.80 to $10.50 per share, and a
weighted average exercise price of $5.27 per share. Such options were
issued pursuant to Rule 701 and Regulation D under the Securities Act.
II-3
<PAGE> 113
8. In January 1998, the Company issued options to purchase an
aggregate of 30,000 shares of Common Stock to Michael W. Harlan and William
J. Razzouk, at an exercise price of $3.00 per share. Such options were
issued pursuant to Regulation D under the Securities Act.
9. In February 1998, the Company issued to the shareholders of Madera
an aggregate of 1,000,000 shares of Common Stock and warrants to purchase
200,000 shares of Common Stock at an exercise price of $4.00 per share, all
as part of the consideration for the acquisition by the Company of Madera.
Such shares and warrants were issued pursuant to Regulation D under the
Securities Act.
10. In February 1998, the Company issued options to purchase 230,000
shares of Common Stock to Steven Bouck, of which 130,000 are exercisable at
$2.80 per share, 50,000 are exercisable at $9.50 per share, and 50,000 are
exercisable at $12.50 per share. On the same date, the Company issued to
Mr. Bouck warrants to purchase 50,000 shares of Common Stock, at an
exercise price of $2.80 per share. Such options and warrants were issued
pursuant to Regulation D under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
A. EXHIBITS.
The following exhibits are filed herewith and made a part hereof:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement among the Registrant and the
Underwriters
3.1 Amended and Restated Certificate of Incorporation of the
Company, in effect as of the date hereof
3.2 Amended and Restated By-laws of the Company, in effect as of
the date hereof
4.1* Form of Common Stock Certificate
5.1* Opinion of Shartsis, Friese & Ginsburg LLP
10.1+ Revolving Credit Agreement, dated as of January 30, 1998,
between the Company and various banks represented by
BankBoston, N.A
10.2 1997 Stock Option Plan
10.3 Form of Option Agreement(1)
10.4 Form of Warrant Agreement(2)
10.5 Warrant Agreement and related Anti-Dilution Agreement issued
to Imperial Bank
10.6 Warrant Agreement and related Anti-Dilution Agreement issued
to BankBoston, N.A
10.7 Form of Stock Purchase Agreement dated as of September 30,
1997(3)
10.8 Form of Second Amended and Restated Investors' Rights
Agreement dated as of September 30, 1997(3)
10.9 Form of Stockholders' Agreement dated as of September 30,
1997(3)
10.10 Employment Agreement among the Company, J. Bradford Bishop,
Frank W. Cutler, James N. Cutler, Jr. and Ronald J.
Mittelstaedt, dated as of October 1, 1997
10.11 First Amended Employment Agreement between the Company and
Darrell Chambliss, dated as of October 1, 1997
10.12 First Amended Employment Agreement between the Company and
Michael Foos, dated as of October 1, 1997
10.13 First Amended Employment Agreement between the Company and
Eric Moser, dated as of October 1, 1997
</TABLE>
II-4
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
10.14 Employment Agreement between the Company and Steven Bouck,
dated as of February 1, 1998
10.15 Employment Agreement between the Company and Eugene V.
Dupreau, dated as of February 23, 1998
10.16 Employment Agreement between the Company and Charles B.
Youngclaus, dated as of February 23, 1998
10.17+ Purchase and Sale Agreement, dated as of September 29, 1997,
between Browning-Ferris Industries, Inc., Browning-Ferris,
Inc. and Browning-Ferris Industries of Idaho, Inc., as
Sellers, and the Company, Waste Connections of Idaho, Inc.
and Continental Paper Recycling, L.L.C. as Buyers
10.18 Stock Purchase Agreement, dated as of January 26, 1998,
among the Company, Waste Connections of Idaho, Inc. and the
shareholders of Waste Connections of Idaho, Inc.
10.19+ Stock Purchase Agreement, dated as of February 4, 1998,
among the Company and the shareholders of Madera Disposal
Company, Inc.
10.20+ Asset Purchase Agreement, dated as of March 1, 1998, among
the Company, Waste Connections of Idaho, Inc., Hunter
Enterprises, Inc. and the shareholder of Hunter Enterprises,
Inc.
10.21* Form of Indemnification Agreement entered into by the
Company and each of its directors and officers
11* Statement re: Computation of per share earnings
21.1 Subsidiaries of the Registrant
23.1* Consent of Shartsis, Friese & Ginsburg LLP (included in
opinion filed as Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3* Consent of Williams, Kastner & Gibbs PLLC
24.1 Power of Attorney (included in Part II of the Registration
Statement under the caption "Signatures")
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
+ Filed without exhibits and schedules (to be provided supplementally on request
of the Commission).
(1) Pursuant to the 1997 Stock Option Plan, the Company issued options in this
form to the following officers of the Company (or in certain cases to an
entity controlled by such individual) for the number of shares of Common
Stock indicated: Darrell W. Chambliss (150,000); Michael R. Foos (150,000);
Ronald J. Mittelstaedt (100,000); Eric J. Moser (85,000); Steven F. Bouck
(230,000); Eugene V. Dupreau (10,000) and Charles B. Youngclaus (10,000).
The Company also issued options in this form to the following directors of
the Company: Michael W. Harlan (15,000); and William J. Razzouk (15,000).
(2) The Company issued warrants in this form to the following directors of the
Company (or in certain cases to an entity controlled by such individual) for
the number of shares of Common Stock indicated: James N. Cutler, Jr.
(247,000); J. Bradford Bishop (247,000); Ronald J. Mittelstaedt (100,000).
The Company also issued warrants in this form as follows: warrants to
purchase 247,000 shares of Common Stock to Board consultant Frank W. Cutler;
warrants to purchase an aggregate of 200,000 shares of Common Stock to the
shareholders of Madera in connection with the Company's acquisition of
Madera; warrants to purchase 20,000 shares of
II-5
<PAGE> 115
Common Stock to four consultants to the Company; and warrants to purchase
50,000 shares of Common Stock to Steven Bouck.
(3) Each purchaser of shares in the Company's September 1997 private placement
of 2,300,000 shares of Common Stock and 2,499,998 shares of Series A
Preferred Stock entered into a Stock Purchase Agreement, Investors' Rights
Agreement and Stockholders' Agreement in these forms with respect to the
shares purchased. Subsequent holders of the Company's Common Stock have also
become parties to the Investors' Rights and Stockholders' Agreements.
B. FINANCIAL STATEMENT SCHEDULE.
The following financial statement schedule is filed herewith and made a
part hereof:
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
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 Commission such indemnification is
against public policy as expressed in the 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 Act and
will be governed by the final adjudication of such issue.
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 of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(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.
II-6
<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Roseville, State of
California, on , 1998.
WASTE CONNECTIONS, INC.
By:
------------------------------------
Ronald J. Mittelstaedt
President, Chief Executive Officer
and Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
respective capacities and on the respective dates set forth opposite their
names. Each person whose signature appears below hereby appoints Ronald J.
Mittelstaedt and Steven F. Bouck and each of them, each of whom may act without
joinder of the other, as 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, to execute in the name and on behalf of
each such person any amendment or any post-effective amendment to this
Registration Statement, and any registration statement relating to any offering
made in connection with the offering covered by this Registration Statement that
is to be effective on filing pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing appropriate or necessary to be done, as fully and for all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on March , 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ President, Chief Executive
- ----------------------------------------------------- Officer and Chairman
Ronald J. Mittelstaedt
/s/ Director and Vice President--
- ----------------------------------------------------- Madera
Eugene V. Dupreau
/s/ Director
- -----------------------------------------------------
Michael W. Harlan
/s/ Director
- -----------------------------------------------------
William J. Razzouk
/s/ Executive Vice President and
- ----------------------------------------------------- Chief Financial Officer
Steven F. Bouck
/s/ Vice President and Corporate
- ----------------------------------------------------- Controller
Michael R. Foos
</TABLE>
II-7
<PAGE> 117
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<S> <C> <C>
1.1* Form of Underwriting Agreement among the Registrant and the
Underwriters
3.1 Amended and Restated Certificate of Incorporation of the
Company, in effect as of the date hereof
3.2 Amended and Restated By-laws of the Company, in effect as of
the date hereof
4.1* Form of Common Stock Certificate
5.1* Opinion of Shartsis, Friese & Ginsburg LLP
10.1 Revolving Credit Agreement, dated as of January 30, 1998,
between the Company and various banks represented by
BankBoston, N.A
10.2 1997 Stock Option Plan
10.3 Form of Option Agreement(1)
10.4 Form of Warrant Agreement(2)
10.5 Warrant Agreement and related Anti-Dilution Agreement issued
to Imperial Bank
10.6 Warrant Agreement and related Anti-Dilution Agreement issued
to BankBoston, N.A
10.7 Form of Stock Purchase Agreement dated as of September 30,
1997(3)
10.8 Form of Investors' Rights Agreement dated as of September
30, 1997(3)
10.9 Form of Stockholders' Agreement dated as of September 30,
1997(3)
10.10 Employment Agreement among the Company, J. Bradford Bishop,
Frank W. Cutler, James N. Cutler, Jr. and Ronald J.
Mittelstaedt, dated as of October 1, 1997
10.11 First Amended Employment Agreement between the Company and
Darrell Chambliss, dated as of October 1, 1997
10.12 First Amended Employment Agreement between the Company and
Michael Foos, dated as of October 1, 1997
10.13 First Amended Employment Agreement between the Company and
Eric Moser, dated as of October 1, 1997
10.14 Employment Agreement between the Company and Steven Bouck,
dated as of February 1, 1998
10.15 Employment Agreement between the Company and Eugene V.
Dupreau, dated as of February 23, 1998
10.16 Employment Agreement between the Company and Charles B.
Youngclaus, dated as of February 23, 1998
10.17+ Purchase and Sale Agreement, dated as of September 29, 1997,
between Browning-Ferris Industries, Inc., Browning-Ferris,
Inc. and Browning-Ferris Industries of Idaho, Inc., as
Sellers, and the Company, Waste Connections of Idaho, Inc.
and Continental Paper Recycling, L.L.C. as Buyers
10.18 Stock Purchase Agreement, dated as of January 26, 1998,
among the Company, Waste Connections of Idaho, Inc. and the
shareholders of Waste Connections of Idaho, Inc.
10.19+ Stock Purchase Agreement, dated as of February 4, 1998,
among the Company and the shareholders of Madera Disposal
Company, Inc.
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<S> <C> <C>
10.20+ Asset Purchase Agreement, dated as of March 1, 1998, among
the Company, Waste Connections of Idaho, Inc., Hunter
Enterprises, Inc. and the shareholder of Hunter Enterprises,
Inc.
10.21* Form of Indemnification Agreement entered into by the
Company and each of its directors and officers
11* Statement re: Computation of per share earnings
21.1 Subsidiaries of the Registrant
23.1* Consent of Shartsis, Friese & Ginsburg LLP (included in
opinion filed as Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3* Consent of Williams, Kastner & Gibbs PLLC
24.1 Power of Attorney (included in Part II of the Registration
Statement under the caption "Signatures")
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
+ Filed without exhibits and schedules (to be provided supplementally on request
of the Commission).
(1) Pursuant to the 1997 Stock Option Plan, the Company issued options in this
form to the following officers of the Company (or in certain cases to an
entity controlled by such individual) for the number of shares of Common
Stock indicated: Darrell W. Chambliss (150,000); Michael R. Foos (150,000);
Ronald J. Mittelstaedt (100,000); Eric J. Moser (85,000); Steven F. Bouck
(230,000); Eugene V. Dupreau (10,000) and Charles B. Youngclaus (10,000).
The Company also issued options in this form to the following directors of
the Company: Michael W. Harlan (15,000); and William J. Razzouk (15,000).
(2) The Company issued warrants in this form to the following directors of the
Company (or in certain cases to an entity controlled by such individual) for
the number of shares of Common Stock indicated: James N. Cutler, Jr.
(247,000); J. Bradford Bishop (247,000); Ronald J. Mittelstaedt (100,000).
The Company also issued warrants in this form as follows: warrants to
purchase 247,000 shares of Common Stock to Board consultant Frank W. Cutler;
warrants to purchase an aggregate of 200,000 shares of Common Stock to the
shareholders of Madera in connection with the Company's acquisition of
Madera; warrants to purchase 20,000 shares of Common Stock to four
consultants to the Company; and warrants to purchase 50,000 shares of Common
Stock to Steven Bouck.
(3) Each purchaser of shares in the Company's September 1997 private placement
of 2,300,000 shares of Common Stock and 2,499,998 shares of Series A
Preferred Stock entered into a Stock Purchase Agreement, Investors' Rights
Agreement and Stockholders' Agreement in these forms with respect to the
shares purchased. Subsequent holders of the Company's Common Stock have also
become parties to the Investors' Rights and Stockholders' Agreements.
<PAGE> 119
WASTE CONNECTIONS, INC. AND PREDECESSORS
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
----------------------- DEDUCTIONS
BALANCE AT CHARGED TO CHARGED TO (WRITE-OFFS, BALANCE
BEGINNING COSTS AND OTHER NET OF AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS COLLECTIONS) OF PERIOD
----------- ---------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts:
Allowance for doubtful accounts:
Fibres International, Inc.:
January 1, 1995 through
November 30, 1995........... $ 18 $ 10 $ -- $ -- $ 28
The Disposal Group Combined:
Year ended December 31, 1995... 73 139 -- (99) 113
Period from January 1, 1996
through July 31, 1996....... 113 72 -- (94) 91
Predecessors Combined:
One month ended December 31,
1995........................ 28 -- -- -- 28
Period ended December 31,
1996........................ 28 61 -- (8) 81
Nine months ended September 30,
1997........................ 81 139 -- (97) 123
Waste Connections, Inc.:
Period from inception
(September 9, 1997) through
December 31, 1997........... -- 19 -- -- 19
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WASTE CONNECTIONS, INC.
Waste Connections, Inc., a Corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is Waste Connections, Inc., and
the original Certificate of Incorporation (the "Original Certificate") of the
Corporation was filed with the Secretary of State of the State of Delaware on
September 9, 1997.
2. Pursuant to Sections 242 and 245 of the Delaware General
Corporation Law, this Amended and Restated Certificate of Incorporation restates
and integrates and further amends the provisions of the Corporation's
Certificate of Incorporation.
3. The terms and provisions of this Amended and Restated
Certificate of Incorporation have been duly adopted pursuant to the provisions
of Sections 242 and 245 of the Delaware General Corporation Law.
4. The text of the Original Certificate is hereby restated and
further amended to read in its entirety as follows:
ARTICLE I
The name of this Corporation is Waste Connections, Inc.
ARTICLE II
The address of the registered office of this Corporation in the
State of Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware,
19805. The Partnership's registered agent at that address is Corporation Service
Company.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or
activity for which a Corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
This Corporation is to have perpetual existence.
<PAGE> 2
ARTICLE V
A. The Corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock". The amount of
the total authorized capital stock of the Corporation is 60,000,000 shares,
divided into (a) 50,000,000 shares of Common Stock, par value $0.01 per share,
and (b) 10,000,000 shares of Preferred Stock, par value $0.01 per share.
B. The Preferred Stock may be issued from time to time in one or
more series. Subject to the restrictions prescribed by law, the Board of
Directors is authorized to fix by resolution or resolutions the number of shares
of any series of Preferred Stock and to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock and, within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series of Preferred Stock, to
increase (but not above the total number of authorized shares of Preferred
Stock) or decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequent to the issue of
shares of that series. Different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purposes of voting
by classes unless expressly provided.
The authority of the Board of Directors with respect to each
series of Preferred Stock shall include, but not be limited to, determination of
the following: (a) the number of shares constituting that series and the
distinctive designation of that series; (b) the dividend rate on the shares of
that series, whether dividends shall be cumulative, and if so, from which date
or dates, and the relative rights of priority, if any, of payment of dividends
on shares of that series; (c) whether that series shall have voting rights in
addition to the voting rights provided by law, and if so, the terms of such
voting rights; (d) whether that series shall have conversion privileges, and if
so, the terms and conditions of such privileges, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine; (e) whether or not the shares of that series shall be redeemable, and
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates; (f) whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and if so, the terms
and the amount of such sinking funds; (g) the rights of the shares of that
series in the event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of priority, if any, of
payment of shares of that series; and (h) any other relative rights, preferences
and limitations of that series.
C. 2,500,000 shares of Preferred Stock are designated the Series
A Preferred Stock, $0.01 par value (the "Series A Preferred Stock"), of this
Corporation, with the following powers, designations, preferences and other
special rights:
1. Dividend Provisions. Subject to the rights of series of Preferred
Stock which may from time to time come into existence, the holders of shares of
Series A Preferred Stock shall be entitled to receive dividends, out of any
assets legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock
2
<PAGE> 3
or other securities and rights convertible into or entitling the holder thereof
to receive, directly or indirectly, additional shares of Common Stock of this
Corporation) on the Common Stock of this Corporation, at the rate of $0.098 per
share of Series A Preferred Stock (as adjusted for any stock dividends, splits
or combinations with respect to such shares) per annum, payable quarterly when,
as and if declared by the Board of Directors on the last day of each calendar
quarter beginning December 31, 1997. Such dividends shall accrue on each share
from September 30, 1997, and shall accrue from day to day, whether or not earned
or declared. Such dividends shall be cumulative so that, except as provided
below, if such dividends in respect of any previous or current annual dividend
period, at the annual rate specified above, shall not have been paid, the
deficiency shall first be fully paid before any dividend or other distribution
shall be paid on or declared and set apart for the Common Stock. Any
accumulation of dividends on the Series A Preferred Stock shall not bear
interest. Cumulative dividends with respect to a share of Series A Preferred
Stock which are accrued, payable and/or in arrears shall, upon conversion of
such share to Common Stock, subject to the rights of series of Preferred Stock
which may from time to time come into existence, be converted into additional
shares of Common Stock on the same terms as Series A Preferred Stock is
convertible into Common Stock, based upon the Conversion Price (as defined
below) at the time of such conversion.
Unless full dividends on the Series A Preferred Stock for all past
dividend periods and the then current dividend period shall have been paid or
declared and a sum sufficient for the payment thereof set apart: (A) no dividend
whatsoever (other than a dividend payable solely in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock) shall be
paid or declared, and no distribution shall be made, on any Common Stock and (B)
no shares of Common Stock shall be purchased, redeemed, or acquired by this
Corporation and no funds shall be paid into or set aside or made available for a
sinking fund for the purchase, redemption, or acquisition thereof; provided,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock held by employees, officers, directors, consultants or other
persons performing services for this Corporation or any wholly-owned subsidiary
(including, but not by way of limitation, distributors and sales
representatives) that are subject to restrictive stock purchase agreements under
which this Corporation has the option to repurchase such shares upon the
occurrence of certain events, such as the termination of employment.
2. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up of
this Corporation, either voluntary or involuntary (a "Liquidation"), subject to
the rights of series of Preferred Stock that may from time to time come into
existence, the holders of Series A Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets of this
Corporation to the holders of Common Stock by reason of their ownership thereof,
an amount per share equal to the sum of (i) $2.80 for each outstanding share of
Series A Preferred Stock (the "Original Series A Issue Price"), (ii) an amount
equal to accrued but unpaid dividends on such share ("Accrued Dividends"), and
(iii) if a Liquidation occurs prior to October 1, 1998, $1.40 for each
outstanding share of Series A Preferred Stock or, if a Liquidation occurs on or
after October 1, 1998, an amount necessary to provide the holder of such share
an internal rate of return of 50% (such amounts in clauses (ii) and (iii) being
referred
3
<PAGE> 4
to herein as the "Premium"). If upon the occurrence of such event, the assets
and funds thus distributed among the holders of the Series A Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then, subject to the rights of series of
Preferred Stock that may from time to time come into existence, the entire
assets and funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock in
proportion to the amount of such stock owned by each such holder.
b. Upon the completion of the distribution required by
subparagraph (a) of this Section C.2 and any other distribution that may be
required with respect to series of Preferred Stock that may from time to time
come into existence, if assets remain in this Corporation, the holders of the
Common Stock and the Series A Preferred Stock of this Corporation, shall receive
all of the remaining assets of this Corporation as if the Series A Preferred
Stock had been converted to Common Stock immediately prior to the distribution
of such remaining assets.
c. For purposes of this Section C.2, a Liquidation of this
Corporation shall be deemed to be occasioned by, or to include, (A) the
acquisition of this Corporation by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation but, excluding any merger effected
exclusively for the purpose of changing the domicile of this Corporation); (B) a
sale of all or substantially all of the assets of this Corporation; or (C) sale
of the outstanding stock of this Corporation by its stockholders unless this
Corporation's stockholders of record as constituted immediately prior to such
acquisition or sale will, immediately after such acquisition or sale (by virtue
of securities issued as consideration for this Corporation's acquisition or sale
or otherwise) hold at least 50% of the voting power of the surviving or
acquiring entity.
(1) In any of such events, if the consideration
received by this Corporation is other than cash, its value will be deemed its
fair market value. Any securities shall be valued as follows:
(a) Securities not subject to investment letter
or other similar restrictions on free marketability:
i) If traded on a securities exchange
or through The NASDAQ Stock Market, Inc., the value shall be deemed to be the
average of the closing prices of the securities on such exchange over the
thirty-day period ending three (3) days prior to the closing;
ii) If actively traded over-the-counter,
the value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty-day period ending three (3) days prior
to the closing; and
iii) If there is no active public market,
the value shall be the fair market value thereof, as mutually determined by this
Corporation and the holders of
4
<PAGE> 5
at least a majority of the voting power of the then outstanding shares of Common
Stock and of such Preferred Stock.
(b) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (a) (i), (ii) or (iii) to reflect the approximate
fair market value thereof, as mutually determined by this Corporation and the
holders of at least a majority of the voting power of each of all then
outstanding shares of Common Stock and of such Preferred Stock.
(2) In the event the requirements of this subsection
C.2(c) are not complied with, this Corporation shall forthwith either:
(a) cause such closing to be postponed until
such time as the requirements of this Section C.2 have been complied with; or
(b) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Series A Preferred
Stock shall revert to and be the same as such rights, preferences and privileges
existing immediately prior to the date of the first notice referred to in
subsection C.2.c.(3) hereof.
(3) This Corporation shall give each holder of record of
Series A Preferred Stock written notice of such impending transaction not later
than twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (20) days prior to the closing of such transaction,
whichever is earlier, and shall also notify such holders in writing of the final
approval of such transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and the provisions of
this Section C.2, and this Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after this Corporation has given the first notice
provided for herein or sooner than ten (10) days after this Corporation has
given notice of any material changes provided for herein; provided, however,
that such periods may be shortened upon the written consent of the holders of
Preferred Stock that are entitled to such notice rights or similar notice rights
and that represent at least a majority of the voting power of all then
outstanding shares of such Preferred Stock.
3. Redemption.
a. Subject to the rights of series of Preferred Stock which may
from time to time come into existence, to statutory limitation on the right of
this Corporation to repurchase its own stock and to any limitation imposed by
this Corporation's bank or other institutional lenders to repurchase or redeem
shares of its stock, at any time after April 1, 1999 and before October 1, 1999,
at the individual option of each holder of shares of Series A Preferred Stock
this Corporation shall redeem, from any source of funds legally available
therefor, within 30 days after the date this Corporation receives a request for
redemption, (each a "Series A Redemption Date"), the number of shares of Series
A Preferred Stock held by such holder that
5
<PAGE> 6
is specified in a request for redemption delivered to this Corporation by the
holder on or prior to October 1, 1999, by paying in cash therefor: (i) $4.20 per
share of Series A Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus (ii) an amount equal to
Accrued Dividends on such share (the "Series A Redemption Price").
b. As used herein and in subsection C.3.c below, the term
"Redemption Date" shall refer to each "Series A Redemption Date" and the term
"Redemption Price" shall refer to each "Series A Redemption Price." Subject to
the rights of series of Preferred Stock which may from time to time come into
existence, at least ten (10) but no more than twenty (20) days prior to the
Redemption Date, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series A Preferred Stock to
be redeemed, at the address last shown on the records of this Corporation for
such holder, confirming the number of shares to be redeemed from such holder,
the Redemption Date, the Redemption Price, the place at which payment may be
obtained and calling upon such holder to surrender to this Corporation, in the
manner and at the place designated, his, her or its certificate or certificates
representing the shares to be redeemed (the "Redemption Notice"). Except as
provided in subsection C.3.c on or after the Redemption Date, each holder of
Series A Preferred Stock to be redeemed shall surrender to this Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
c. From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series A Preferred Stock designated for redemption in the Redemption
Notice as holders of Series A Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this Corporation or be deemed to be
outstanding for any purpose whatsoever. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, if the funds of
this Corporation legally available for redemption of shares of Series A
Preferred Stock on any Redemption Date are insufficient to redeem the total
number of shares of Series A Preferred Stock to be redeemed on such date, this
Corporation shall use reasonable efforts to sell additional shares of capital
stock but this Corporation shall be under no obligation to incur debt or sell
assets to effect any such redemption. Those funds which are legally available
will be used to redeem the maximum possible number of such shares ratably among
the holders of such shares to be redeemed based upon their holdings of Series A
Preferred Stock. The shares of Series A Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. Subject to the rights of series of Preferred Stock which may from time
to time come into existence, at any time thereafter when additional funds of
this Corporation are legally available for the redemption of shares of Series A
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which this Corporation has become obliged to redeem on any Redemption
Date but which it has not redeemed.
6
<PAGE> 7
4. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
a. Right to Convert. Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the date
of issuance of such share at the office of this Corporation or any transfer
agent for such stock, into: (i) such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Original Series A Issue
Price by the Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion;
plus (ii) such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing the Accrued Dividends attributable to such share of
Series A Preferred Stock as of such date by the Conversion Price as of such
date. The initial Conversion Price per share for shares of Series A Preferred
Stock shall be the Original Series A Issue Price; provided, however, that the
Conversion Price for the Series A Preferred Stock shall be subject to adjustment
as set forth in subsection C.4.d.
b. Automatic Conversion. Each share of Series A Preferred Stock
and any Accrued Dividends attributable to such share of Series A Preferred Stock
shall automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such Series A Preferred Stock immediately upon
the earlier of (i) except as provided below in subsection C.4.c, this
Corporation's sale of its Common Stock in a firm commitment underwritten public
offering pursuant to a registration statement on Form S-1 under the Securities
Act of 1933, as amended, the public offering price of which was not less than
$5.00 per share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and $5,000,000 in the aggregate (an "IPO") or (ii) the date
specified by written consent or agreement of the holders of a majority of the
then outstanding shares of Series A Preferred Stock.
c. Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to this Corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. This Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series A Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Securities Act of 1933, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock upon
conversion
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of the Series A Preferred Stock shall not be deemed to have converted such
Series A Preferred Stock until immediately prior to the closing of such sale of
securities.
d. Conversion Price Adjustments of Preferred Stock for Certain
Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series
A Preferred Stock shall be subject to adjustment from time to time as follows:
(1) (a) If this Corporation shall issue, after the date
upon which any shares of Series A Preferred Stock were first issued (the
"Purchase Date" with respect to such series), any Additional Stock (as defined
below in Section C.4.d.(2)) without consideration or for a consideration per
share less than the Conversion Price for such series in effect immediately prior
to the issuance of such Additional Stock, the Conversion Price for such series
in effect immediately prior to each such issuance shall forthwith (except as
otherwise provided in this paragraph (1)) be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (not including shares excluded from the definition of Additional Stock
by Section C.4.d.(2)(b)) plus the number of shares of Common Stock that the
aggregate consideration received by this Corporation for such issuance would
purchase at such Conversion Price; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
(not including shares excluded from the definition of Additional Stock by
subsection C.4.d.(2)(b)) plus the number of shares of such Additional Stock.
(b) No adjustment of the Conversion Price for
the Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections
C.4.d.(1)(e)(iii) and C.4.d.(1)(e)(iv), no adjustment of such Conversion Price
pursuant to this subsection C.4.d.(1)(b) shall have the effect of increasing the
Conversion Price above the Conversion Price in effect immediately prior to such
adjustment.
(c) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(d) In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
(e) In the case of the issuance (whether before, on
or after the applicable Purchase Date) of options, warrants or other rights to
purchase or subscribe for
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Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options, warrants or other rights to purchase or subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this subsection C.4.d.(1) and subsection C.4.d.(2):
i) The aggregate maximum number of
shares of Common Stock deliverable upon exercise (assuming the
satisfaction of any conditions to exercisability, including
without limitation, the passage of time, but without taking into
account potential antidilution adjustments) of such options,
warrants, or other rights to purchase or subscribe for Common
Stock shall be deemed to have been issued at the time such
options, warrants or other rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subsections C.4.d.(1)(c) and C.4.d.(1)(a)), if
any, received by this Corporation upon the issuance of such
options, warrants or other rights plus the minimum exercise price
provided in such options, warrants or other rights (without
taking into account potential antidilution adjustments) for the
Common Stock covered thereby.
ii) The aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in
exchange (assuming the satisfaction of any conditions to
convertibility or exchangeability, including, without limitation,
the passage of time, but without taking into account potential
antidilution adjustments) for any such convertible or
exchangeable securities or upon the exercise of options, warrants
or other rights to purchase or subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities were issued or such options, warrants, or other rights
were issued and for a consideration equal to the consideration,
if any, received by this Corporation for any such securities and
related options, warrants or other rights (excluding any cash
received on account of accrued interest or accrued dividends),
plus the minimum additional consideration, if any, to be received
by this Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such
securities or the exercise in full of any related options,
warrants or other rights (the consideration in each case to be
determined in the manner provided in subsections C.4.d.(1)(c) and
C.4.d.(1)(a)).
iii) In the event of any change in the
number of shares of Common Stock deliverable or in the
consideration payable to this Corporation upon exercise of such
options, warrants or other rights or upon conversion of or in
exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the
Series A Preferred Stock to the extent in any way affected by or
computed using such options, warrants, or other rights or
securities, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of
Common Stock or any payment of such
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<PAGE> 10
consideration upon the exercise of any such options, warrants or
other rights or the conversion or exchange of such securities.
iv) Upon the expiration of any such
options, warrants or other rights, the termination of any such
rights to convert or exchange or the expiration of any options,
warrants or other rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A
Preferred Stock, to the extent in any way affected by or computed
using such options, warrants or other rights or securities or
options, warrants or other rights related to such securities,
shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the
exercise of such options, warrants or other rights, upon the
conversion or exchange of such securities or upon the exercise of
the options, warrants or other rights related to such securities.
v) The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant
to subsections C.4.d.(1)(e)(i) and (ii) shall be appropriately
adjusted to reflect any change, termination or expiration of the
type described in either subsection C.4.d.(1)(e)(iii) or (iv).
(2) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection C.4.d.(1)(e))
by this Corporation after the Purchase Date other than
(a) shares of Common Stock issued or issuable upon
exercise of Warrants to purchase up to 4% of this Corporation's
outstanding stock and granted to Imperial Bank on or about the
Purchase Date,
(b) shares of Common Stock issued or issuable i) in
a public offering before or in connection with which all
outstanding shares of Series A Preferred Stock will be converted
to Common Stock or ii) upon exercise of warrants or rights
granted to underwriters in connection with such a public
offering.
(3) In the event this Corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock shall be appropriately decreased so that
the number of shares
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of Common Stock issuable on conversion of each share of such series shall be
increased in proportion to such increase of the aggregate of shares of Common
Stock outstanding and those issuable with respect to such Common Stock
Equivalents with the number of shares issuable with respect to Common Stock
Equivalents determined from time to time in the manner provided for deemed
issuances in subsection 4.d.(1)(e).
(4) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in the outstanding shares of Common Stock as a result of such
combination.
e. Other Distributions. In the event this Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection C.4.d.(3), then,
in each such case for the purpose of this subsection C.4.e., the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of this Corporation into which their shares of Series A Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of this Corporation entitled to receive such distribution.
f. Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section C.4 or Section C.2) provision shall be made so that the holders of
the Series A Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Preferred Stock the number of shares of stock or
other securities or property of this Corporation or otherwise, to which a holder
of Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section C.4 with respect to the rights of
the holders of the Series A Preferred Stock after the recapitalization to the
end that the provisions of this Section C.4 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock) shall be applicable after that event
as nearly equivalent as may be practicable.
g. No Impairment. This Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
Corporation, but will at all times in good faith assist in the carrying out of
all he provisions of this Section C.4 and in the taking of all such action as
may bc necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock against impairment.
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h. No Fractional Shares and Certificate as to Adjustments.
(1) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock and the number
of shares of Common Stock to be issued shall be rounded to the nearest whole
share. Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A Preferred
Stock the holder is at the time converting into Common Stock and the number of
shares of Common Stock issuable upon such aggregate conversion.
(2) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section
C.4, this Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price for such series of Preferred Stock at the
time in effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of a share of Series A Preferred Stock.
i. Notices of Record Date. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
Corporation shall mail to each holder of Series A Preferred Stock, at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
j. Reservation of Stock Issuable Upon Conversion. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and any Premium
attributable to such shares of Series A Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock and any
Premium attributable to such shares of Series A Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
A Preferred Stock and any Premium attributable to such Series A Preferred Stock,
in addition to such other remedies as shall be available to the holder of such
Preferred Stock, this Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to these articles.
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k. Notices. Any notice required by the provisions of this Section
C.4 to be given to the holders of shares of Series A Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
Corporation.
5. Voting Rights. The holder of each share of Series A Preferred
Stock shall have the right to one vote for each share of Common Stock into which
such Series A Preferred Stock could then be converted, and with respect to such
vote, such holder shall have full voting rights and powers equal to the voting
rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of this Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of Series A
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).
6. Protective Provisions. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, so long as at
least fifty percent (50%) of the originally issued shares of Series A Preferred
Stock are outstanding, this Corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least a majority of the then outstanding shares of Series A Preferred Stock,
voting together as a single class, and Common Stock, voting separately as a
class, voting in accordance with Section C.5, except where otherwise required by
law:
a. sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other Corporation (other than a wholly-owned subsidiary Corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of this Corporation is disposed of; or
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares; or
c. increase or decrease (other than by redemption or conversion)
the total number of authorized shares of Series A Preferred Stock; or
d. authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security, having a preference over, or being on a parity with,
the Series A Preferred Stock with respect to voting, dividends or upon
Liquidation; or
e. redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided, however, that this restriction shall not apply
to the redemption of Series A Preferred Stock as provided in Section C.3 or to
the repurchase of shares of Common Stock from
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employees, officers, directors, consultants or other persons performing services
for this Corporation or any subsidiary pursuant to agreements under which this
Corporation has the option to repurchase such shares on terms approved by the
Board of Directors upon the occurrence of certain events, such as the
termination of employment; or
f. effect a reclassification or recapitalization of the
outstanding capital stock of this Corporation; or
g. increase the authorized number of directors of this
Corporation beyond nine directors;
h. amend or repeal any provision of, or add any provision to this
Corporation's Certificate of Incorporation or Bylaws to change the rights of the
Series A Preferred Stock, or increase or decrease the number of authorized
shares of stock of this Corporation; or
i. create any bonds, notes or other obligations convertible into,
exchangeable for or having option rights to purchase shares of stock with any
preference or priority as to dividends or assets superior to or on a parity with
that of the Preferred.
7. Status of Converted or Redeemed Stock. In the event any shares
of Series A Preferred Stock shall be redeemed or converted pursuant to Section
C.3 or Section C.4 hereof, the shares so converted or redeemed shall be
cancelled and shall not be issuable by this Corporation. The Certificate of
Incorporation of this Corporation shall be appropriately amended to effect the
corresponding reduction in this Corporation's authorized capital stock.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal from time to time any or all of the Bylaws of this Corporation. Any
By-Laws made by the directors under the powers conferred hereby may be amended
or repealed by the directors or by the stockholders. Notwithstanding the
foregoing and anything contained in this Amended and Restated Certificate of
Incorporation to the contrary, the By-Laws shall not be amended or repealed by
the stockholders, and no provision inconsistent therewith shall be adopted by
the stockholders, without the affirmative vote of the holders of at least
66-2/3% of the voting power of all shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
ARTICLE VII
Notwithstanding any other provision contained in this Amended and
Restated Certificate of Incorporation and notwithstanding that a lesser
percentage may be specified by law, the By-Laws or otherwise, this Article VII
and Articles VIII, IX, X and XI of this Amended and Restated Certificate of
Incorporation shall not be amended or repealed, and no provision inconsistent
therewith or providing for cumulative voting in the election of directors shall
be adopted, unless such adoption, amendment or repeal is approved by the
affirmative vote
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of holders of at least 66-2/3% of the voting power of all shares of capital
stock of the Corporation entitled to vote generally for the election of
directors; provided, however, that the provisions of this Article VII shall not
apply unless and until the Corporation shall have completed an IPO.
ARTICLE VIII
The business and affairs of the Corporation shall be managed by
and under the direction of the Board of Directors (the "Board"). The Board may
exercise all such authority and powers of the Corporation and do all such lawful
acts and things as are not by statute or this Amended and Restated Certificate
of Incorporation directed or required to be exercised or done by the
stockholders.
A. Number of Directors. The number of directors comprising the
entire Board shall, at the time of filing of this Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware (the "Effective Time"), be the number of directors then in office and
shall thereafter, subject to the right, if any, of holders of Preferred Stock to
elect directors under specified circumstances, be such number as may be fixed
from time to time exclusively by the Board by action of a majority of the
directors then in office provided that in no event shall such number be fewer
than three or greater than nine, unless approved by action of not less than
two-thirds of the directors then in office. No director need be a stockholder.
B. Classes and Terms of Directors. The directors shall be divided
into three classes: Class I, Class II and Class III. The number of directors
comprising each class (assuming no vacancy in any class) shall be as nearly
equal in number as possible based upon the number of directors comprising the
entire Board. The Board shall, at or before the first meeting of the Board
following the Effective Time, designate the class to which each director then
serving shall be a member. The initial term of the directors in Class I shall
extend until the first annual meeting of stockholders following the end of the
Corporation's fiscal year ending December 31, 1998; the initial term of the
directors in Class II shall extend until the first annual meeting of
stockholders following the end of the Corporation's fiscal year ending December
31, 1999; and the initial term of the directors in Class III shall extend until
the first annual meeting of stockholders following the end of the Corporation's
fiscal year ending December 31, 2000. At each annual meeting of stockholders,
successors to directors of the class whose term expires at such meeting will be
elected to serve for three-year terms and until their successors are elected and
qualified.
C. Allocation of Directors Among Classes in the Event of
Increases or Decreases in the Number of Directors. Subject to the rights of the
holder of any class or series of preferred stock then outstanding, in the event
of any increase or decrease in the authorized number of directors, (i) each
director then serving as such shall nevertheless continue as director of the
class of which he is a member until the expiration of his current term or his
prior death, retirement or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to ensure that
the number of directors comprising each class (assuming no
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vacancy in any class) shall be as nearly equal in number as possible based on
the number of directors comprising the entire Board. To the extent possible,
consistent with the foregoing rule, any newly created directorships shall be
added to those classes whose terms of office are to expire at the latest dates
following such allocation, and any newly eliminated directorships shall be
subtracted from those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum.
D. Newly-Created Directorships and Vacancies. Subject to the
rights of the holders of any class or series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
number of directors or any vacancies in the Board resulting from death,
resignation, retirement, disqualification, removal from office or any other
cause may be filled by the Board (and not by the stockholders unless there are
no directors then in office), provided that a quorum is then in office and
present, or by a majority of the directors then in office, if less than a quorum
is then in office, or by the sole remaining director. A director elected to fill
a newly created directorship or other vacancy shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor has been elected and qualified.
E. Removal of Directors. Subject to the rights of the holders of
any class or series of Preferred Stock then outstanding, the directors or any
director may be removed from office any time, but only for cause, at a meeting
called for that purpose, and only by the affirmative vote of the holders of at
least 66-2/3% of the voting power of all shares of the Corporation entitled to
vote generally in the election of directors, voting together as a single class;
provided, however, that the directors or any director may be removed with or
without cause, by the affirmative vote of the holders of at least a majority of
such voting power, at any time prior to the completion of an IPO.
F. Rights of Holders of Preferred Stock. Notwithstanding the
foregoing provisions of this Article VIII, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
rights and preferences of such Preferred Stock, and such directors so elected
shall not be divided into classes pursuant to this Article VIII unless expressly
provided by such rights and preferences.
G. Written Ballot Not Required. The election of directors need
not be By written ballot unless the By-Laws of the Corporation shall so provide.
ARTICLE IX
The By-Laws of the Corporation may provide, without limitation,
requirements relating to the notice and conduct of annual meetings, special
meetings, and the nomination and election of directors of the Corporation.
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ARTICLE X
In furtherance and not in limitation of the powers conferred by
law or in this Amended and Restated Certificate of Incorporation, the Board (and
any committee of the Board) is expressly authorized, to the extent permitted by
law, to take such action or actions as the Board or such committee may determine
to be reasonably necessary or desirable to (a) encourage any person to enter
into negotiations with the Board and management of the Corporation with respect
to any transaction which may result in a change in control of the Corporation
which is proposed or initiated by such person or (b) contest or oppose any such
transaction which the Board or such committee determines to be unfair, abusive
or otherwise undesirable with respect to the Corporation and its business,
assets or properties or the stockholders of the Corporation, including, without
limitation, the adoption of plans or the issuance of rights, options, capital
stock, notes, debentures or other evidences of indebtedness or other securities
of the Corporation, which rights, options, capital stock, notes, evidences of
indebtedness and other securities (i) may be exchangeable for or convertible
into cash or other securities on such terms and conditions as may be determined
by the Board or such committee and (ii) may provide that any holder or class of
holders thereof designated by the Board or any such committee will be treated
differently than, and unequally to, all other holders in respect of the terms,
conditions, provisions and rights of such securities.
ARTICLE XI
Subject to the rights, if any, of holders of any class or series
of Preferred Stock then outstanding, (i) stockholders are not permitted to call
a special meeting of stockholders or to require the Board or officers of the
Corporation to call such a special meeting, (ii) a special meeting of
stockholders may only be called by a majority of the Board, by the President or
by the Chairman of the Board, (iii) the business permitted to be conducted at a
special meeting of stockholders shall be limited to matters properly brought
before the meeting by or at the direction of the Board, and (iv) any action
required or permitted to be taken by the stockholders must be taken at a duly
called and convened annual meeting or special meeting of stockholders and cannot
be taken by consent in writing; provided, however, that the provisions of the
foregoing clause (iv) shall not apply prior to the completion of an IPO.
ARTICLE XII
A director of this Corporation shall not be personally liable to
this Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to this Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. Neither the amendment nor repeal of this
Article XII, nor the adoption of any provision of the Certificate of
Incorporation or Bylaws or of any statute inconsistent with this Article XII,
shall eliminate or reduce the effect of this Article XII in respect of any acts
or omissions occurring, or any causes of action, suits or claims that, but for
this Article XII, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision. If
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the Delaware General Corporation Law is amended after approval by the
stockholders of this Article to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director shall be eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law, as so amended.
ARTICLE XIII
Meetings of stockholders may be held outside the State of
Delaware, if the Bylaws so provide. The books of this Corporation may be kept
(subject to any provision of law) outside of the State of Delaware. Elections of
directors need not be by ballot unless the Bylaws of this Corporation shall so
provide.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be duly executed this _____ day of
March, 1998.
WASTE CONNECTIONS, INC.
By: _____________________________________
Ronald J. Mittelstaedt, President,
Chief Executive Officer and Chairman
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EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
WASTE CONNECTIONS, INC.
(EFFECTIVE MARCH __, 1998)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in
the City of Wilmington, County of Newcastle, State of Delaware.
Section 2. Other Offices. The corporation may also have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders
for the election of Directors shall be held at the principal office of the
corporation in Roseville, California, at such place as may be fixed from time to
time by the Board of Directors, or at such other place either within or without
the State of Delaware as shall be designated from time to time by the Board of
Directors. Meetings of stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as shall be designated
by the Board of Directors.
Section 2. Annual Meetings. Annual meetings of stockholders,
commencing with the year 1999, shall be held on the second Tuesday of May in
each year, if not a legal holiday and if a legal holiday, then on the next
secular day following, at 10:00 A.M., or at such other date and time as shall be
designated from time to time by the Board of Directors, at which they shall
transact such business as may properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote
<PAGE> 2
at such meeting not less than ten nor more than sixty days before the date of
the meeting, except as may otherwise be provided by law.
Section 4. Special Meetings. Stockholders are not permitted to
call a special meeting of stockholders or to require the Board of Directors or
officers of the Corporation to call such a special meeting. A special meeting of
stockholders may only be called by a majority of the Board of Directors, by the
President or by the Chairman of the Board. The business permitted to be
conducted at a special meeting of stockholders shall be limited to matters
relating to the purpose or purposes stated in the notice of the meeting or
properly brought before the meeting by or at the direction of the Board of
Directors. Any action required or permitted to be taken by the stockholders must
be taken at a duly called and convened annual meeting or special meeting of
stockholders and cannot be taken by consent in writing; provided, however, that
the foregoing shall not apply prior to the completion by the Corporation of an
IPO (as defined in the Certificate of Incorporation).
Section 5. Notice of Special Meetings. Written notice of a
special meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called, shall be given not less than ten
nor more than sixty days before the date of the meeting, to each stockholder
entitled to vote at such meeting.
Section 6. Quorum. The holders of a majority of the shares
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation.
Section 7. Organization. Meetings of stockholders shall be
presided over by the Chairman, if any, or in his absence (or election not to
preside) by the Vice Chairman, if any, or in his absence (or election not to
preside) by the President, or in his absence (or election not to preside) by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence (or election not to so act) the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 8. Conduct of Meetings. The Board of Directors may adopt
such rules and regulations for the conduct of the meeting of stockholders as it
shall deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting
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<PAGE> 3
to stockholders of record of the Corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (iv) restrictions on entry to the meeting after the time fixed for
the commencement thereof; and (v) limitations on the time allotted to questions
or comments by participants. Unless and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
Section 9. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as Directors; provided, however, that the following procedures shall
not apply to the nomination of persons for election as Directors by vote of any
class or series of preferred stock of the Corporation. Nominations of persons
for election to the Board of Directors of the Corporation at the annual meeting
may be made at such meeting by or at the direction of the Board of Directors, by
any committee appointed by the Board of Directors or by any common stockholder
of the Corporation entitled to vote for the election of Directors at the meeting
who complies with the notice procedures set forth in this Section 9. Such
nominations, other than those made by or at the direction of the Board of
Directors or by any committee appointed by the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the fifteenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a Director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class, series and
number of shares of capital stock of the Corporation which are beneficially
owned by the person and (v) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of Directors
pursuant to the Rules and Regulations of the Securities and Exchange Commission
under Section 14 of the Securities Exchange Act of 1934, as amended; and (b) as
to the stockholder giving the notice (i) the name and record address of the
stockholder, (ii) the class, series and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder and (iii) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder. Such notice shall be accompanied by the executed consent of each
nominee to serve as a Director if so elected. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as a Director of the Corporation. No person shall be eligible for election
as a Director of the Corporation by the holders of Common Stock of the
Corporation unless nominated in accordance with the procedures set forth herein.
The officer of the Corporation presiding at an annual meeting shall, if the
facts warrant, determine that a nomination was not made in
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<PAGE> 4
accordance with the foregoing procedure and, if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Section 10. Advance Notification of Business to be Transacted at
Stockholder Meetings. To be properly brought before the annual or any special
meeting of stockholders, business must be either (a) specified in the notice of
meeting (or any supplement or amendment thereto) given by or at the direction of
the Board of Directors or any committee appointed by the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before an annual meeting
by a stockholder. In addition to any other applicable requirements, for business
to be properly brought before any annual meeting of stockholders by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the fifteenth day following the day on which such notice of
the date of the meeting was mailed or such public disclosure was made, whichever
first occurs. Such stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the meeting (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class, series and
number of shares of capital stock of the Corporation which are beneficially
owned by the stockholder and (iv) any material interest of the stockholder in
such business.
No business shall be conducted at the annual or any special
meeting of stockholders unless it is properly brought before the meeting in
accordance with the procedures set forth in this Section 10, provided, however,
that nothing in this Section 10 shall be deemed to preclude discussion by any
stockholder of any business properly brought before the meeting in accordance
with the procedures set forth in this Section 10. The officer of the Corporation
presiding at the meeting shall, if the facts warrant, determine that business
was not properly brought before the meeting in accordance with the provisions of
this Section 10 and, if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
Section 11. Compliance with Securities and Exchange Act of 1934.
Notwithstanding any other provision of these bylaws, on completion of an IPO the
Corporation shall be under no obligation to include any stockholder proposal in
its proxy statement materials or otherwise present any such proposal to
stockholders at a special or annual meeting of stockholders if the Board of
Directors reasonably believes that the proponents thereof have not complied with
Sections 13 and 14 of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, and the Corporation shall not be
required to include in its proxy statement material to stockholders any
stockholder proposal not required to
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<PAGE> 5
be included in its proxy material to stockholders in accordance with such Act,
rules, or regulations.
Section 12. Adjournment of Meetings. If a quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 13. Voting. Unless otherwise provided in the certificate
of incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted after
three years from its date, unless the proxy provides for a longer period.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The number of Directors which
shall constitute the entire Board of Directors shall be as set by the Board of
Directors from time to time, and shall initially be five. No reduction in the
number of Directors constituting the entire Board of Directors shall have the
effect of removing any Director before that Director's term of office expires.
Section 2. Term of Office. Subject to the provisions of the
certificate of incorporation, each Director, including a Director elected to
fill a vacancy, shall hold office until such Director's successor is elected and
qualified or the earlier resignation or removal of such Director.
Section 3. Meetings of the Board of Directors. The Board of
Directors of the corporation may hold meetings, both regular and special, either
within or without the State of Delaware.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman, the Vice Chairman, the President or the
Secretary or by resolution of
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<PAGE> 6
the Board of Directors. Unless waived, notice of the time and place of special
meetings shall be delivered to each Director either (i) personally (either
orally or in writing), (ii) by telephone, (iii) by telex, telecopy or other
facsimile transmission, or (iv) by first-class mail, postage prepaid, addressed
to a Director at that Director's address as it is shown on the records of the
Corporation. If the notice is mailed, it shall be deposited in the United States
mail at least four days before the time of the holding of the meeting (ten days
in the case of a Director whose address as shown on the records of the
Corporation is outside of the United State of America). If the notice to a
Director is delivered in any other manner it shall be delivered (which shall for
this purpose mean received by the Director) at least 24 hours before the time of
the holding of the meeting.
Section 6. Quorum. At all meetings of the Board, a majority of
the entire Board shall constitute a quorum for the transaction of business and
the act of a majority of the Directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or the certificate of incorporation. If a quorum
shall not be present at any meeting of the Board of Directors, the Directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 7. Action Without A Meeting. Unless otherwise restricted
by the certificate of incorporation or these bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Written consents representing actions taken by the Board or committee may be
executed by telex, telecopy or other facsimile transmission, and such facsimile
shall be valid and binding to the same extent as if it were an original.
Section 8. Meetings by Conference Telephone. Unless otherwise
restricted by the certificate of incorporation or these bylaws, members of the
Board of Directors, or any committee established by the Board of Directors, may
participate in a meeting of the Board of Directors, or such committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 9. Organization. Meetings of the Board of Directors shall
be presided over by the Chairman, if any, or in his absence by the Vice
Chairman, if any, or in the absence of the foregoing persons by a chairman
chosen at the meeting.
Section 10. Committees of Directors. The Board of Directors may,
by resolution passed by a majority of the whole Board, establish one or more
committees, each committee to consist of one or more of the Directors of the
corporation. The Board may designate one or more Directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee.
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<PAGE> 7
In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided by resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; provided that no such committee
shall have power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
General Corporation Law of Delaware to be submitted to stockholders for approval
or (ii) adopting, amending or repealing any bylaw of the corporation. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required.
Section 11. Compensation of Directors. Unless otherwise
restricted by the certificate of incorporation or these bylaws, the Board of
Directors shall have the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Notice of Meetings of Stockholders and Directors.
Except as provided in Article III, Section 5 of these bylaws, whenever notice is
required by law, the certificate of incorporation or these bylaws to be given to
any Director or stockholder, such notice shall be in writing and delivered
personally, by mail or by telegram or other electronic means, postage and
charges prepaid, addressed to such Director or stockholder, at his or her
address as it appears on the records of the corporation, and such notice shall
be deemed given when the same shall be delivered personally, delivered to the
agent for transmission or deposited in the United States mail.
Section 2. Waiver of Notice. Whenever any notice is required by
law, the certificate of incorporation or these bylaws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
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ARTICLE V
OFFICERS
Section 1. Officers. The officers of the corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors may also appoint a Chairman of the Board and
one or more vice chairmen, vice presidents, assistant secretaries or assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate or incorporation or these bylaws otherwise provide.
Section 2. Appointment of Officers. The Board of Directors at its
first meeting after each annual meeting of stockholders shall choose a
President, a Secretary and a Treasurer.
Section 3. Assistant Officers. The Board of Directors may appoint
such other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. Officers' Salaries. The salaries of all officers and
agents of the corporation shall be fixed by or pursuant to the authority of the
Board of Directors.
Section 5. Terms of Office. The officers of the corporation shall
hold office until their successors are chosen and qualify, or until his
resignation or removal. The Board of Directors may remove any officer with or
without cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation. Any officer
elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the corporation shall be filled by the Board of Directors.
Section 6. Powers and Duties of Officers. The President shall be
the Chief Executive Officer of the Corporation shall have such powers in the
management of the Corporation as may be prescribed in a resolution by the Board
of Directors and, to the extent not so provided, as generally pertain to such
office. The President and Chief Executive Officer shall see that all orders and
resolutions of the Board of Directors are carried into effect.
The other officers of the Corporation shall have such powers and
duties in the management of the Corporation as may be prescribed in a resolution
by the Board of Directors or delegated to them by the President and Chief
Executive Officer and, to the extent not so provided or delegated, as generally
pertain to their respective offices, subject to the control of the Board of
Directors and the President and Chief Executive Officer. Without limiting the
foregoing, the Secretary shall have the duty to record the proceedings of the
meetings of the stockholders and Directors in a book to be kept for that
purpose.
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ARTICLE VI
STOCK CERTIFICATES
Section 1. Form of Certificate. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the chairman or vice chairman of the Board of Directors
or the president or a vice president and by the treasurer, an assistant
treasurer, the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by such holder in the corporation.
Section 2. Consideration. Certificates may be issued for partly
paid shares and, in such case, the total amount of the consideration to be paid
therefor and the amount paid thereon shall be specified on the face or back of
the certificates issued to represent any such partly paid shares.
Section 3. Classes or Series of Stock. If the corporation shall
be authorized to issue more than one class of stock or more than one series of
any class, the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualification, limitations or restrictions of such preferences or rights
shall be set forth in full or summarized on the face or back of any certificate
that the corporation shall issue to represent shares of such class or series of
stock; provided that, except as otherwise provided in section 202 of the General
Corporation Law of Delaware, in lieu thereof, a statement that the corporation
will furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences or rights may be set forth on
the face or back of each certificate that the corporation shall issue to
represent shares of such class or series of stock.
Section 4. Facsimile Signatures. Any or all of the signatures on
any such certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed on a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he, she or it were such officer, transfer agent or registrar
at the date of issue.
Section 5. Lost Certificates. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, on the taking of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his, her or its legal representative, to advertise the same in
such manner as it shall require or to give the corporation a bond in such sum as
it
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may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 6. Transfer of Stock. Subject to applicable law, on
surrender to the corporation or the transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, the corporation shall issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction on its books.
Section 7. Stockholders of Record. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Subject to applicable law and the
certificate of incorporation, dividends on the capital stock of the corporation
may be declared by the Board of Directors at any regular or special meeting and
may be paid in cash, shares of the capital stock or other property.
Section 2. Payment of Dividends. Before payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, for
equalizing dividends, for repairing or maintaining any property of the
corporation or for such other purpose as the Directors shall think conducive to
the interest of the corporation, and the Directors may modify or abolish any
such reserve in the manner in which it is created.
Section 3. Annual Statement. The Board of Directors shall present
at each annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
Section 4. Checks. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the corporation shall
be fixed by the Board of Directors.
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Section 6. Seal. The corporation shall have a corporate seal,
which may be altered at pleasure, and which may have inscribed thereon the name
of the corporation, the year of its organization and the words "Incorporated,
Delaware", or which may have inscribed thereon, any other words, including but
not limited to the words "Corporate Seal" as the officers may designate. The
seal may be used by causing it or a facsimile thereof to be impressed, affixed
or reproduced, or otherwise.
Section 7. Entire Board. As used in these bylaws, "entire Board
of Directors" means the total number of Directors which the Corporation would
have if there were no vacancies in the Board of Directors.
Section 8. Severability. Any determination that any provision of
these bylaws is for any reason inapplicable, illegal or ineffective shall not
affect or invalidate any other provision of these bylaws.
Section 9. Pronouns. All pronouns used in these bylaws shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
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CERTIFICATE OF SECRETARY
The undersigned, Secretary of Waste Connections, Inc., a Delaware
corporation, hereby certifies that the foregoing is a full, true and correct
copy of the Amended and Restated Bylaws of said corporation, as amended and in
full force and effect at the date of this Certificate.
WITNESS the signature of the undersigned and the seal of the
corporation this March __, 1998.
[SEAL] _________________________________
Darrell Chambliss, Secretary of
Waste Connections, Inc.
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EXHIIBIT 10.1
================================================================================
REVOLVING CREDIT AGREEMENT
Dated as of January 30, 1998
by and among
WASTE CONNECTIONS, INC.
AND ITS SUBSIDIARIES
(the "Borrowers")
THE LENDING INSTITUTIONS PARTY HERETO
(the "Banks")
and
BANKBOSTON, N.A., AS AGENT
With
BANCBOSTON SECURITIES INC., as Arranger
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. DEFINITIONS AND RULES OF INTERPRETATION......................................................1
Section 1.1. Definitions. .................................................................1
Section 1.2. Rules of Interpretation........................................................17
Section 2. THE REVOLVING CREDIT FACILITY................................................................18
Section 2.1. Commitment to Lend. ..........................................................18
Section 2.2. Reduction of Total Commitment. ...............................................18
Section 2.3. The Revolving Credit Notes. ..................................................19
Section 2.4. Interest on Revolving Credit Loans. ..........................................19
Section 2.5. Election of Eurodollar Rate; Notice of Election; Interest Periods;
Minimum Amounts................................................................20
Section 2.6. Requests for Revolving Credit Loans. .........................................21
Section 2.7. Funds for Revolving Credit Loans. ............................................21
Section 2.8. Maturity of the Loans. .......................................................22
Section 2.9. Mandatory Repayments of the Revolving Credit Loans. ..........................22
Section 2.10. Optional Prepayments or Repayments of Revolving Credit Loans. .................23
Section 3. LETTERS OF CREDIT............................................................................23
Section 3.1. Letter of Credit Commitments...................................................23
Section 3.2. Reimbursement Obligation of the Borrowers. ...................................24
Section 3.3. Letter of Credit Payments. ...................................................25
Section 3.4. Obligations Absolute. ........................................................25
Section 3.5. Reliance by Agent. ...........................................................26
Section 4. FEES, PAYMENTS, AND COMPUTATIONS; JOINT AND SEVERAL LIABILITY................................26
Section 4.1. Fees...........................................................................26
Section 4.2. Payments.......................................................................27
Section 4.3. Computations. ................................................................28
Section 4.4. Capital Adequacy. ............................................................28
Section 4.5. Certificate. .................................................................29
Section 4.6. Interest on Overdue Amounts. .................................................29
Section 4.7. Interest Limitation. .........................................................29
Section 4.8. Eurodollar Indemnity. ........................................................29
Section 4.9. Illegality; Inability to Determine Eurodollar Rate. ..........................30
Section 4.10. Additional Costs, Etc. ........................................................30
Section 4.11. Replacement of Banks. ........................................................31
Section 4.12. Concerning Joint and Several Liability of the Borrowers. ......................32
Section 5. REPRESENTATIONS AND WARRANTIES. ............................................................34
Section 5.1. Corporate Authority............................................................34
Section 5.2. Governmental Approvals. ......................................................35
Section 5.3. Title to Properties; Leases. .................................................35
Section 5.4. Financial Statements; Solvency.................................................36
Section 5.5. No Material Changes, Etc. ....................................................36
Section 5.6. Permits, Franchises, Patents, Copyrights, Etc. ...............................36
Section 5.7. Litigation. ..................................................................36
</TABLE>
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Section 5.8. No Materially Adverse Contracts, Etc. ........................................37
Section 5.9. Compliance With Other Instruments, Laws, Etc. ................................37
Section 5.10. Tax Status. ..................................................................37
Section 5.11. No Event of Default. .........................................................38
Section 5.12. Holding Company and Investment Company Acts. .................................38
Section 5.13. Absence of Financing Statements, Etc. ........................................38
Section 5.14. Employee Benefit Plans.........................................................38
Section 5.15. Use of Proceeds. .............................................................39
Section 5.15.1. General. ....................................................39
Section 5.15.2. Regulations U and X. ........................................39
Section 5.15.3. Ineligible Securities. ......................................40
Section 5.16. Environmental Compliance. ....................................................40
Section 5.17. Perfection of Security Interests. ............................................41
Section 5.18. Transactions with Affiliates. ................................................42
Section 5.19. Subsidiaries. ................................................................42
Section 5.20. True Copies of Charter and Other Documents. ..................................42
Section 5.21. Disclosure. ..................................................................42
Section 5.22. Capitalization. ..............................................................43
Section 5.23. Year 2000 Problem. ...........................................................43
Section 6. AFFIRMATIVE COVENANTS OF THE BORROWERS. ....................................................43
Section 6.1. Punctual Payment. ............................................................43
Section 6.2. Maintenance of Offices. ......................................................44
Section 6.3. Records and Accounts. ........................................................44
Section 6.4. Financial Statements, Certificates and Information. ..........................44
Section 6.5. Corporate Existence and Conduct of Business. .................................46
Section 6.6. Maintenance of Properties. ...................................................46
Section 6.7. Insurance. ...................................................................46
Section 6.8. Taxes. .......................................................................47
Section 6.9. Inspection of Properties, Books, and Contracts. ..............................47
Section 6.10. Compliance with Laws, Contracts, Licenses and Permits;
Maintenance of Material Licenses and Permits. .................................47
Section 6.11. Environmental Indemnification. ...............................................48
Section 6.12. Further Assurances. ..........................................................48
Section 6.13. Notice of Potential Claims or Litigation. ....................................48
Section 6.14. Notice of Certain Events Concerning Insurance and
Environmental Claims...........................................................49
Section 6.15. Response Actions. ............................................................50
Section 6.16. Environmental Assessments. ...................................................50
Section 6.17. Notice of Default. ...........................................................50
Section 6.18. New Subsidiaries. ............................................................50
Section 6.19. Employee Benefit Plans. ......................................................51
Section 6.20. Notice of Loss of Material Contracts. ........................................51
Section 7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. ...............................................51
Section 7.1. Restrictions on Indebtedness. ................................................51
Section 7.2. Restrictions on Liens. .......................................................52
</TABLE>
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Section 7.3. Restrictions on Investments. .................................................54
Section 7.4. Merger, Consolidation and Disposition of Assets. .............................55
Section 7.4.1. Mergers and Acquisitions. ....................................55
Section 7.4.2. Disposition of Assets. .......................................56
Section 7.5. Sale and Leaseback. ..........................................................57
Section 7.6. Restricted Distributions and Redemptions. ....................................57
Section 7.7. Employee Benefit Plans. ......................................................57
Section 7.8. Negative Pledges. ............................................................58
Section 7.9. Business Activities. .........................................................58
Section 7.10. Transactions with Affiliates. ................................................58
Section 8. FINANCIAL COVENANTS. .......................................................................58
Section 8.1. Leverage Ratio. ..............................................................58
Section 8.2. Funded Debt to Capitalization Ratio. .........................................59
Section 8.3. Interest Coverage Ratio. .....................................................59
Section 8.4. Profitable Operations. .......................................................59
Section 8.5. Consolidated Net Worth. ......................................................59
Section 8.6. Capital Expenditures. ........................................................59
Section 9. CLOSING CONDITIONS. ........................................................................59
Section 9.1. Corporate Action. ............................................................60
Section 9.2. Loan Documents, Etc. .........................................................60
Section 9.3. Certificate of Secretary; Good Standing Certificates. ........................60
Section 9.4. Validity of Liens. ...........................................................60
Section 9.5. Perfection Certificates and UCC Search Results. ..............................60
Section 9.6. Certificates of Insurance. ...................................................61
Section 9.7. Legal Opinions. ..............................................................61
Section 9.8. Environmental Permit Certificate. ............................................61
Section 9.9. Payment of Fees. .............................................................61
Section 9.10. Payoff Letters. ..............................................................61
Section 9.11. Closing Certificate. .........................................................61
Section 9.12. Audit. .......................................................................61
Section 9.13. Contracts. ...................................................................62
Section 9.14. Consents. ....................................................................62
Section 10. CONDITIONS OF ALL LOANS. ...................................................................62
Section 10.1. Representations True; No Event of Default. ...................................62
Section 10.2. Performance; No Event of Default. ............................................62
Section 10.3. No Legal Impediment. .........................................................62
Section 10.4. Governmental Regulation. .....................................................63
Section 10.5. Proceedings and Documents. ...................................................63
Section 11. COLLATERAL SECURITY. .......................................................................63
Section 11.1. Security of Borrowers. .......................................................63
Section 12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT. ................................63
Section 12.1. Events of Default and Acceleration. ..........................................63
Section 12.2. Termination of Commitments. ..................................................67
Section 12.3. Remedies. ....................................................................67
</TABLE>
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Section 13. SETOFF. ....................................................................................68
Section 14. THE AGENT. .................................................................................68
Section 14.1. Appointment of Agent, Powers and Immunities. .................................68
Section 14.2. Actions By Agent. ............................................................69
Section 14.3. INDEMNIFICATION. .............................................................70
Section 14.4. Reimbursement. ...............................................................70
Section 14.5. Documents. ...................................................................71
Section 14.5.1. Closing Documentation. ......................................71
Section 14.5.2. Other Documents. ............................................71
Section 14.6. Non-Reliance on Agent and Other Banks. .......................................71
Section 14.7. Resignation or Removal of Agent. .............................................72
Section 14.8. Consents, Amendments, Waivers, Etc. ..........................................72
Section 14.9. Delinquent Banks. ............................................................73
Section 15. EXPENSES AND INDEMNIFICATION. ..............................................................74
Section 15.1. Expenses. ....................................................................74
Section 15.2. Indemnification. .............................................................74
Section 15.3. Survival. ....................................................................75
Section 16. SURVIVAL OF COVENANTS, ETC. ................................................................75
Section 17. ASSIGNMENT AND PARTICIPATION. ..............................................................76
Section 18. PARTIES IN INTEREST. .......................................................................77
Section 19. NOTICES, ETC. ..............................................................................77
Section 20. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. .............................................78
Section 20.1. Sharing of Information with Section 20 Subsidiary. ...........................78
Section 20.2. Confidentiality. .............................................................78
Section 20.3. Prior Notification. ..........................................................79
Section 20.4. Other. .......................................................................79
Section 21. MISCELLANEOUS. .............................................................................79
Section 22. ENTIRE AGREEMENT, ETC. .....................................................................79
Section 23. WAIVER OF JURY TRIAL. ......................................................................80
Section 24. GOVERNING LAW. .............................................................................80
Section 25. SEVERABILITY. ..............................................................................80
</TABLE>
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SCHEDULES & EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Loan and Letter of Credit Request
Exhibit C Form of Compliance Certificate
Exhibit D Form of Environmental Compliance Certificate
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Reliance Letter
Schedule 1 Banks; Addresses; Commitment Percentages
Schedule 2 Subsidiaries
Schedule 5.7 Litigation
Schedule 5.9 Material Contracts
Schedule 5.16 Environmental Matters
Schedule 5.18 Transactions with Affiliates
Schedule 7.2 Existing Liens
Schedule 7.3 Existing Investments
<PAGE> 7
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT is made as of January 30, 1998 (the
"Credit Agreement"), by and among (a) WASTE CONNECTIONS, INC., a Delaware
corporation (the "Parent"), the subsidiaries of the Parent identified on
Schedule 2 hereto (the "Subsidiaries," and collectively with the Parent, the
"Borrowers"), (b) BankBoston, N.A., a national banking association having its
principal place of business at 100 Federal Street, Boston, Massachusetts 02110
(acting in its individual capacity, "BKB") and the other BANKS and lending
institutions which become parties hereto (collectively, the "Banks"), and (c)
BANKBOSTON, N.A., as agent for the Banks (the "Agent").
Section 1. DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1. DEFINITIONS. The following terms shall have the meanings
set forth in this Section 1 or elsewhere in the provisions of this Credit
Agreement referred to below:
Accountants. An independent accounting firm of national standing
reasonably acceptable to the Banks and the Agent.
Affected Bank. See Section 4.11.
Agent. See Preamble.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or such other location as the Agent may
designate from time to time.
Applicable Base Rate Margin. The applicable margin with respect to Base
Rate Loans as set forth in the Pricing Table.
Applicable Commitment Rate. The applicable rate with respect to the
Commitment Fee as set forth in the Pricing Table.
Applicable Eurodollar Margin. The applicable margin with respect to
Eurodollar Loans as set forth in the Pricing Table.
Applicable Laws. See Section 6.10.
Applicable L/C Margin. The applicable margin with respect to the Letter
of Credit Fee as set forth in the Pricing Table.
Arranger. BancBoston Securities Inc.
Assignment and Acceptance. See Section 17.
Balance Sheet Date. December 31, 1997.
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Banks. See Preamble.
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by the Agent at the Agent's Head Office as its "base rate" (it
being understood that such rate is a reference rate and not necessarily the
lowest rate of interest charged by the Agent) or (b) one percent (1%) above the
overnight federal funds effective rate, as published by the Board of Governors
of the Federal Reserve System, as in effect from time to time.
Base Rate Loans. Loans bearing interest calculated by reference to the
Base Rate.
BFI. Browning-Ferris Industries, Inc., a Delaware corporation.
BFI Notes. Collectively, the (a) Waste Bridge Note made by the Parent
payable to BFI in the principal amount of $500,000 and (b) Promissory Note made
by W.C. of Idaho payable to BFI in the principal amount of $1,450,000, each
dated as of September 30, 1997, as amended and in effect from time to time.
BKB. See Preamble.
Borrowers. See Preamble.
Business Day. Any day on which banking institutions in Boston,
Massachusetts, New York, New York, and Los Angeles, California are open for the
transaction of banking business.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and goodwill); provided that Capital Assets shall not
include (a) any item customarily charged directly to expense or depreciated over
a useful life of twelve (12) months or less in accordance with generally
accepted accounting principles, or (b) any item obtained through an acquisition
permitted by Section 7.4 hereof.
Capital Expenditures. Amounts paid or indebtedness incurred by the
Borrowers and their Subsidiaries in connection with (i) the purchase or lease of
Capital Assets that would be required to be capitalized and shown on the balance
sheet of such Person in accordance with GAAP or (ii) the lease of any assets by
the Borrowers or any Subsidiary as lessee under any Synthetic Lease to the
extent that such assets would have been Capital Assets had the Synthetic Lease
been treated for accounting purposes as a Capitalized Lease.
Capitalized Leases. Leases under which any Borrower is the lessee or
obligor, the discounted future rental payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with GAAP.
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CERCLA. See definition of Release.
Certified. With respect to the financial statements of any Person, such
statements as audited by a firm of independent auditors, whose report expresses
the opinion, without qualification, that such financial statements present
fairly the financial position of such Person.
CFO. See Section 6.4(b).
Closing Date. The date on which the conditions precedent set forth in
Section 9 are satisfied.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time.
Collateral. All of the property, rights and interests of the Borrowers
(other than with respect to moneys due under the Excluded Contracts) that are or
are intended to be subject to the security interests created by the Security
Documents.
Commitment. With respect to each Bank, the amount determined by
multiplying such Bank's Commitment Percentage by the Total Commitment specified
inSection 2.1 hereof, as the same may be reduced from time to time.
Commitment Fee. See Section 4.1.
Commitment Percentage. With respect to each Bank, the percentage
initially set forth beside its name on Schedule 1 (subject to adjustment in
accordance withSection 17).
Compliance Certificate. See Section 6.4(c).
Consolidated or consolidated. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Borrowers and their
Subsidiaries consolidated in accordance with GAAP.
Consolidated Earnings Before Interest and Taxes or EBIT. For any period,
the Consolidated Net Income (or Deficit) of the Borrowers, plus (a) interest
expense for such period (including, for the fiscal quarters ending December 31,
1997 and March 31, 1998, non-cash charges for interest expense attributable to
loan fees paid, and warrants issued to, Imperial Bank in connection with the
Imperial Credit Agreement of up to $650,000 in the aggregate), (b) income taxes
for such period, and (c) for the fiscal quarters ending December 31, 1997 and
March 31, 1998, start-up or organizational expenses taken as a special charge in
such quarters of up to $400,000 (pre-tax) in the aggregate and non-cash stock
compensation charges of up to $3,500,000 in the aggregate, to the extent that
each was deducted in determining Consolidated Net Income (or Deficit), provided
that, for purposes of calculating the
<PAGE> 10
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financial covenants under Section 8 (but not the Pricing Ratio) for a Compliance
Certificate delivered pursuant to Section 7.4(a), EBIT (excluding any projected
cost savings or adjustments other than nonrecurring private company expenses
that are discontinued upon acquisition by the Parent or its Subsidiaries, such
as owner compensation and insurance and benefit cost reductions, and that are
approved by the Agent and the Majority Banks) of Subsidiaries acquired since the
date of the most recent financial statements delivered to the Banks pursuant to
Section 6.4 shall be included in the calculation of EBIT if (i) the financial
statements of such acquired Subsidiaries have been audited for the period sought
to be included by the Accountants or (ii) the Agent and the Majority Banks
consent to such inclusion after being furnished with unaudited financial
statements, together with a Compliance Certificate and other appropriate
documentation certifying the historical operating results and balance sheet of
the acquired companies.
Consolidated Earnings Before Interest, Taxes, Depreciation and
Amortization or EBITDA. For any period, EBIT plus (a) depreciation expense for
such period and (b) amortization expense relating to intangible assets for such
period, to the extent that each was deducted in determining Consolidated Net
Income (or Deficit), provided that, for purposes of calculating the financial
covenants under Section 8 (but not the Pricing Ratio), EBITDA (excluding any
projected cost savings or adjustments other than nonrecurring private company
expenses that are discontinued upon acquisition by the Parent or its
Subsidiaries, such as owner compensation and insurance and benefit cost
reductions, and that are approved by the Agent and the Majority Banks) of
Subsidiaries acquired since the date of the most recent financial statements
delivered to the Banks pursuant to Section 6.4 shall be included in the
calculation of EBITDA if (i) the financial statements of such acquired
Subsidiaries have been audited for the period sought to be included by the
Accountants or (ii) the Agent and the Majority Banks consent to such inclusion
after being furnished with unaudited financial statements, together with a
Compliance Certificate and other appropriate documentation certifying the
historical operating results and balance sheet of the acquired companies.
Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of the Borrowers after deduction of all expenses, taxes, and other
proper charges, determined in accordance with GAAP.
Consolidated Net Worth. The excess of Consolidated Total Assets over
Consolidated Total Liabilities, less, to the extent otherwise includable in the
computation of Consolidated Net Worth, any subscriptions receivable, plus the
value of the Preferred Stock to the extent otherwise excluded in the computation
of Consolidated Net Worth.
Consolidated Total Assets. All assets of the Borrowers and their
Subsidiaries determined on a consolidated basis in accordance with GAAP, plus
(i) without duplication, all assets leased by the Borrowers or any Subsidiary as
lessee under any
<PAGE> 11
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Synthetic Lease to the extent that such assets would have been consolidated
balance sheet assets had the Synthetic Lease been treated for accounting
purposes as a Capitalized Lease, plus (ii) without duplication, all sold
receivables referred to in clause (vii) of the definition of the term
"Indebtedness" to the extent that such receivables would have been consolidated
balance sheet assets had they not been sold.
Consolidated Total Interest Expense. For any period, the aggregate
amount of interest required to be paid or accrued by the Borrowers and their
Subsidiaries during such period on all Indebtedness of the Borrowers and their
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of any
Capitalized Lease or any Synthetic Lease and including commitment fees, agency
fees, facility fees, balance deficiency fees and similar fees or expenses in
connection with the borrowing of money (but excluding, for the fiscal quarters
ending December 31, 1997 and March 31, 1998, non-cash charges for interest
expense attributable to loan fees paid, and warrants issued to, Imperial Bank in
connection with the Imperial Credit Agreement of up to $650,000 in the
aggregate).
Consolidated Total Liabilities. All liabilities of the Borrowers
determined on a consolidated basis in accordance with GAAP and classified as
such on the consolidated balance sheet of the Borrowers, but excluding the
Preferred Stock to the extent that it is treated as a liability under GAAP.
Credit Agreement. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto, as amended and in effect from time to time.
Default. See Section 12.
Delinquent Bank. See Section 14.9.
Disposal (or Disposed). See definition of Release.
Distribution. The declaration or payment of any dividend or distribution
on or in respect of any shares of any class of capital stock, any partnership
interests or any membership interests of any Person (other than dividends or
other distributions payable solely in shares of common stock, partnership
interests or membership units of such Person, as the case may be); the purchase,
redemption, or other retirement of any shares of any class of capital stock,
partnership interests or membership units of such Person, directly or indirectly
through a Subsidiary or otherwise; the return of equity capital by any Person to
its shareholders, partners or members as such; or any other distribution on or
in respect of any shares of any class of capital stock, partnership interest or
membership unit of such Person.
Dollars or $. Dollars in lawful currency of the United States of
America.
<PAGE> 12
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Drawdown Date. The date on which any Revolving Credit Loan is made or is
to be made, and the date on which any Revolving Credit Loan is converted or
continued in accordance with Section 2.5.
EBIT. See definition of Consolidated Earnings Before Interest and Taxes.
EBITDA. See definition of Consolidated Earnings Before Interest, Taxes,
Depreciation and Amortization.
Eligible Assignee. Any of (i) a commercial bank organized under the laws
of the United States, or any State thereof or the District of Columbia, and
having total assets in excess of $1,000,000,000; (ii) a savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof or the District of Columbia, and having a net worth of at
least $100,000,000, calculated in accordance with generally accepted accounting
principles; (iii) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such country, and
having total assets in excess of $1,000,000,000, provided that such bank is
acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; and (v) if, but only
if, any Event of Default has occurred and is continuing, any other bank,
insurance company, commercial finance company or other financial institution
approved by the Agent, such approval not to be unreasonably withheld.
Eligible Foreign Bank. (a) Any commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, provided that such bank is acting through a branch or agency located in
the country in which it is organized or another country which is also a member
of the OECD; or (b) the central bank of any country which is a member of the
OECD.
Employee Benefit Plan. Any employee benefit plan within the meaning
of Section 3(3) of ERISA maintained or contributed to by the Borrowers or any
ERISA Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See Section 5.16(a).
EPA. See Section 5.16(b).
ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrowers under Section 414 of the Code.
<PAGE> 13
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ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder.
Eurodollar Business Day. Any Business Day on which dealings in foreign
currency and exchange are carried on among banks in London, England.
Eurodollar Interest Determination Date. For any Interest Period, the
date two Eurodollar Business Days prior to the first day of such Interest
Period.
Eurodollar Loans. Revolving Credit Loans bearing interest calculated by
reference to the Eurodollar Rate.
Eurodollar Offered Rate. The rate per annum at which deposits of dollars
are offered to the Agent by prime banks in whatever Eurodollar interbank market
may be selected by the Agent, in its sole discretion, acting in good faith, at
or about 11:00 a.m. local time in such interbank market, on the Eurodollar
Interest Determination Date, for a period equal to the requested Interest Period
in an amount substantially equal to the principal amount requested to be loaned
at or converted to a rate based on the Eurodollar Rate.
Eurodollar Rate. The rate per annum, rounded upwards to the nearest 1/16
of 1%, determined by the Agent with respect to an Interest Period in accordance
with the following formula:
Eurodollar Rate = Eurodollar Offered Rate
-----------------------
1-Reserve Rate
Event of Default. See Section 12.
Excluded Contracts. The (a) Contract for Curbside and Drop Box Recycling
Services among (i) the Six East Snohomish County Cities of Snohomish, Monroe,
Lake Stevens, Sultan, Granite Falls and Gold Bar (Operating as ESCARC) and (ii)
Fibres International, Incorporated d.b.a. Pacific Resource Management/Bill's
Disposal, dated as of September 1, 1995 and (b) Single Family Recyclables
Collection Contract between City of Vancouver and Browning Ferris Industries of
Washington, Inc., dated as of December 2, 1996, each as amended and in effect
from time to time.
Funded Debt. Consolidated Indebtedness of the Borrowers for borrowed
money, the net present value (using the Base Rate as the discount rate) of every
obligation of such Person issued or assumed as the deferred purchase price of
property or services (including securities repurchase agreements but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business which are not overdue or which are being contested in good faith), and
guarantees of such Indebtedness, recorded on the Consolidated balance sheet of
the Borrowers, including reimbursement obligations
<PAGE> 14
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of the Borrowers with respect to letters of credit and the amount of any
Indebtedness of such Persons for Capitalized Leases which corresponds to
principal.
generally accepted accounting principles or GAAP. When used in general,
generally accepted accounting principles means (1) principles that are
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect for the fiscal year
ended on the Balance Sheet Date, as shall be concurred in by independent
certified public accountants of recognized standing whose report expresses an
unqualified opinion (other than a qualification regarding changes in generally
accepted accounting principles) as to financial statements in which such
principles have been applied; and (2) when used with reference to the Borrowers,
such principles shall include (to the extent consistent with such principles)
the accounting practices reflected in the consolidated financial statements for
the year ended on the Balance Sheet Date.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrowers
or any ERISA Affiliate, the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
Hazardous Substances. See Section 5.16(b).
Imperial Credit Agreement. The Loan and Security Agreement, dated as of
September 30, 1997, among Imperial Bank and the Parent, Browning-Ferris
Industries of Washington, Inc., and Fibres International, Inc., as amended and
in effect from time to time.
Indebtedness. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses,
(iii) every reimbursement obligation of such Person with respect
to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person,
(iv) the net present value (using the Base Rate as the discount
rate) of every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities
repurchase agreements but excluding (A) trade accounts payable or
accrued liabilities arising in the ordinary course of business which are
not overdue or which are being
<PAGE> 15
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contested in good faith and (B) contingent purchase price obligations
solely to the extent that the contingency upon which such obligation is
conditioned has not yet occurred),
(v) every obligation of such Person under any Capitalized Lease,
(vi) every obligation of such Person under any Synthetic Lease,
(vii) all sales by such Person of (A) accounts or general
intangibles for money due or to become due, (B) chattel paper,
instruments or documents creating or evidencing a right to payment of
money or (C) other receivables (collectively, "receivables"), whether
pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Person relating
thereto or a disposition of defaulted receivables for collection and not
as a financing arrangement, and together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties,
recourse, expenses or other amounts in connection therewith, provided,
however, that sales referred to in clauses (B) and (C) shall not
constitute Indebtedness to the extent that such sales are non-recourse
to such Person;
(viii) every obligation of such Person (an "equity related
purchase obligation") to purchase, redeem, retire or otherwise acquire
for value any shares of capital stock of any class issued by such
Person, any warrants, options or other rights to acquire any such
shares, or any rights measured by the value of such shares, warrants,
options or other rights, excluding the Preferred Stock to the extent
that it is treated as a liability under GAAP,
(ix) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or
arrangement (including, without limitation, caps, floors, collars and
similar agreements), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices,
(x) every obligation in respect of Indebtedness of any other
entity (including any partnership in which such Person is a general
partner) to the extent that such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such
entity, except to the extent that the terms of such Indebtedness provide
that such Person is not liable therefor and such terms are enforceable
under applicable law,
(xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of
clauses (i) through (x) (the "primary obligation") of another Person
(the "primary obligor"), in any manner, whether directly or indirectly,
and including, without limitation, any
<PAGE> 16
-10-
obligation of such Person (A) to purchase or pay (or advance or supply
funds for the purchase of) any security for the payment of such primary
obligation, (B) to purchase property, securities or services for the
purpose of assuring the payment of such primary obligation, or (C) to
maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any
time of determination represented by (v) any Indebtedness, issued at a
price that is less than the principal amount at maturity thereof, shall
be the amount of the liability in respect thereof determined in
accordance with generally accepted accounting principles, (w) any
Capitalized Lease shall be the principal component of the aggregate of
the rentals obligation under such Capitalized Lease payable over the
term thereof that is not subject to termination by the lessee, (x) any
sale of receivables shall be the amount of unrecovered capital or
principal investment of the purchaser (other than the Borrowers)
thereof, excluding amounts representative of yield or interest earned on
such investment, (y) any Synthetic Lease shall be the stipulated loss
value, termination value or other equivalent amount and (z) any equity
related purchase obligation shall be the maximum fixed redemption or
purchase price thereof inclusive of any accrued and unpaid dividends to
be comprised in such redemption or purchase price.
Ineligible Securities. Securities which may not be underwritten or dealt
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.
Interest Period. With respect to each Eurodollar Loan:
(a) initially, the period commencing on the date of the making
of a Eurodollar Loan or the conversion from a Base Rate Loan into a Eurodollar
Loan and ending one (1), two (2), three (3), or six (6) months thereafter, as
selected by the Borrowers in a Loan and Letter of Credit Request; and
(b) thereafter, each subsequent Interest Period shall begin on
the last day of the preceding Interest Period and shall end one (1), two (2),
three (3), or six (6) months thereafter, as selected by the Borrowers in a Loan
and Letter of Credit Request;
provided, however, that whenever the first day of any Interest
Period occurs on a day of an initial calendar month for which there is no
numerically corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months in such
Interest Period, such Interest Period shall end on the last Business Day of such
succeeding calendar month.
Interim Balance Sheet Date. November 30, 1997.
<PAGE> 17
-11-
Letter of Credit Applications. Letter of Credit Applications in such
form as may be agreed upon by the Borrowers and the Agent from time to time
which are entered into pursuant to Section 3 hereof, as such Letter of Credit
Applications are amended, varied or supplemented from time to time.
Letter of Credit Fee. See Section 4.1(b).
Letter of Credit Participation. See Section 3.1(b).
Letters of Credit. Standby Letters of Credit issued or to be issued by
the Agent under Section 3 hereof for the account of the Borrowers.
Leverage Ratio. See Section 8.1.
Loan and Letter of Credit Request. See Section 2.6.
Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, and the Security Documents, each as amended
and in effect from time to time.
Loans. The Revolving Credit Loans.
Majority Banks. As of any date, the Banks holding sixty-six and
two-thirds percent (66-2/3%) of the outstanding principal amount of the Loans on
such date; and if no such principal is outstanding, the Banks whose aggregate
Commitments constitute sixty-six and two-thirds percent (66-2/3%) of the Total
Commitment.
Material Contract. Any contract, franchise agreement or G Permit from
which the Borrowers derived more than five percent (5%) of their consolidated
revenues for the fiscal year most recently ending.
Maturity Date. January 30, 2001.
Maximum Drawing Amount. The maximum aggregate amount from time to time
that the beneficiaries may draw under outstanding Letters of Credit.
Maximum Rate. With respect to each Bank, the maximum lawful nonusurious
rate of interest (if any) which under Applicable Law such Bank may charge the
Borrowers on the Loans and other Obligations from time to time.
Mittelstaedt Pledge Agreement. The Stock Pledge Agreement, dated as of
the date hereof, between the Trustee and the Agent in form and substance
satisfactory to the Agent, as amended and in effect from time to time, pursuant
to which all of the capital stock of the Parent issued to the Trustee is pledged
to the Agent for the benefit of the Banks.
<PAGE> 18
-12-
Multiemployer Plan. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by the Borrowers or any ERISA
Affiliate.
Notes. The Revolving Credit Notes.
Obligations. All indebtedness, obligations and liabilities of the
Borrowers to any of the Banks or the Agent, individually or collectively,
existing on the date of this Credit Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising or incurred under this Credit Agreement or any of
the other Loan Documents, or under any Swap Contract between the Borrowers and
any Bank, or in respect of any of the Loans made or Reimbursement Obligations
incurred or the Letters of Credit, the Notes or any other instrument at any time
evidencing any thereof.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Permitted Liens. See Section 7.2.
Person. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Preferred Stock. The Series A Preferred Stock issued by the Parent
pursuant to the Certificate of Designations, Preferences and Rights of Preferred
Stock, Series A, dated as of September 29, 1997, consisting of not more than
2,500,000 shares.
Pricing Ratio. As of the end of any fiscal quarter of the Borrowers
commencing with the fiscal quarter ending September 30, 1998, the ratio of (a)
Funded Debt as at the end of such quarter to (b) EBITDA for the period of four
(4) consecutive fiscal quarters ending on such date. For the fiscal quarter
ending (i) December 31, 1997, the denominator of such ratio shall be EBITDA for
such quarter multiplied by four (4), (ii) March 31, 1998, the denominator of
such ratio shall be EBITDA for the period of two consecutive fiscal quarters
ending on such date multiplied by two (2), and (iii) June 30, 1998, the
denominator of such ratio shall be EBITDA for the period of three consecutive
fiscal quarters ending on such date multiplied by 1.33.
Pricing Table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
APPLICABLE APPLICABLE BASE RATE APPLICABLE
PRICING RATIO EURODOLLAR MARGIN APPLICABLE COMMITMENT RATE
MARGIN (PER ANNUM) L/C MARGIN (PER ANNUM)
(PER ANNUM) (PER ANNUM)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than 2.50:1 2.00% 0.00% 2.00% 0.50%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
-13-
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Greater than or equal to 2.50:1 2.25% 0.25% 2.25% 0.50%
but less than 3.00:1
- ---------------------------------------------------------------------------------------------------------------------
Greater than or equal to 3.00:1 2.75% 0.50% 2.75% 0.50%
- ---------------------------------------------------------------------------------------------------------------------
Initial Pricing 2.75% 0.50% 2.75% 0.50%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Any change in the applicable margin shall become effective on the first day
after receipt by the Banks of financial statements delivered pursuant to Section
6.4(a) or (b) which indicate a change in the Pricing Ratio or, with respect to
the Eurodollar Applicable Margin, on the first day of each Interest Period which
begins three (3) or more days after receipt of such financial statements. If at
any time such financial statements are not delivered within the time periods
specified in Section 6.4(a) or (b), the applicable margin shall be the highest
rate set forth in the respective column of the Pricing Table, subject to
adjustment upon actual receipt of such financial statements. The initial pricing
set forth in the table above shall be effective until the Borrowers deliver to
the Agent a calculation of the Pricing Ratio for the fiscal quarter ending
December 31, 1997.
RCRA. See definition of Release.
Real Property. All real property heretofore, now, or hereafter owned or
leased by the Borrowers.
Reimbursement Obligation. The Borrowers' obligation to reimburse the
Agent and the Banks on account of any drawing under any Letter of Credit as
provided in Section 3.2.
Release. Shall have the meaning specified in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Sections 9601 et seq. ("CERCLA") and the term "Disposal" (or "Disposed") shall
have the meaning specified in the Resource Conservation and Recovery Act of
1976, 42 U.S.C. Sections 6901 et seq. ("RCRA") and regulations promulgated
thereunder; provided that in the event either CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply as of the effective date of such amendment and provided further, to the
extent that the laws of a state wherein the property lies establishes a meaning
for "Release" or "Disposal" which is broader than specified in either CERCLA or
RCRA, such broader meaning shall apply.
Replacement Bank. See Section 4.11.
Replacement Notice. See Section 4.11.
Reserve Rate. The rate, expressed as a decimal, at which the Banks
would be required to maintain reserves under Regulation D of the Board of
Governors of the Federal Reserve System (or any subsequent or similar regulation
relating to such reserve requirements) against "Eurocurrency Liabilities" (as
such term is defined in
<PAGE> 20
-14-
Regulation D), or against any other category of liabilities which might be
incurred by the Banks to fund Eurodollar Loans, if such liabilities were
outstanding.
Revolving Credit Loans. Revolving credit loans made or to be made by the
Banks to the Borrowers pursuant to Section 2.
Revolving Credit Notes. The promissory notes of the Borrowers evidencing
the Revolving Credit Loans hereunder, dated as of the date hereof and in
substantially the form of Exhibit A hereto.
Section 20 Subsidiary. A subsidiary of the bank holding company
controlling any Bank, which subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreement. The Security Agreement, dated as of the date hereof,
among the Borrowers and the Agent in form and substance satisfactory to the
Agent, as amended and in effect from time to time.
Security Documents. The Security Agreement, Stock Pledge Agreements and
Mittelstaedt Pledge Agreement, each as amended and in effect from time to time,
and any other instruments or documents evidencing or perfecting the Agent's lien
on the assets of the Borrowers for the benefit of the Banks.
Stock Pledge Agreements. Collectively, the Stock Pledge Agreements,
dated as of the date hereof, (a) between the Parent and the Agent, pursuant to
which 100% of the capital stock of the Subsidiaries (other than W.C.
International) is pledged to the Agent for the benefit of the Banks and (b)
between W.C. of Washington and the Agent, pursuant to which 100% of the stock of
W.C. International is pledged to the Agent for the benefit of the Banks, each in
form and substance satisfactory to the Agent, as amended and in effect from time
to time.
Subsidiary. Any corporation, association, trust, or other business
entity of which any Borrower shall at any time own directly, or indirectly
through a Subsidiary or Subsidiaries, at least a majority of the outstanding
capital stock or other interest entitled to vote generally.
Swap Contracts. Any agreement (including any master agreement and any
agreement, whether or not in writing, relating to any single transaction) that
is an interest rate swap agreement, basis swap, forward rate agreement,
commodity swap, commodity option, equity or equity index swap or option, bond
option, interest rate option, forward foreign exchange agreement, rate cap,
collar or floor agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or other similar agreement (including any
option to enter into any of the foregoing).
<PAGE> 21
-15-
Synthetic Lease. Any lease treated as an operating lease under generally
accepted accounting principles and as a loan or financing for U.S. income tax
purposes.
Total Commitment. See Section 2.1.
Trustee. Ron J. Mittelstaedt, as Trustee for the Mittelstaedt Family
Trust dated 6/18/97.
W.C. of Idaho. Waste Connections of Idaho, Inc., a Delaware corporation
and a wholly-owned Subsidiary of the Parent.
W.C. International. Waste Connections International, Inc., a Washington
corporation and a wholly-owned Subsidiary of W.C. of Washington.
W.C. of Washington. Waste Connections of Washington, Inc., a Washington
corporation and a wholly-owned Subsidiary of the Parent.
Year 2000 Problem. The risk that computer applications used by the
Borrowers may be unable to recognize and properly perform date-sensitive
functions involving certain dates prior to, and any date after, December 31,
1999.
Section 1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural
includes the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms capitalized but not otherwise defined
herein have the meanings assigned to them by generally accepted accounting
principles applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include," "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by
generally accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in
<PAGE> 22
-16-
effect in the Commonwealth of Massachusetts, have the meanings assigned to them
therein.
(h) Reference to a particular "Section" refers to that
section of this Credit Agreement unless otherwise indicated.
(i) The words "herein," "hereof," "hereunder" and words of
like import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, 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."
Section 2. THE REVOLVING CREDIT FACILITY.
Section 2.1. COMMITMENT TO LEND. Subject to the terms and conditions set
forth in this Credit Agreement, each of the Banks severally agrees to lend to
the Borrowers and the Borrowers may borrow, repay, and reborrow from time to
time from the Closing Date to the Maturity Date, upon notice by the Borrowers to
the Agent given in accordance with Section 2.6, its Commitment Percentage of the
Revolving Credit Loans as are requested by the Borrowers, provided that the
outstanding amount of Revolving Credit Loans, unpaid Reimbursement Obligations,
and the Maximum Drawing Amount shall not exceed a maximum aggregate amount
outstanding of $25,000,000 at any time, as such amount may be reduced pursuant
to Section 2.2 hereof (the "Total Commitment"), and provided further that the
maximum amount of Loans and Letters of Credit available hereunder shall be
$17,000,000 until a CFO acceptable to the Banks has commenced employment with
the Borrowers. The Revolving Credit Loans shall be made pro rata in accordance
with each Bank's Commitment Percentage. Each request for a Loan hereunder shall
constitute a representation and warranty by the Borrowers that the conditions
set forth in Section 9 and Section 10, as the case may be, have been satisfied
on the date of such request.
Section 2.2. REDUCTION OF TOTAL COMMITMENT.
(a) The Borrowers shall have the right at any time and from time to time
upon five (5) Business Days' prior written notice to the Agent to reduce by
$1,000,000 or an integral multiple of $500,000 in excess thereof, or terminate
entirely, the Total Commitment, whereupon the Commitments of the Banks shall be
reduced pro rata in accordance with their respective Commitment Percentages of
the amount specified in such notice or, as the case may be, terminated. The
Agent will notify the Banks promptly after receiving any notice of the Borrowers
delivered pursuant to this Section 2.2.
<PAGE> 23
-17-
(b) No reduction or termination of the Commitments once made may be
revoked; the portion of the Commitments reduced or terminated may not be
reinstated; and amounts in respect of such reduced or terminated portion may not
be reborrowed.
Section 2.3. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans
shall be evidenced by separate promissory notes of the Borrowers in
substantially the form of Exhibit A hereto (each a "Revolving Credit Note"),
dated as of the Closing Date and completed with appropriate insertions. One
Revolving Credit Note shall be payable to the order of each Bank in a principal
amount equal to such Bank's Commitment or, if less, the outstanding amount of
all Revolving Credit Loans made by such Bank, plus interest accrued thereon, as
set forth below. The Borrowers irrevocably authorize each Bank to make or cause
to be made, in connection with a Drawdown Date of any Revolving Credit Loan or
at the time of receipt of any payment of principal on such Bank's Revolving
Credit Note, an appropriate notation on such Bank's records reflecting the
making of such Loan or the receipt of such payment (as the case may be). The
outstanding amount of the Loans set forth on such Bank's record shall be prima
facie evidence of the principal amount thereof owing and unpaid to such Bank,
but the failure to record, or any error in so recording, any such amount shall
not limit or otherwise affect the obligation of the Borrowers hereunder or under
any Revolving Credit Note to make payments of principal of or interest on any
Revolving Credit Note when due.
Section 2.4. INTEREST ON REVOLVING CREDIT LOANS. The outstanding
principal amount of the Revolving Credit Loans shall bear interest at the rate
per annum equal to (a) the Base Rate plus the Applicable Base Rate Margin on
Base Rate Loans or (b) the Eurodollar Rate plus the Applicable Eurodollar Margin
on Eurodollar Loans. Interest shall be payable (i) quarterly in arrears on the
first Business Day of each calendar quarter, commencing April 1, 1998, on Base
Rate Loans, (ii) on the last day of the applicable Interest Period, and if such
Interest Period is longer than three (3) months, also on the day which is three
(3) months after the commencement of such Interest Period, on Eurodollar Loans,
and (iii) on the Maturity Date for all Revolving Credit Loans.
Section 2.5. ELECTION OF EURODOLLAR RATE; NOTICE OF ELECTION; INTEREST
PERIODS; MINIMUM AMOUNTS.
(a) At the Borrowers' option, so long as no Default or
Event of Default has occurred and is then continuing, the Borrowers may (i)
elect to convert any Revolving Credit Loan which is a Base Rate Loan or a
portion thereof to a Eurodollar Loan, (ii) at the time of any Loan and Letter of
Credit Request, specify that a requested Revolving Credit Loan shall be a
Eurodollar Loan, or (iii) upon expiration of the applicable Interest Period,
elect to maintain an existing Eurodollar Loan as such, provided that the
Borrowers give notice to the Agent pursuant to Section 2.5(b) hereof. Upon
determining any Eurodollar Rate, the Agent shall forthwith
<PAGE> 24
-18-
provide notice thereof to the Borrowers and the Banks, and each such notice to
the Borrowers and the Banks shall be considered prima facie correct and binding,
absent manifest error.
(b) Three (3) Eurodollar Business Days prior to the making
of any Eurodollar Loan or the conversion of any Base Rate Loan to a Eurodollar
Loan, or, in the case of an outstanding Eurodollar Loan, the expiration date of
the applicable Interest Period, the Borrowers shall give telephonic notice
(confirmed by telecopy on the same Eurodollar Business Day) to the Agent not
later than 11:00 a.m. (Boston time) of their election pursuant to Section
2.5(a). Each such notice delivered to the Agent shall specify the aggregate
principal amount of the Loans to be borrowed or maintained as or converted to
Eurodollar Loans and the requested duration of the Interest Period that will be
applicable to such Eurodollar Loan, and shall be irrevocable and binding upon
the Borrowers. If the Borrowers shall fail to give the Agent notice of their
election hereunder together with all of the other information required by this
Section 2.5(b) with respect to any Revolving Credit Loan, such Loan shall be
deemed a Base Rate Loan. In the event that the Borrowers fail to provide any
such notice with respect to the continuation of any Eurodollar Loan as such,
then such Eurodollar Loan shall be automatically converted to a Base Rate Loan
at the end of the then expiring Interest Period relating thereto.
(c) Notwithstanding anything herein to the contrary, the
Borrowers may not specify an Interest Period that would extend beyond the
Maturity Date.
(d) All Revolving Credit Loans shall be in a minimum amount
of $100,000 or an integral multiple of $100,000 in excess thereof. In no event
shall the Borrowers have more than five (5) different maturities of Eurodollar
Loans outstanding at any time.
Section 2.6. REQUESTS FOR REVOLVING CREDIT LOANS. The Borrowers shall
give to the Agent written notice in the form of Exhibit B hereto (or telephonic
notice confirmed by telecopy on the same Business Day in the form of Exhibit B
hereto) of each Revolving Credit Loan requested hereunder (a "Loan and Letter of
Credit Request") not later than (a) 11:00 a.m. Boston time one (1) Business Day
prior to the proposed Drawdown Date of any Revolving Credit Loan which is a Base
Rate Loan, or (b) 11:00 a.m. Boston time three (3) Eurodollar Business Days
prior to the proposed Drawdown Date of any Eurodollar Loan. Each such notice
shall be given by the Borrowers and shall specify the principal amount of the
Revolving Credit Loan requested and shall include a current Loan and Letter of
Credit Request reflecting the Maximum Drawing Amount. Each Loan and Letter of
Credit Request shall be irrevocable and binding on the Borrowers and shall
obligate the Borrowers to accept the Revolving Credit Loan requested from the
Banks on the proposed Drawdown Date. Each of the representations and warranties
made by or on behalf of the Borrowers to the Banks or the Agent in this Credit
Agreement or any other Loan Document shall be true and correct in all material
respects when made and shall, for
<PAGE> 25
-19-
all purposes of this Credit Agreement, be deemed to be repeated on and as of the
date of the submission of any Loan and Letter of Credit Request and on and as of
the Drawdown Date of such Revolving Credit Loan, or the date of issuance of such
Letter of Credit (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and the other Loan Documents
and changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, or to the extent that such representations
and warranties expressly relate solely to an earlier date). The Agent shall
promptly notify each Bank of each Loan and Letter of Credit Request received by
the Agent.
Section 2.7. FUNDS FOR REVOLVING CREDIT LOANS.
(a) Not later than 1:00 p.m. (Boston time) on the proposed Drawdown Date
of any Revolving Credit Loan, each of the Banks will make available to the
Agent, at the Agent's Head Office, in immediately available funds, the amount of
such Bank's Commitment Percentage of the amount of the requested Revolving
Credit Loans. Upon receipt from each Bank of such amount, and upon receipt of
the documents required by Section ss.9 and 10 and the satisfaction of the other
conditions set forth therein, to the extent applicable, the Agent will make
available to the Borrowers in immediately available funds the aggregate amount
of such Revolving Credit Loans made available to the Agent by the Banks. The
failure or refusal of any Bank to make available to the Agent at the aforesaid
time and place on any Drawdown Date the amount of its Commitment Percentage of
the requested Revolving Credit Loans shall not relieve any other Bank from its
several obligation hereunder to make available to the Agent the amount of such
other Bank's Commitment Percentage of any requested Revolving Credit Loans.
(b) The Agent may, unless notified to the contrary by any Bank prior to
a Drawdown Date, assume that such Bank has made available to the Agent on such
Drawdown Date the amount of such Bank's Commitment Percentage of the Revolving
Credit Loans to be made on such Drawdown Date, and the Agent may (but shall not
be required to), in reliance upon such assumption, make available to the
Borrowers a corresponding amount. If any Bank makes available to the Agent such
amount on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (i) the average computed for the period
referred to in clause (iii) below, of the weighted average interest rate paid by
the Agent for federal funds acquired by the Agent during each day included in
such period, times (ii) the amount of such Bank's Commitment Percentage of such
Revolving Credit Loans, times (iii) a fraction, the numerator of which is the
number of days that elapse from and including such Drawdown Date to the date on
which the amount of such Bank's Commitment Percentage of such Revolving Credit
Loans shall become immediately available to the Agent, and the denominator of
which is 365. A statement of the Agent submitted to such Bank with respect to
any amounts owing under this paragraph shall be prima facie evidence, absent
manifest error, of the amount due and
<PAGE> 26
-20-
owing to the Agent by such Bank. If the amount of such Bank's Commitment
Percentage of such Revolving Credit Loans is not made available to the Agent by
such Bank within three (3) Business Days following such Drawdown Date, the Agent
shall be entitled to recover such amount from the Borrowers on demand, with
interest thereon at the rate per annum applicable to the Revolving Credit Loans
made on such Drawdown Date.
Section 2.8. MATURITY OF THE LOANS. The Revolving Credit Loans shall be
due and payable on the Maturity Date. The Borrowers jointly and severally
promise to pay on the Maturity Date all Revolving Credit Loans outstanding on
such date, together with any and all accrued and unpaid interest thereon.
Section 2.9. MANDATORY REPAYMENTS OF THE REVOLVING CREDIT LOANS. If at
any time the outstanding amount of the Revolving Credit Loans plus the Maximum
Drawing Amount plus unpaid Reimbursement Obligations exceeds the Total
Commitment, whether by reduction of the Total Commitment or otherwise, then the
Borrowers shall immediately pay the amount of such excess to the Agent for
application to the Revolving Credit Loans, or if no Revolving Credit Loans shall
be outstanding, to be held by the Agent as collateral security for the
Reimbursement Obligations, provided, however, that if the amount of cash
collateral held by the Agent pursuant to this Section 2.9 exceeds the amount of
the Obligations, the Agent shall return such excess to the Borrowers.
Section 2.10. OPTIONAL PREPAYMENTS OR REPAYMENTS OF REVOLVING CREDIT
LOANS. The Borrowers shall have the right, at their election, to repay or prepay
the outstanding amount of the Revolving Credit Loans, as a whole or in part, at
any time without penalty or premium (other than the obligation to reimburse the
Banks and the Agent pursuant to Section 4.8 hereof). The Borrowers shall give
written notice to the Agent (or telephonic notice confirmed in writing) no later
than (a) 1:00 p.m. (Boston time) on the Business Day of the proposed prepayment
or repayment of any Base Rate Loan or (b) 1:00 p.m. (Boston time) three (3)
Eurodollar Business Days prior to the proposed prepayment or repayment of any
Eurodollar Loan, in each case specifying the proposed date of prepayment or
repayment of Revolving Credit Loans and the principal amount to be paid. Each
such partial repayment of the Revolving Credit Loans shall be $50,000 or an
integral multiple of $50,000 in excess thereof, and shall be accompanied by the
payment of accrued interest on the principal prepaid to the date of repayment
and shall be applied, in the absence of instruction by the Borrowers, first to
the principal of Base Rate Loans and then to the principal of Eurodollar Loans.
Each partial prepayment shall be allocated among the Banks, in proportion, as
nearly as practicable, to the respective unpaid principal amount of each Bank's
Revolving Credit Loans, with adjustments to the extent practicable to equalize
any prior repayments not exactly in proportion. Unless the Borrowers elect to
repay the total aggregate outstanding amount of the Revolving Credit Loans, the
Borrowers
<PAGE> 27
-21-
may not elect to make any repayments which would reduce the total aggregate
outstanding amount of the Revolving Credit Loans to an amount less than $50,000.
Section 3. LETTERS OF CREDIT.
Section 3.1. LETTER OF CREDIT COMMITMENTS.
(a) Subject to the terms and conditions hereof and the
execution and receipt of a Loan and Letter of Credit Request reflecting the
Maximum Drawing Amount of all Letters of Credit (including the requested Letter
of Credit) and a Letter of Credit Application, the Agent, on behalf of the Banks
and in reliance upon the agreement of the Banks set forth in Section 3.1(b) and
upon the representations and warranties of the Borrowers contained herein,
agrees to issue standby letters of credit, in such form as may be requested from
time to time by the Borrowers and agreed to by the Agent; provided, however,
that, after giving effect to such request, the Maximum Drawing Amount shall not
exceed the lesser of (i) $5,000,000 or (ii) the Total Commitment minus the
aggregate outstanding amount of the Revolving Credit Loans. No Letter of Credit
shall have an expiration date later than the earlier of (i) one (1) year after
the date of issuance of the Letter of Credit (which may incorporate automatic
renewals for periods of up to one (1) year, provided that the Agent may, upon 30
days' notice to the beneficiary, cancel such Letter of Credit which has been
renewed beyond its initial one (1) year term), or (ii) thirty (30) days prior to
the Maturity Date.
(b) Each Bank severally agrees that it shall be absolutely
liable, without regard to the occurrence of any Default or Event of Default or
any other condition precedent whatsoever, to the extent of such Bank's
Commitment Percentage thereof, to reimburse the Agent on demand for the amount
of each draft paid by the Agent under each Letter of Credit issued in accordance
with the terms hereof to the extent that such amount is not reimbursed by the
Borrowers pursuant to Section 3.2 (such agreement for a Bank being called herein
the "Letter of Credit Participation" of such Bank).
(c) Each such payment made by a Bank shall be treated as
the purchase by such Bank of a participating interest in the Borrowers'
Reimbursement Obligation under Section 3.2 in an amount equal to such payment.
Each Bank shall share in accordance with its participating interest in any
interest which accrues pursuant to Section 3.2.
Section 3.2. REIMBURSEMENT OBLIGATION OF THE BORROWERS. In order to
induce the Agent to issue, extend and renew each Letter of Credit and the Banks
to participate therein, the Borrowers hereby agree to reimburse or pay to the
Agent with respect to each Letter of Credit issued, extended or renewed by the
Agent hereunder as follows:
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(a) on each date that any draft presented under any Letter
of Credit is honored by the Agent or the Agent otherwise makes payment with
respect thereto, (i) the amount paid by the Agent under or with respect to such
Letter of Credit, and (ii) the amount of any taxes, fees, charges or other costs
and expenses whatsoever incurred by the Agent or any Bank in connection with any
payment made by the Agent or any Bank under, or with respect to, such Letter of
Credit; provided however, if the Borrowers do not reimburse the Agent on the
Drawdown Date, such amount shall, provided that no Event of Default under
Sections 12.1(h) or 12.1(i) has occurred, become automatically a Revolving
Credit Loan which is a Base Rate Loan advanced hereunder in an amount equal to
such sum; and
(b) upon the Maturity Date, or the termination of the Total
Commitment, or the acceleration of the Reimbursement Obligations in accordance
with Section 12, an amount equal to the Maximum Drawing Amount, which amount
shall be held by the Agent for the benefit of the Banks and the Agent as cash
collateral for all Reimbursement Obligations.
Section 3.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented
or other demand for payment shall be made under any Letter of Credit, the Agent
shall notify the Borrowers of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. On the date that such draft is paid or other
payment is made by the Agent, the Agent shall promptly notify the Banks of the
amount of any unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each Bank
shall make available to the Agent, at the Agent's Head Office, in immediately
available funds, such Bank's Commitment Percentage of such Reimbursement
Obligation, together with an amount equal to the product of (a) the weighted
average, computed for the period referred to in clause (c) below, of the
interest rate paid by the Agent for federal funds acquired by the Agent during
each day included in such period, times (b) the amount equal to such Bank's
Commitment Percentage of such unpaid Reimbursement Obligation, times (c) a
fraction, the numerator of which is the number of days that have elapsed from
and including the date the Agent paid the draft presented for honor or otherwise
made payment until the date on which such Bank's Commitment Percentage of such
unpaid Reimbursement Obligation shall become immediately available to the Agent,
and the denominator of which is 365. The responsibility of the Agent to the
Borrowers and the Banks shall be only to determine that the documents (including
each draft) delivered under each Letter of Credit in connection with such
presentment shall be in conformity in all material respects with such Letter of
Credit.
Section 3.4. OBLIGATIONS ABSOLUTE. The Borrowers' obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrowers may have or
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have had against the Agent, any Bank or any beneficiary of a Letter of Credit.
Subject to the obligations of the Banks pursuant to Article V of the Uniform
Commercial Code and the obligations of the Agent pursuant to the last sentence
of Section 3.3, the Borrowers further agree with the Agent and the Banks that
the Agent and the Banks shall not be responsible for, and the Borrowers'
Reimbursement Obligations under Section 3.2 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, fraudulent or forged, or any dispute between or among the
Borrowers, the beneficiary of any Letter of Credit or any financing institution
or other party to which any Letter of Credit may be transferred or any claims or
defenses whatsoever of the Borrowers against the beneficiary of any Letter of
Credit or any such transferee. The Agent and the Banks shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with any Letter of
Credit. The Borrowers agree that any action taken or omitted by the Agent or any
Bank under or in connection with each Letter of Credit and the related drafts
and documents, if done in good faith, shall be binding upon the Borrowers and
shall not result in any liability on the part of the Agent or any Bank to the
Borrowers.
Section 3.5. RELIANCE BY AGENT. To the extent not inconsistent with
Section 3.4, the Agent shall be entitled to rely, and shall be fully protected
in relying upon, any Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel, independent
accountants or other experts selected by the Agent.
Section 4. FEES, PAYMENTS, AND COMPUTATIONS; JOINT AND SEVERAL
LIABILITY.
Section 4.1. FEES.
(a) COMMITMENT FEE. The Borrowers agree to pay to the
Agent, for the respective account of each Bank, a fee (the "Commitment Fee")
equal to the Applicable Commitment Rate multiplied by the average daily amount
of the unused portion of such Bank's Commitment during each calendar quarter or
portion thereof from the Closing Date to the Maturity Date (or to the date of
termination in full of the Total Commitment, if earlier). The Commitment Fee
shall be payable quarterly in arrears on the first day of each calendar quarter
for the immediately preceding calendar quarter commencing on April 1, 1998, with
a final payment on the Maturity Date.
(b) LETTER OF CREDIT FEES. The Borrowers shall pay a fee
(the "Letter of Credit Fee") equal to the Applicable L/C Margin multiplied by
the Maximum Drawing Amount of each Letter of Credit. Such Letter of Credit Fee
shall
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be payable to the Agent for the account of the Banks, to be shared pro rata by
the Banks in accordance with their respective Commitment Percentages. The
Borrowers shall also pay a fee (the "Issuance Fee") to the Agent, for its own
account, equal to 0.125% per annum on the Maximum Drawing Amount of all Letters
of Credit issued by such Bank, plus its customary administrative charges. The
Letter of Credit Fee and the Issuance Fee shall be payable for the number of
days each Letter of Credit is outstanding, and shall be payable quarterly in
arrears on the first day of each calendar quarter for the immediately preceding
calendar quarter, and on the Maturity Date.
(c) CLOSING FEES. The Borrowers shall pay at closing any
fees owing to any of the Banks, as previously agreed between the Borrowers and
the Agent.
Section 4.2. PAYMENTS.
(a) All payments of principal, interest, Reimbursement
Obligations, fees and any other amounts due hereunder or under any of the other
Loan Documents shall be made to the Agent, for the respective accounts of the
Banks and the Agent, to be received at the Agent's Head Office in immediately
available funds by 12:00 p.m. (Boston time) on any due date.
(b) All payments by the Borrowers hereunder and under any
of the other Loan Documents shall be made without setoff or counterclaim and
free and clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein unless
the Borrowers are compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrowers with respect to any amount payable
by them hereunder or under any of the other Loan Documents, the Borrowers will
pay to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks or the Agent to receive the same net amount which
the Banks or the Agent would have received on such due date had no such
obligation been imposed upon the Borrowers. In the event that the Borrowers are
required to make such deduction or withholding as a result of the fact that a
Bank is organized outside of the United States, such Bank shall use its
reasonable best efforts to transfer its Loans to an affiliate organized within
the United States if such transfer would have no adverse effect on such Bank or
the Loans. The Borrowers will deliver promptly to the Bank certificates or other
valid vouchers for all taxes or other charges deducted from or paid with respect
to payments made by the Borrowers hereunder or under such other Loan Document.
(c) Whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date for
such
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payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension; provided that any Interest Period for any
Eurodollar Loan which ends on a day that is not a Eurodollar Business Day shall
end on the next succeeding Eurodollar Business Day unless the result of such
extension would be to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the immediately preceding
Eurodollar Business Day.
Section 4.3. COMPUTATIONS. All computations of interest on Base Rate
Loans and of Commitment Fees, Letter of Credit Fees or other fees shall, unless
otherwise expressly provided herein, be based on a 365-day year (or 366-day
year, as applicable) and paid for the actual number of days elapsed. All
computations of interest on Eurodollar Loans shall, unless otherwise expressly
provided herein, be based on a 360-day year and paid for the actual number of
days elapsed.
Section 4.4. CAPITAL ADEQUACY. If any present or future law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) or the interpretation thereof by a court or
governmental authority with appropriate jurisdiction affects the amount of
capital required or expected to be maintained by any Bank or the Agent or any
corporation controlling such Bank or the Agent, and such Bank or the Agent
determines that the amount of capital required to be maintained by it is
increased by or based upon the existence of such Bank's or the Agent's Loans,
Letter of Credit Participations or Letters of Credit, or commitment with respect
thereto, then such Bank or the Agent may notify the Borrowers of such fact. To
the extent that the costs of such increased capital requirements are not
reflected in the Base Rate (if relating to Base Rate Loans), the Borrowers and
such Bank or (as the case may be) the Agent shall thereafter attempt to
negotiate in good faith, within thirty (30) days of the day on which the
Borrowers receive such notice, an adjustment payable hereunder that will
adequately compensate such Bank or the Agent in light of these circumstances. If
the Borrowers and such Bank or the Agent are unable to agree to such adjustment
within thirty (30) days of the date on which the Borrowers receive such notice,
then commencing on the date of such notice (but not earlier than the effective
date of any such increased capital requirement), the fees payable hereunder
shall increase by an amount that will, in such Bank's or the Agent's reasonable
determination, provide adequate compensation. Each Bank and the Agent shall
allocate such cost increases among its customers in good faith and on an
equitable basis.
Section 4.5. CERTIFICATE. A certificate setting forth any additional
amounts payable pursuant to Section 4.4 and a reasonable explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrowers,
shall be conclusive, absent manifest error, that such amounts are due and owing.
Section 4.6. INTEREST ON OVERDUE AMOUNTS. Overdue principal and (to the
extent permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall bear
interest
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compounded monthly and payable on demand at a rate per annum equal to the Base
Rate plus the Applicable Base Rate Margin plus two (2) percentage points (2.00%)
until such amount shall be paid in full (after, as well as before, judgment).
Section 4.7. INTEREST LIMITATION. Notwithstanding any other term of this
Credit Agreement or any Note or any other document referred to herein or
therein, the maximum amount of interest which may be charged to or collected
from any person liable hereunder or under any Note by any Bank shall be
absolutely limited to, and shall in no event exceed, the maximum amount of
interest which could lawfully be charged or collected under applicable law
(including, to the extent applicable, the provisions of Section 5197 of the
Revised Statutes of the United States of America, as amended, 12 U.S.C. Section
85, as amended), so that the maximum of all amounts constituting interest under
applicable law, howsoever computed, shall never exceed as to any Person liable
therefor such lawful maximum, and any term of this Credit Agreement, the Notes,
the Letter of Credit Applications, or any other document referred to herein or
therein which could be construed as providing for interest in excess of such
lawful maximum shall be and hereby is made expressly subject to and modified by
the provisions of this paragraph.
Section 4.8. EURODOLLAR INDEMNITY. The Borrowers agree to indemnify the
Banks and the Agent and to hold them harmless from and against any loss, cost or
expenses (including loss of anticipated profits) that the Banks and the Agent
may sustain or incur as a consequence of (a) default by the Borrowers in payment
of the principal amount of or any interest on any Eurodollar Loans as and when
due and payable, including any such loss or expense arising from interest or
fees payable by any Bank or the Agent to lenders of funds obtained by it in
order to maintain its Eurodollar Loans, (b) a prepayment of principal on any
Eurodollar Loan, including prepayments which are the result of acceleration by
the Banks, or (c) default by the Borrowers in making a borrowing or conversion
after the Borrowers have given (or are deemed to have given) notice pursuant to
Section 2.5 or Section 2.6, the making of any payment of a Eurodollar Loan or
the making of any conversion of any such Eurodollar Loan to a Base Rate Loan on
a day that is not the last day of the applicable Interest Period with respect
thereto, including interest or fees payable by any Bank to lenders of funds
obtained by it in order to maintain any such Loans.
Section 4.9. ILLEGALITY; INABILITY TO DETERMINE EURODOLLAR RATE.
Notwithstanding any other provision of this Credit Agreement, if (a) the
introduction of, any change in, or any change in the interpretation of, any law
or regulation applicable to the Agent or any Bank shall make it unlawful, or any
central bank or other governmental authority having jurisdiction thereof shall
assert that it is unlawful, for any Bank or the Agent to perform its obligations
in respect of any Eurodollar Loans, or (b) if any Bank or the Agent shall
reasonably determine with respect to Eurodollar Loans that (i) by reason of
circumstances affecting any Eurodollar interbank market, adequate and reasonable
methods do not exist for ascertaining the Eurodollar Rate which would otherwise
be
<PAGE> 33
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applicable during any Interest Period, or (ii) deposits of Dollars in the
relevant amount for the relevant Interest Period are not available to such Bank
or the Agent in any Eurodollar interbank market, or (iii) the Eurodollar Rate
does not or will not accurately reflect the cost to such Bank or the Agent of
obtaining or maintaining the applicable Eurodollar Loans during any Interest
Period, then such Bank or the Agent shall promptly give telephonic, telex or
cable notice of such determination to the Borrowers (which notice shall be
conclusive and binding upon the Borrowers). Upon such notification by such Bank
or the Agent, the obligation of such Bank or the Agent to make Eurodollar Loans
shall be suspended until such Bank or the Agent determines that such
circumstances no longer exist, and the outstanding Eurodollar Loans shall
continue to bear interest at the applicable rate based on the Eurodollar Rate
until the end of the applicable Interest Period, and thereafter shall be deemed
converted to Base Rate Loans in equal principal amounts.
Section 4.10. ADDITIONAL COSTS, ETC. If any present or future applicable
law, which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Bank by any central bank or other fiscal, monetary or
other authority (whether or not having the force of law), shall impose on any
Bank any tax, levy, impost, duty, charge fees, deduction or withholdings of any
nature or requirements with respect to this Credit Agreement, the other Loan
Documents, the Loans, such Bank's Commitment, the Letters of Credit or any class
of loans or commitments or letters of credit of which any of the Loans, the
Commitments or the Letters of Credit forms a part, and the result of any of the
foregoing is:
(i) to increase the cost to such Bank of making, funding,
issuing, renewing, extending or maintaining the Loans, such Bank's Commitment,
or the Letters of Credit; or
(ii) to reduce the amount of principal, interest or other
amount payable to such Bank hereunder on account of such Bank's Commitment, the
Loans, or drawings under the Letters of Credit, or
(iii) to require such Bank to make any payment or to forego
any interest or other sum payable hereunder, the amount of which payment or
foregone interest or other sum is calculated by reference to the gross amount of
any sum receivable or deemed received by such Bank from the Borrowers hereunder,
then, and in each such case, the Borrowers will, upon demand made by such Bank
at any time and from time to time and as often as the occasion therefor may
arise, pay to such Bank such additional amounts as will be sufficient to
compensate such Bank for such additional cost, reduction, payment or foregone
interest or other sum (after such
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Bank shall have allocated the same fairly and equitably among all customers of
any class generally affected thereby).
Section 4.11. REPLACEMENT OF BANKS. If any Bank (an "Affected Bank") (i)
makes demand upon the Borrowers for (or if the Borrowers are otherwise required
to pay) amounts pursuant to Sections 4.4 or 4.10 or (ii) is unable to
make or maintain Eurodollar Loans as a result of a condition described in
Section 4.9, the Borrowers may, within 90 days of receipt of such demand or
notice (or the occurrence of such other event causing the Borrowers to be
required to pay such compensation or causing Section 4.9 to be applicable), by
notice in writing to the Agent and such Affected Bank (a "Replacement Notice")
(A) request the Affected Bank to cooperate with the Borrowers in obtaining a
replacement bank satisfactory to the Agent and the Borrowers (the "Replacement
Bank"); (B) request the non-Affected Banks to acquire and assume all of the
Affected Bank's Loans and Commitment, as provided herein, but none of such Banks
shall be under an obligation to do so; or (C) designate a Replacement Bank
reasonably satisfactory to the Agent. If any satisfactory Replacement Bank shall
be obtained, and/or any of the non-Affected Banks shall agree to acquire and
assume all of the Affected Bank's Loans and Commitment, then such Affected Bank
shall, so long as no Event of Default shall have occurred and be continuing,
assign, in accordance with Section 17, all of its Commitment, Loans, Notes and
other rights and obligations under this Credit Agreement and all other Loan
Documents to such Replacement Bank or non-Affected Banks, as the case may be, in
exchange for payment of the principal amount so assigned and all interest and
fees accrued on the amount so assigned, plus all other Obligations then due and
payable to the Affected Bank; provided, however, that (i) such assignment shall
be without recourse, representation or warranty and shall be on terms and
conditions reasonably satisfactory to such Affected Bank and such Replacement
Bank and/or non-Affected Banks, as the case may be, and (ii) prior to any such
assignment, the Borrowers shall have paid to such Affected Bank all amounts
properly demanded and unreimbursed under Sections 4.4, 4.8, 4.9 and 4.10.
Upon the effective date of such assignment, the Borrowers shall issue
replacement Notes to such Replacement Bank and/or non-Affected Banks, as the
case may be, and such institution shall become a "Bank" for all purposes under
this Credit Agreement and the other Loan Documents.
Section 4.12. CONCERNING JOINT AND SEVERAL LIABILITY OF THE BORROWERS.
(a) Each of the Borrowers is accepting joint and several liability
hereunder and under the other Loan Documents in consideration of the financial
accommodations to be provided by the Banks under this Credit Agreement, for the
mutual benefit, directly and indirectly, of each of the Borrowers and in
consideration of the undertakings of each other Borrower to accept joint and
several liability for the Obligations.
(b) Each of the Borrowers, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and
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several liability with the other Borrowers with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 4.12), it being the intention of the
parties hereto that all of the Obligations shall be the joint and several
Obligations of each of the Borrowers without preferences or distinction among
them.
(c) If and to the extent that any of the Borrowers shall fail to make
any payment with respect to any of the Obligations as and when due or to perform
any of the Obligations in accordance with the terms thereof, then in each such
event the other Borrowers will make such payment with respect to, or perform,
such Obligation.
(d) The Obligations of each of the Borrowers under the provisions of
this Section 4.12 constitute full recourse Obligations of each of the Borrowers
enforceable against each such corporation to the full extent of its properties
and assets, irrespective of the validity, regularity or enforceability of this
Credit Agreement or any other circumstance whatsoever.
(e) Except as otherwise expressly provided in this Credit Agreement,
each of the Borrowers hereby waives notice of acceptance of its joint and
several liability, notice of any Loans made under this Credit Agreement, notice
of any action at any time taken or omitted by the Banks under or in respect of
any of the Obligations, and, generally, to the extent permitted by applicable
law, all demands, notices and other formalities of every kind in connection with
this Credit Agreement. Each of the Borrowers hereby assents to, and waives
notice of, any extension or postponement of the time for the payment of any of
the Obligations, the acceptance of any payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by the Banks at any time or times in respect of any default by
any of the Borrowers in the performance or satisfaction of any term, covenant,
condition or provision of this Credit Agreement, any and all other indulgences
whatsoever by the Banks in respect of any of the Obligations, and the taking,
addition, substitution or release, in whole or in part, at any time or times, of
any security for any of the Obligations or the addition, substitution or
release, in whole or in part, of any of the Borrowers. Without limiting the
generality of the foregoing, each of the Borrowers assents to any other action
or delay in acting or failure to act on the part of the Banks with respect to
the failure by any of the Borrowers to comply with any of its respective
Obligations, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might, but for the provisions of this
Section 4.12, afford grounds for terminating, discharging or relieving any of
the Borrowers, in whole or in part, from any of its Obligations under this
Section 4.12, it being the intention of each of the Borrowers that, so long as
any of the Obligations hereunder remain unsatisfied, the Obligations of such
Borrowers under this Section 4.12 shall not be discharged except by performance
and then only to the extent
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of such performance. The Obligations of each of the Borrowers under this Section
4.12 shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, re-construction or similar proceeding
with respect to any of the Borrowers or the Banks. The joint and several
liability of the Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of any of
the Borrowers or the Banks.
(f) The provisions of this Section 4.12 are made for the benefit of the
Banks and their successors and assigns, and may be enforced in good faith by
them from time to time against any or all of the Borrowers as often as the
occasion therefor may arise and without requirement on the part of the Banks
first to marshal any of their claims or to exercise any of their rights against
any other Borrower or to exhaust any remedies available to them against any
other Borrower or to resort to any other source or means of obtaining payment of
any of the Obligations hereunder or to elect any other remedy. The provisions of
this Section 4.12 shall remain in effect until all of the Obligations shall have
been paid in full or otherwise fully satisfied. If at any time, any payment, or
any part thereof, made in respect of any of the Obligations, is rescinded or
must otherwise be restored or returned by the Banks upon the insolvency,
bankruptcy or reorganization of any of the Borrowers, or otherwise, the
provisions of this Section 4.12 will forthwith be reinstated in effect, as
though such payment had not been made.
Section 5. REPRESENTATIONS AND WARRANTIES. The Borrowers jointly and
severally represent and warrant to the Banks that on and as of the date of this
Credit Agreement, each Drawdown Date, and the date of issuance of any Letter of
Credit (with any disclosure on a schedule pursuant to this Section 5 applying to
all relevant representations and warranties, regardless of whether such schedule
is referenced in each relevant representation):
Section 5.1. CORPORATE AUTHORITY.
(a) INCORPORATION; GOOD STANDING. Each Borrower (i) is a corporation
duly organized, validly existing and in good standing or in current status under
the laws of its respective state of incorporation, (ii) has all requisite
corporate power to own its property and conduct its business as now conducted
and as presently contemplated, and (iii) is in good standing as a foreign
corporation and is duly authorized to do business in each jurisdiction in which
its property or business as presently conducted or contemplated makes such
qualification necessary except where a failure to be so qualified would not have
a material adverse effect on the business, assets or financial condition of such
Borrower.
(b) AUTHORIZATION. The execution, delivery and performance of the Loan
Documents and the transactions contemplated hereby and thereby (i) are within
the corporate authority of each Borrower, (ii) have been duly authorized by all
necessary corporate proceedings, (iii) do not conflict with or result in any
material breach or
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contravention of any provision of law, statute, rule or regulation to which any
Borrower is subject or any judgment, order, writ, injunction, license or permit
applicable to any Borrower so as to materially adversely affect the assets,
business or any activity of the Borrowers, and (iv) do not conflict with any
provision of the corporate charter or bylaws of any Borrower or any agreement or
other instrument binding upon them.
(c) ENFORCEABILITY. The execution, delivery and performance of the Loan
Documents will result in valid and legally binding obligations of the Borrowers
enforceable against each in accordance with the respective terms and provisions
hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
Section 5.2. GOVERNMENTAL APPROVALS. The execution, delivery and
performance by the Borrowers of the Loan Documents and the transactions
contemplated hereby and thereby do not require any approval or consent of, or
filing with, any governmental agency or authority other than those already
obtained.
Section 5.3. TITLE TO PROPERTIES; LEASES. The Borrowers own all of the
assets reflected in the consolidated balance sheets as at the Interim Balance
Sheet Date or acquired since that date (except property and assets sold or
otherwise disposed of in the ordinary course of business since that date),
subject to no mortgages, capitalized leases, conditional sales agreements, title
retention agreements, liens or other encumbrances except Permitted Liens.
Section 5.4. FINANCIAL STATEMENTS; SOLVENCY.
(a) There has been furnished to the Banks audited
consolidated financial statements of the Borrowers dated the Interim Balance
Sheet Date. Said financial statements have been prepared in accordance with GAAP
and fairly present in all material respects the financial condition of the
Borrowers on a consolidated basis, as at the close of business on the date
thereof and the results of operations for the period then ended. There are no
contingent liabilities of the Borrowers involving material amounts, known to the
officers of the Borrowers, which have not been disclosed in said balance sheets
and the related notes thereto or otherwise in writing to the Banks.
(b) The Borrowers on a consolidated basis (both before and
after giving effect to the transactions contemplated by this Credit Agreement)
are and will be solvent (i.e., they have assets having a fair value in excess of
the amount required to pay their probable liabilities on their existing debts as
they become absolute and
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matured) and have, and expect to have, the ability to pay their debts from time
to time incurred in connection therewith as such debts mature.
Section 5.5. NO MATERIAL CHANGES, ETC. Since the Interim Balance Sheet
Date, there have occurred no material adverse changes in the financial condition
or businesses of the Borrowers, taken as a whole, as shown on or reflected in
the consolidated balance sheet of the Borrowers as of the Interim Balance Sheet
Date, or the consolidated statement of income for the fiscal year then ended.
Since the Interim Balance Sheet Date, there have not been any Distributions
other than as permitted by Section 7.6 hereof.
Section 5.6. PERMITS, FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each
Borrower possess all franchises, patents, copyrights, trademarks, trade names,
licenses and permits, and rights in respect of the foregoing, adequate for the
conduct of their businesses substantially as now conducted without known
conflict with any rights of others.
Section 5.7. LITIGATION. Except as shown on Schedules 5.7 and 5.16
hereto, there are no actions, suits, proceedings or investigations of any kind
pending or, to the knowledge of any Borrower, threatened against any Borrower
before any court, tribunal or administrative agency or board which, if adversely
determined, might, either in any individual case or in the aggregate, materially
adversely affect the properties, assets, financial condition or business of the
Borrowers, taken as a whole, or materially impair the right of the Borrowers,
taken as a whole, to carry on business substantially as now conducted, or result
in any substantial liability not adequately covered by insurance, or for which
adequate reserves are not maintained on the consolidated balance sheet or which
question the validity of any of the Loan Documents or any action taken or to be
taken pursuant hereto or thereto.
Section 5.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. No Borrower is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Borrowers'
officers has or is expected in the future to have a materially adverse effect on
the business, assets or financial condition of the Borrowers, taken as a whole.
No Borrower is a party to any contract or agreement which in the judgment of the
Borrowers' officers has or is expected to have any materially adverse effect on
the business of the Borrowers, taken as a whole, except as otherwise reflected
in adequate reserves.
Section 5.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. No Borrower
is violating any provision of its charter documents or by-laws or any agreement
or instrument by which any of them may be subject or by which any of them or any
of their properties may be bound or any decree, order, judgment, or any statute,
license, rule or regulation, in a manner which could result in the imposition of
substantial penalties or materially and adversely affect the financial
condition, properties or business of any Borrower. All Material Contracts (a
complete and accurate list of
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which is attached hereto as Schedule 5.9) are in full force and effect, and no
default or event of default has occurred and is continuing under any Material
Contract.
Section 5.10. TAX STATUS. Each Borrower has made or filed all federal
and state income and all other tax returns, reports and declarations required by
any jurisdiction to which any of them is subject (unless and only to the extent
that such Borrower has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes); and have paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith; and have set aside on their books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Borrowers know of no basis for any
such claim.
Section 5.11. NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing as of the date of this Credit Agreement.
Section 5.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. No Borrower
is a "holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company," as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is any of them a "registered investment
company," or an "affiliated company" or a "principal underwriter" of a
"registered investment company," as such terms are defined in the Investment
Company Act of 1940, as amended.
Section 5.13. ABSENCE OF FINANCING STATEMENTS, ETC. Other than Permitted
Liens and the liens of Imperial Bank and BFI to be discharged in accordance with
the payoff letters under Section 9.10, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry, or other public office, which
purports to cover, affect or give notice of any present or possible future lien
on, or security interest in, any assets or property of any Borrower, or any
rights relating thereto.
Section 5.14. EMPLOYEE BENEFIT PLANS.
(a) Each Employee Benefit Plan and each Guaranteed Pension Plan has been
maintained and operated in compliance in all material respects with the
provisions of ERISA and, to the extent applicable, the Code, including but not
limited to the provisions thereunder respecting prohibited transactions and the
bonding of fiduciaries and other persons handling plan funds as required by
Section 412 of ERISA. Each Borrower has heretofore delivered to the Agent the
most recently completed annual report, Form 5500, with all required attachments,
and actuarial statement
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required to be submitted under Section 103(d) of ERISA, with respect to each
Guaranteed Pension Plan.
(b) No Employee Benefit Plan, which is an employee welfare benefit plan
within the meaning of Section 3(1) or Section 3(2)(B) of ERISA, provides benefit
coverage subsequent to termination of employment, except as required by Title I,
Part 6 of ERISA or the applicable state insurance laws. A Borrower may terminate
each such Plan at any time (or at any time subsequent to the expiration of any
applicable bargaining agreement) in the discretion of such Borrower without
liability to any Person other than for claims arising prior to termination.
(c) Each contribution required to be made to a Guaranteed Pension Plan,
whether required to be made to avoid the incurrence of an accumulated funding
deficiency, the notice or lien provisions of Section 302(f) of ERISA, or
otherwise, has been timely made. No waiver of an accumulated funding deficiency
or extension of amortization periods has been received with respect to any
Guaranteed Pension Plan, and no Borrower nor any ERISA Affiliate is obligated to
or has posted security in connection with an amendment to a Guaranteed Pension
Plan pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code. No
liability to the PBGC (other than required insurance premiums, all of which have
been paid) has been incurred by any Borrower or any ERISA Affiliate with respect
to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event
(other than an ERISA Reportable Event as to which the requirement of 30 days
notice has been waived), or any other event or condition which presents a
material risk of termination of any Guaranteed Pension Plan by the PBGC. Based
on the latest valuation of each Guaranteed Pension Plan (which in each case
occurred within twelve months of the date of this representation), and on the
actuarial methods and assumptions employed for that valuation, the aggregate
benefit liabilities of all such Guaranteed Pension Plans within the meaning of
Section 4001 of ERISA did not exceed the aggregate value of the assets of all
such Guaranteed Pension Plans, disregarding for this purpose the benefit
liabilities and assets of any Guaranteed Pension Plan with assets in excess of
benefit liabilities.
(d) No Borrower nor any ERISA Affiliate has incurred any material
liability (including secondary liability) to any Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan under Section
4201 of ERISA or as a result of a sale of assets described in Section 4204 of
ERISA. No Borrower nor any ERISA Affiliate has been notified that any
Multiemployer Plan is in reorganization or insolvent under and within the
meaning of Section 4241 or Section 4245 of ERISA or is at risk of entering
reorganization or becoming insolvent, or that any Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA.
Section 5.15. USE OF PROCEEDS.
Section 5.15.1. GENERAL. The proceeds of the Loans shall
be used solely as follows: (a) to repay existing Indebtedness of the Borrowers;
(b) to finance
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acquisitions permitted pursuant to Section 7.4; and (c) for capital
expenditures, working capital, and general corporate purposes.
Section 5.15.2. REGULATIONS U AND X. No portion of any
Loan is to be used, and no portion of any Letter of Credit is to be obtained,
for the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
Section 5.15.3. INELIGIBLE SECURITIES. No portion of the
proceeds of any Loans is to be used, and no portion of any Letter of Credit is
to be obtained, for the purpose of (a) knowingly purchasing, or providing credit
support for the purchase of, Ineligible Securities from a Section 20 Subsidiary
during any period in which such Section 20 Subsidiary makes a market in such
Ineligible Securities, (b) knowingly purchasing, or providing credit support for
the purchase of, during the underwriting or placement period, any Ineligible
Securities being underwritten or privately placed by a Section 20 Subsidiary, or
(c) making, or providing credit support for the making of, payments of principal
or interest on Ineligible Securities underwritten or privately placed by a
Section 20 Subsidiary and issued by or for the benefit of the Borrowers or other
Affiliate of the Borrowers.
Section 5.16. ENVIRONMENTAL COMPLIANCE. Each Borrower has investigated
the past and present condition and usage of the Real Property and the operations
conducted thereon and, based upon such diligent investigation, has determined
that, except as shown on Schedule 5.16:
(a) No Borrower, nor any operator of the Borrowers' properties, is in
violation, or alleged violation, of any judgment, decree, order, law, permit,
license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under RCRA, CERCLA, the Superfund Amendments
and Reauthorization Act of 1986, the Federal Clean Water Act, the Federal Clean
Air Act, the Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to health, safety or the
environment (the "Environmental Laws"), which violation would have a material
adverse effect on the business, assets or financial condition of the Borrowers
on a consolidated basis.
(b) No Borrower has received notice from any third party, including,
without limitation: any federal, state or local governmental authority, (i) that
any of the Borrowers has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C. Section
6903(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any
pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic
substance, oil or hazardous materials or other chemicals or substances regulated
by any Environmental Laws ("Hazardous
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Substances") which any of the Borrowers has generated, transported or disposed
of has been found at any site at which a federal, state or local agency or other
third party has conducted or has ordered that any Borrower conduct a remedial
investigation, removal or other response action pursuant to any Environmental
Law; or (iii) that it is or shall be a named party to any claim, action, cause
of action, complaint, legal or administrative proceeding arising out of any
third party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances.
(c) Except where it would not have a material adverse effect on the
value of the Real Property, (i) no portion of the Real Property has been used
for the handling, processing, storage or disposal of Hazardous Substances; and
no underground tank or other underground storage receptacle for Hazardous
Substances is located on such properties; (ii) in the course of any activities
conducted by the Borrowers, or operators of the Real Property, no Hazardous
Substances have been generated or are being used on such properties; (iii) there
have been no unpermitted Releases or threatened Releases of Hazardous Substances
on, upon, into or from the Real Property; (iv) to the best of the Borrowers'
knowledge, there have been no Releases on, upon, from or into any real property
in the vicinity of the Real Property which, through soil or groundwater
contamination, may have come to be located on such properties; and (v) in
addition, when required under applicable Environmental Laws, any Hazardous
Substances that have been generated on the Real Property have been transported
offsite only by carriers having an identification number issued by the EPA,
treated or disposed of only by treatment or disposal facilities maintaining
valid permits as required under applicable Environmental Laws, which
transporters and facilities, to the best of the Borrowers' knowledge, have been
and are operating in material compliance with such permits and applicable
Environmental Laws.
(d) None of the Real Property is or shall be subject to any applicable
environmental clean-up responsibility law or environmental restrictive transfer
law or regulation, by virtue of the transactions set forth herein and
contemplated hereby.
Section 5.17. PERFECTION OF SECURITY INTERESTS. All filings,
assignments, pledges and deposits of documents or instruments have been made and
all other actions have been taken that are necessary or advisable under
applicable law to establish and perfect the Agent's security interest in the
Collateral. The Collateral and the Agent's rights with respect to the Collateral
are not subject to any setoff, claims, withholdings or other defenses.
Section 5.18. TRANSACTIONS WITH AFFILIATES. Except as disclosed in
Schedule 5.18 or filings made by the Borrowers under the Securities Exchange Act
of 1934 prior to the Closing Date, and except for arm's length transactions
pursuant to which a Borrower makes payments in the ordinary course of business
upon terms no less favorable than such Borrower could obtain from third parties,
none of the officers, directors, or employees of any Borrower is presently a
party to any transaction with another
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Borrower (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of any Borrower, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
Section 5.19. SUBSIDIARIES. Schedule 2 sets forth a complete and
accurate list of the Subsidiaries of the Parent, including the name of each
Subsidiary, the location of its chief executive office, and its jurisdiction of
incorporation, together with the number of authorized and outstanding shares of
each Subsidiary. Each Subsidiary listed on Schedule 2 is (a) wholly owned by the
Parent (other than W.C. International, which is wholly-owned by W.C. of
Washington) and (b) is a Borrower hereunder, 100% of the assets and stock of
which have been pledged to the Agent on behalf of the Banks pursuant to the
Security Documents. The Parent has good and marketable title to all of the
shares it purports to own of the stock of each such Subsidiary, and W.C. of
Washington has good and marketable title to all of the shares it purports to own
of the stock of W.C. International, free and clear in each case of any lien. All
such shares have been duly issued and are fully paid and non-assessable.
Section 5.20. TRUE COPIES OF CHARTER AND OTHER DOCUMENTS. Each Borrower
has furnished the Agent copies, in each case true and complete as of the Closing
Date, of its (a) charter and other incorporation documents and (b) by-laws, each
including any amendments thereto.
Section 5.21. DISCLOSURE. Neither this Credit Agreement, nor any of the
other Loan Documents, nor any document or information furnished by the Borrowers
in connection therewith contains any untrue statement of a material fact or
omits to state a material fact (known to any Borrower in the case of any
document or information not furnished by the Borrowers) necessary in order to
make the statements herein or therein not misleading. There is no fact known to
any Borrower which materially adversely affects, or which is reasonably likely
in the future to materially adversely affect, the business, assets, or financial
condition of any Borrower, exclusive of effects resulting from changes in
general economic conditions, legal standards or regulatory conditions.
Section 5.22. CAPITALIZATION.
(a) As of the Closing Date, the authorized capital stock of the Parent
consists of 15,000,000 shares of common stock (par value $0.01) per share) of
which 2,300,000 shares were outstanding as of the Closing Date and 10,000,000
shares of preferred stock (par value $0.01) of which 2,499,998 shares were
outstanding as of the Closing Date. All of such outstanding shares are fully
paid and non-assessable. In addition, as of the Closing Date, the Board of
Directors of the Parent has duly
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reserved 1,451,000 shares of the Parent's common stock for issuance pursuant to
outstanding warrants, and has reserved 819,000 shares of the Parent's common
stock for issuance upon the exercise of employee stock options.
(b) The shares of the capital stock of the Subsidiaries pledged to the
Agent pursuant to the Stock Pledge Agreements are held of record as set forth on
the respective Annex A to each Stock Pledge Agreement. Such capital stock
constitutes, of record, 100% of the outstanding capital stock of each such
Subsidiary, and, to our knowledge, on a fully-diluted basis, 100% of such
outstanding capital stock.
Section 5.23. YEAR 2000 PROBLEM. The Borrowers have reviewed the areas
within their business and operations which could be adversely affected by, and
have developed or are developing a program to address on a timely basis, the
Year 2000 Problem. Based on such review and program, the Year 2000 Problem will
not have a material adverse effect on their business and operations.
Section 6. AFFIRMATIVE COVENANTS OF THE BORROWERS. The Borrowers jointly
and severally covenant and agree that, so long as any Loan or Note is
outstanding or the Banks have any obligation to make Loans or the Agent has any
obligation to issue, extend, or renew any Letters of Credit hereunder:
Section 6.1. PUNCTUAL PAYMENT. The Borrowers will duly and punctually
pay or cause to be paid the principal and interest on the Loans, all
Reimbursement Obligations, fees and other amounts provided for in this Credit
Agreement and the other Loan Documents, all in accordance with the terms of this
Credit Agreement and such other Loan Documents.
Section 6.2. MAINTENANCE OF OFFICES. The Parent will maintain its chief
executive offices at 2260 Douglas Boulevard, Suite 280, Roseville, California
95661, and each Subsidiary will maintain its chief executive offices at the
location set forth on Schedule 2, or at such other place in the United States as
the Borrowers shall designate upon 30 days' prior written notice to the Agent.
Section 6.3. RECORDS AND ACCOUNTS. Each Borrower will (i) keep true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with generally accepted accounting principles, (ii)
maintain adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties,
contingencies, and other reserves, and (iii) at all times engage the Accountants
as the independent certified public accountants of the Borrowers.
Section 6.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The
Borrowers will deliver to the Banks:
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(a) as soon as practicable, but, in any event not later than 90 days
after the end of each fiscal year of the Borrowers, the consolidated and
consolidating balance sheets of the Borrowers as at the end of such year,
statements of cash flows, and the related consolidated and consolidating
statements of operations, each setting forth in comparative form the figures for
the previous fiscal year, all such consolidated and consolidating financial
statements to be in reasonable detail, prepared in accordance with GAAP and,
with respect to the consolidated financial statements, certified by the
Accountants. In addition, simultaneously therewith, the Borrowers shall use
reasonable efforts to provide the Banks with a written statement from the
Accountants to the effect that the Borrowers are in compliance with the
covenants set forth in Section 8 hereof, and that, in making the examination
necessary to said certification, nothing has come to the attention of the
Accountants that would indicate that any Default or Event of Default exists, or,
if the Accountants shall have obtained knowledge of any then existing Default or
Event of Default they shall disclose in such statement any such Default or Event
of Default; provided that the Accountants shall not be liable to the Banks for
failure to obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than 45 days
after the end of each fiscal quarter of the Borrowers, copies of the
consolidated and consolidating balance sheets and statement of operations of the
Borrowers as at the end of such quarter, subject to year end adjustments, and
the related statement of cash flows, all in reasonable detail and prepared in
accordance with GAAP, with a certification by the principal financial or
accounting officer of the Borrowers (the "CFO") that the consolidated financial
statements are prepared in accordance with GAAP and fairly present the
consolidated financial condition of the Borrowers as at the close of business on
the date thereof and the results of operations for the period then ended;
(c) as soon as practicable, but in any event within thirty (30) days
after the end of each month in each fiscal year of the Borrowers, unaudited
monthly consolidated and consolidating financial statements of the Borrowers for
such month, prepared in accordance with GAAP, with a certification by the CFO
that the information contained in such financial statements fairly presents the
financial condition of the Borrowers on the date thereof (subject to year-end
adjustments);
(d) simultaneously with the delivery of the financial statements
referred to in (a) and (b) above, a statement in the form of Exhibit C hereto
(the "Compliance Certificate") certified by the CFO that the Borrowers are in
compliance with the covenants contained in Sections 6, 7 and 8 hereof as of the
end of the applicable period setting forth in reasonable detail computations
evidencing such compliance, provided that if the Borrowers shall at the time of
issuance of such certificate or at any other time obtain knowledge of any
Default or Event of Default, the Borrowers shall include in such certificate or
otherwise deliver forthwith to the Banks a certificate
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specifying the nature and period of existence thereof and what action the
Borrowers propose to take with respect thereto and a certificate of the
Borrowers' Chief Operating Officer in the form attached hereto as Exhibit D with
respect to environmental matters;
(e) contemporaneously with or promptly following the delivery thereof to
the boards of directors of the Borrowers, copies of the financial statements,
financial projections, annual budget, variance reports and business plan
concerning the Borrowers in substantially the same form in which such
information is supplied to the boards of directors of the Borrowers;
(f) contemporaneously with, or promptly following, the filing or mailing
thereof, copies of all material of a financial nature filed with the Securities
and Exchange Commission or sent to the stockholders of the Borrowers; and
(g) from time to time, such other financial data and other information
(including accountants' management letters) as the Banks may reasonably request.
The Borrowers hereby authorize the Banks to disclose any information
obtained pursuant to this Credit Agreement to all appropriate governmental
regulatory authorities where required by law; provided, however, that this
authorization shall not be deemed to be a waiver of any rights to object to the
disclosure by the Banks of any such information which the Borrowers have or may
have under the federal Right to Financial Privacy Act of 1978, as in effect from
time to time.
Section 6.5. CORPORATE EXISTENCE AND CONDUCT OF BUSINESS. Each Borrower
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, corporate rights and franchises;
effect and maintain its foreign qualifications, licensing, domestication or
authorization except as terminated by such Borrower's Board of Directors in the
exercise of its reasonable judgment and except where the failure of a Borrower
to remain so qualified would not materially adversely impair the financial
condition of the Borrowers on a consolidated basis; use its best efforts to
comply with all applicable laws; and shall not become obligated under any
contract or binding arrangement which, at the time it was entered into would
materially adversely impair the financial condition of the Borrowers on a
consolidated basis. Each Borrower will continue to engage primarily in the
businesses now conducted by it and in related businesses.
Section 6.6. MAINTENANCE OF PROPERTIES. The Borrowers will cause all
material properties used or useful in the conduct of their businesses to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrowers may be necessary so that the businesses carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this
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section shall prevent the Borrowers from discontinuing the operation and
maintenance of any of their properties if such discontinuance is, in the
judgment of the Borrowers, desirable in the conduct of their business and which
does not in the aggregate materially adversely affect the businesses of the
Borrowers on a consolidated basis.
Section 6.7. INSURANCE. The Borrowers will maintain with financially
sound and reputable insurance companies, funds or underwriters' insurance of the
kinds, covering the risks (other than risks arising out of or in any way
connected with personal liability of any officers and directors thereof) and in
the relative proportionate amounts usually carried by reasonable and prudent
companies conducting businesses similar to that of the Borrowers, but in no
event less than that required under Section 7 of the Security Agreement. In
addition, the Borrowers will furnish from time to time, upon the Agent's
request, a summary of the insurance coverage of each of the Borrowers, which
summary shall be in form and substance satisfactory to the Agent and, if
requested by the Agent, will furnish to the Agent copies of the applicable
policies.
Section 6.8. TAXES. The Borrowers will duly pay and discharge, or cause
to be paid and discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges (other than taxes, assessments and
other governmental charges imposed by foreign jurisdictions which in the
aggregate are not material to the business or assets of any Borrower on an
individual basis or of the Borrowers on a consolidated basis) imposed upon it
and its real properties, sales and activities, or any material part thereof, or
upon the income or profits therefrom, as well as all claims for labor,
materials, or supplies, which if unpaid might by law become a lien or charge
upon any material portion of its property, unless such lien is a Permitted Lien;
provided, however, that any such tax, assessment, charge, levy or claim need not
be paid if the validity or amount thereof shall currently be contested in good
faith by appropriate proceedings and if such Borrower shall have set aside on
its books adequate reserves with respect thereto; and provided, further, that
the Borrowers will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien which may
have attached as security therefor.
Section 6.9. INSPECTION OF PROPERTIES, BOOKS, AND CONTRACTS. The
Borrowers will permit the Banks, the Agent or any of their designated
representatives, upon reasonable notice and during normal business hours, to
visit and inspect any of their properties, to examine their books of account
(including the making of periodic accounts receivable reviews), or contracts
(and to make copies thereof and extracts therefrom), and to discuss their
affairs, finances and accounts with, and to be advised as to the same by, their
officers, all at such times and intervals as the Banks may reasonably request.
Section 6.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND PERMITS;
MAINTENANCE OF MATERIAL LICENSES AND PERMITS. The Borrowers will (i) comply
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with the provisions of their charter documents and by-laws and all agreements
and instruments by which they or any of their properties may be bound; and (ii)
comply with all applicable laws and regulations (including Environmental Laws),
decrees, orders, judgments, licenses and permits, including, without limitation,
all environmental permits hereto ("Applicable Laws"), except where noncompliance
with such Applicable Laws would not have a material adverse effect in the
aggregate on the consolidated financial condition, properties or businesses of
the Borrowers. If at any time while the Notes, or any Loan or Letter of Credit
is outstanding or any Bank or the Agent has any obligation to make Loans or
issue Letters of Credit hereunder, any authorization, consent, approval, permit
or license from any officer, agency or instrumentality of any government shall
become necessary or required in order that the Borrowers may fulfill any of
their obligations hereunder, the Borrowers will immediately take or cause to be
taken all reasonable steps within the power of the Borrowers to obtain such
authorization, consent, approval, permit or license and furnish the Banks with
evidence thereof.
Section 6.11. ENVIRONMENTAL INDEMNIFICATION. Each Borrower covenants and
agrees that it will indemnify and hold the Banks harmless from and against any
and all claims, expense, damage, loss or liability incurred by the Banks
(including all costs of legal representation incurred by the Banks) relating to
(a) any release or threatened release of hazardous substances on the Real
Property; (b) any violation of any Environmental Laws with respect to conditions
at the Real Property or the operations conducted thereon; or (c) the
investigation or remediation of offsite locations at which any Borrower or its
predecessors are alleged to have directly or indirectly disposed of hazardous
substances. It is expressly acknowledged by each Borrower that this covenant of
indemnification shall include claims, expense, damage, loss or liability
incurred by the Banks based upon the Banks' negligence, and this covenant shall
survive any foreclosure or any modification, release or discharge of the Loan
Documents or the payment of the Loans and shall inure to the benefit of the
Banks, their successors and assigns.
Section 6.12. FURTHER ASSURANCES. The Borrowers will cooperate with the
Banks and execute such further instruments and documents as the Banks shall
reasonably request to carry out to the Banks' satisfaction the transactions
contemplated by this Credit Agreement and the Loan Documents.
Section 6.13. NOTICE OF POTENTIAL CLAIMS OR LITIGATION. The Borrowers
will deliver to the Banks, within 30 days of receipt thereof, written notice of
the initiation of any action, claim, complaint, or any other notice of dispute
or potential litigation (including without limitation any alleged violation of
any Environmental Law), wherein the potential liability is in excess of
$150,000, together with a copy of each such notice received by any Borrower.
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Section 6.14. NOTICE OF CERTAIN EVENTS CONCERNING INSURANCE AND
ENVIRONMENTAL CLAIMS.
(a) The Borrowers will provide the Banks with written
notice as to any material cancellation or material change in any insurance of
the Borrowers within ten (10) Business Days after the Borrowers' receipt of any
notice (whether formal or informal) of such cancellation or change by any of
their insurers.
(b) The Borrowers will promptly notify the Banks in
writing of any of the following events:
(i) upon any Borrower obtaining knowledge of any
violation of any Environmental Law regarding the Real Property or any Borrower's
operations, which violation could have a material adverse effect on the Real
Property or on such Borrower's operations; (ii) upon any Borrower obtaining
knowledge of any potential or known Release or threat of Release of any
Hazardous Substance at, from, or into the Real Property which any Borrower
reports in writing or is reportable by it in writing to any governmental
authority and which is material in amount or nature or which could materially
affect the value of the Real Property; (iii) upon any Borrower's receipt of any
notice of violation of any Environmental Laws or of any Release or threatened
Release of Hazardous Substances, including a notice or claim of liability or
potential responsibility from any third party (including without limitation any
federal, state or local governmental officials) and including notice of any
formal inquiry, proceeding, demand, investigation or other action with regard to
(A) any Borrower's or any Person's operation of the Real Property, (B)
contamination on, from or into the Real Property, or (C) investigation or
remediation of offsite locations at which any Borrower or any of its
predecessors is alleged to have directly or indirectly Disposed of Hazardous
Substances, which violation or Release in any such case could have a material
adverse effect on the Real Property or on any Borrower's operations; or (iv)
upon any Borrower obtaining knowledge that any material expense or loss has been
incurred by such governmental authority in connection with the assessment,
containment, removal or remediation of any Hazardous Substances with respect to
which any Borrower may be liable or for which a lien may be imposed on the Real
Property.
Section 6.15. RESPONSE ACTIONS. The Borrowers covenant and agree that if
any Release or Disposal of Hazardous Substances shall occur or shall have
occurred on the Real Property, the Borrowers will cause the prompt containment
and removal of such Hazardous Substances and remediation of the Real Property as
necessary to comply with all Environmental Laws or to preserve the value of the
Real Property.
Section 6.16. ENVIRONMENTAL ASSESSMENTS. If the Banks in their good
faith judgment, after discussion with the Borrowers, have reason to believe that
the environmental condition of the Real Property has deteriorated, after
reasonable notice by the Banks, whether or not an Event of Default shall have
occurred, the Banks may,
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from time to time, for the purpose of assessing and ensuring the value of the
Real Property, obtain one or more environmental assessments or audits of the
Real Property prepared by a hydrogeologist, an independent engineer or other
qualified consultant or expert approved by the Banks to evaluate or confirm (i)
whether Hazardous Substances are present in the soil or water at the Real
Property in material amounts and (ii) whether the use and operation of the Real
Property is in material compliance with all Environmental Laws. Environmental
assessments may include without limitation detailed visual inspections of the
Real Property including, without limitation, any and all storage areas, storage
tanks, drains, dry wells and leaching areas, and the taking of soil samples,
surface water samples and ground water samples, as well as such other
investigations or analyses as the Banks deem appropriate. All such environmental
assessments shall be at the sole cost and expense of the Borrowers.
Section 6.17. NOTICE OF DEFAULT. The Borrowers will promptly notify the
Banks in writing of the occurrence of any Default or Event of Default. If any
Person shall give any notice or take any other action in respect of a claimed
default (whether or not constituting an Event of Default) under this Credit
Agreement or any other note, evidence of Indebtedness, indenture or other
obligation evidencing Indebtedness in excess of $250,000 as to which any
Borrower is a party or obligor, whether as principal or surety, the Borrowers
shall forthwith give written notice thereof to the Banks, describing the notice
of action and the nature of the claimed default.
Section 6.18. NEW SUBSIDIARIES.
(a) Any newly-created or acquired Subsidiaries permitted under Section
7.4 shall become Borrowers hereunder by (i) signing a joinder agreement in form
and substance satisfactory to the Agent, (ii) entering into an amendment to this
Credit Agreement and the Security Documents, as applicable, with the other
parties hereto and thereto providing that such Subsidiary shall become a
Borrower hereunder, 100% of the stock and assets of which shall be pledged to
the Agent for the benefit of the Banks, and (iii) providing such other
documentation as the Banks or the Agent may reasonably request, including,
without limitation, documentation with respect to the conditions specified in
Section 9 hereof. In such event, the Agent is hereby authorized by the parties
to amend Schedule 2 to include such new Subsidiary.
(b) The Parent shall at all times directly or indirectly through a
Subsidiary own all of the shares of capital stock of each of the Subsidiaries
which are corporations, and such shares shall at all times be pledged to the
Agent pursuant to the Stock Pledge Agreements. The Parent shall at all times
directly or indirectly through a Subsidiary own all of the partnership or joint
venture interests in each of the Subsidiaries which are partnerships or joint
ventures, and such interests shall at all times be pledged to the Agent pursuant
to a partnership pledge agreement in form and substance satisfactory to the
Agent.
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Section 6.19. EMPLOYEE BENEFIT PLANS. The Borrowers will (i) promptly
upon filing the same with the Department of Labor or Internal Revenue Service,
upon request of the Agent, furnish to the Agent a copy of the most recent
actuarial statement required to be submitted under Section 103(d) of ERISA and
Annual Report, Form 5500, with all required attachments, in respect of each
Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to
the Agent any notice, report or demand sent or received in respect of a
Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063, 4065, 4066
and 4068 of ERISA, or in respect of a Multiemployer Plan, under Sections 4041A,
4202, 4219, 4242, or 4245 of ERISA.
Section 6.20. NOTICE OF LOSS OF MATERIAL CONTRACTS. The Borrowers will
promptly (and in any event within fifteen (15) Business Days after the
occurrence thereof) notify the Banks in writing of the termination, or (if
earlier) the receipt of a notice of termination of, or any default by any
Borrower under, any Material Contract.
Section 7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. Each Borrower
agrees that, so long as any Loan or any Note or other Obligation is outstanding
or the Banks have any obligation to make Loans or the Agent has any obligation
to issue, extend or renew any Letters of Credit hereunder:
Section 7.1. RESTRICTIONS ON INDEBTEDNESS. No Borrower shall become or
be a guarantor or surety of, or otherwise create, incur, assume, or be or remain
liable, contingently or otherwise, with respect to any Indebtedness, or become
or be responsible in any manner (whether by agreement to purchase any
obligations, stock, assets, goods or services, or to supply or advance any
funds, assets, goods or services or otherwise) with respect to any undertaking
or Indebtedness of any other Person, or incur any Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under this Credit
Agreement or the Loan Documents;
(b) incurrence of guaranty, suretyship or indemnification obligations in
connection with the Borrowers' performance of services for their respective
customers in the ordinary course of their businesses;
(c) Indebtedness of one Borrower to another Borrower;
(d) Subject to Section 8.6, Indebtedness of the Borrowers with respect
to equipment leases or equipment chattel mortgages, including any such
Indebtedness assumed in connection with an acquisition permitted under Section
7.4, in an aggregate amount not to exceed $250,000 at any time outstanding;
(e) Indebtedness of the Borrowers, including assumed obligations,
incurred in connection with acquisitions after the date hereof of any stocks of,
partnership or joint venture interests in, or assets of any Person and owing to
the seller(s) of such
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stocks, partnership or joint venture interests, or assets; provided that such
acquisitions are otherwise permitted pursuant to Section 7.4 and the principal
amount of any such Indebtedness shall not exceed $250,000 in the aggregate
(excluding Indebtedness of acquired companies which is discharged within 30 days
of such acquisition);
(f) Indebtedness of the Borrowers with respect to performance bonds
existing as of the Closing Date, including extensions and renewals thereof, in
an aggregate amount not to exceed $500,000.
Section 7.2. RESTRICTIONS ON LIENS. No Borrower shall create or incur or
suffer to be created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any kind upon any
property or assets of any character, whether now owned or hereafter acquired, or
upon the income or profits therefrom; or transfer any of such property or assets
or the income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; or acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; or suffer to exist
for a period of more than 30 days after the same shall have been incurred any
Indebtedness or claim or demand against it which if unpaid might by law or upon
bankruptcy or insolvency, or otherwise, be given any priority whatsoever over
its general creditors; or sell, assign, pledge or otherwise transfer any
accounts, contract rights, general intangibles or chattel paper, with or without
recourse, except as follows (the "Permitted Liens"):
(a) Liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or liens on properties to secure claims for
labor, material or supplies in respect of obligations not overdue;
(b) Deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or other
social security obligations;
(c) Liens in respect of judgments or awards which have been in force for
less than the applicable period for taking an appeal so long as execution is not
levied thereunder or in respect of which the applicable Borrower shall at the
time in good faith be prosecuting an appeal or proceedings for review and in
respect of which a stay of execution shall have been obtained pending such
appeal or review and in respect of which such Borrower maintains adequate
reserves;
(d) Liens of carriers, warehousemen, mechanics and materialmen, and
other like liens, in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue, provided that such liens may
continue to exist for a period of more than 120 days if the validity or amount
thereof shall currently be contested by the applicable Borrower in good faith by
appropriate proceedings and if such
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Borrower shall have set aside on its books adequate reserves with respect
thereto as required by GAAP and provided further that such Borrower will pay any
such claim forthwith upon commencement of proceedings to foreclose any such
lien;
(e) Encumbrances on Real Property consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and defects
and irregularities in the title thereto, landlord's or lessor's liens under
leases to which any Borrower is a party, and other minor liens or encumbrances
none of which in the opinion of such Borrower interferes materially with the use
of the property affected in the ordinary conduct of the business of such
Borrower, which defects do not individually or in the aggregate have a material
adverse effect on the business of such Borrower individually or of the Borrowers
on a consolidated basis;
(f) Liens existing as of the date hereof and listed on Schedule 7.2 on
the terms and conditions in effect as of the date hereof;
(g) Liens securing Indebtedness permitted under Section 7.1(d) incurred
in connection with the lease or acquisition of property or fixed assets useful
or intended to be used in carrying on the business of the Borrowers, provided
that such Liens shall encumber only the property or assets so acquired and shall
not exceed the fair market value thereof;
(h) Liens securing Indebtedness permitted by Section 7.1(e);
(i) Liens in favor of the Agent for the benefit of the Banks and the
Agent under the Loan Documents.
Section 7.3. RESTRICTIONS ON INVESTMENTS. No Borrower shall purchase or
acquire, or make any commitment therefor, any capital stock, equity interest, or
other obligations or securities of, or any interest in, any other Person, or
make or commit to make any acquisition under Section 7.4, or make or commit to
make any advance, loan, extension of credit or capital contribution to or any
other investment in, any other Person, other than:
(a) marketable direct or guaranteed obligations of the United States of
America that mature within one (1) year from the date of purchase;
(b) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks or Eligible Foreign Banks having unimpaired
capital and surplus in excess of $250,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated and
the ratings for
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which are not less than "P 1" if rated by Moody's Investors Service, Inc., and
not less than "A 1" if rated by Standard and Poor's Rating Group;
(d) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
(e) investments existing on the date hereof and listed on Schedule 7.3;
(f) loans and advances by any Borrower to another Borrower;
(g) investments with respect to Indebtedness permitted by Section
7.1(e);
(h) investments permitted under Section 7.4;
(i) loans to employees of the Parent for the purpose of financing such
employees' acquisition of equity of the Parent (through the exercise of stock
options or otherwise) in an aggregate principal amount not to exceed $107,000 at
any time outstanding.
Section 7.4. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
Section 7.4.1. MERGERS AND ACQUISITIONS. No Borrower will
become a party to any merger or consolidation, or agree to or effect any asset
acquisition or stock acquisition (other than the acquisition of assets in the
ordinary course of business consistent with past practices) except the merger or
consolidation of two or more Borrowers and except as otherwise provided in this
Section 7.4. The Parent may purchase or otherwise acquire all or substantially
all of the assets or stock of any class of, or joint venture interest in, any
Person provided that:
(a) the Borrowers are in current compliance with and, giving effect to
the proposed acquisition (including any borrowings made or to be made in
connection therewith), will continue to be in compliance with all of the
covenants in Section 8 hereof on a pro forma historical combined basis as if the
transaction occurred on the first day of the period of measurement, and a
Compliance Certificate demonstrating such compliance shall have been provided to
the Banks;
(b) at the time of such acquisition, no Default or Event of Default has
occurred and is continuing, and such acquisition will not otherwise create a
Default or an Event of Default hereunder;
(c) the business to be acquired is predominantly in the same lines of
business as the Borrowers, or businesses reasonably related or incidental
thereto;
(d) the business to be acquired operates predominantly in the
continental United States;
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(e) all of the assets to be acquired shall be owned by an existing or
newly created Subsidiary of the Parent which shall be a Borrower, 100% of the
assets and stock of which have been or will be pledged to the Agent on behalf of
the Banks or, in the case of a stock acquisition, the acquired company shall
become or shall be merged with a wholly-owned Subsidiary that is a Borrower;
(f) a copy of the purchase agreement and financial projections, together
with audited (if available, or otherwise unaudited) financial statements for any
Subsidiary to be acquired or created for the preceding two (2) fiscal years
shall have been furnished to the Banks;
(g) each acquisition is preceded by the Borrowers' standard due
diligence practices, summaries of which shall have been provided to the Banks;
(h) each acquisition of a landfill is preceded by a Phase I
environmental assessment, and a copy of such report, together with a reliance
letter in substantially the form of Exhibit F, shall have been provided to the
Banks;
(i) the board of directors and (if required by applicable law) the
shareholders, or the equivalent thereof, of the business to be acquired has
approved such acquisition;
(j) if such acquisition is made by a merger, a Borrower shall be the
surviving entity; and
(k) after giving effect to such acquisition, the cash consideration to
be paid by the Parent in connection with such acquisition or series of related
acquisitions (including deferred payments and the aggregate amount of all
liabilities assumed) shall not exceed, without the consent of the Majority
Banks: (I) $1,000,000 if the Leverage Ratio is equal to or greater than 3.00:1
or if such acquisition includes a landfill, (II) $2,000,000 if the Leverage
Ratio is less than 3.00:1 and greater than or equal to 2.50:1, or (III)
$3,000,000 if the Leverage Ratio is less than 2.50:1.
Section 7.4.2. DISPOSITION OF ASSETS. No Borrower will
become a party to or agree to or effect any disposition of assets in excess of
$100,000 in the aggregate (the "Basket"), provided that the proceeds of any such
disposition shall be applied toward repayment of the Revolving Credit Loans.
Notwithstanding the foregoing, the sale of inventory, the licensing of
intellectual property and the disposition of obsolete assets, in each case in
the ordinary course of business consistent with past practices, are permitted
hereunder without being charged against the Basket.
Section 7.5. SALE AND LEASEBACK. The Borrowers shall not enter into any
arrangement, directly or indirectly, whereby any Borrower shall sell or transfer
any property owned by it in order then or thereafter to lease such property or
lease other property which such Borrower intends to use for substantially the
same purpose as the
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property being sold or transferred, without the prior written consent of the
Majority Banks.
Section 7.6. RESTRICTED DISTRIBUTIONS AND REDEMPTIONS. The Borrowers
shall not make Distributions except as set forth in this Section 7.6. Any
Borrower may make Distributions to another Borrower. In addition, no Borrower
shall redeem, convert, retire or otherwise acquire shares of any class of its
capital stock. Notwithstanding the foregoing, no Borrower shall make any
Distribution under this Section 7.6 if a Default or Event of Default exists or
would be created by the making of such Distribution. The Borrowers shall not
effect or permit any change in or amendment to any document or instrument
pertaining to the terms of any Borrower's capital stock.
Section 7.7. EMPLOYEE BENEFIT PLANS. No Borrower nor any ERISA Affiliate
will:
(a) engage in any "prohibited transaction" within the meaning of Section
406 of ERISA or Section 4975 of the Code which could result in a material
liability for any Borrower; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, whether or not
such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could result
in the imposition of a lien or encumbrance on the assets of any Borrower
pursuant to Section 302(f) or Section 4068 of ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances requiring the
posting of security pursuant to Section 307 of ERISA or Section 401(a)(29) of
the Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (within the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of such
Plans, disregarding for this purpose the benefit liabilities and assets of any
such Plan with assets in excess of benefit liabilities.
Section 7.8. NEGATIVE PLEDGES. No Borrower shall enter into or permit to
exist any arrangement or agreement, enforceable under applicable law, which
directly or indirectly prohibits such Borrower from creating or incurring any
lien, encumbrance, mortgage, pledge, charge, restriction or other security
interest in favor of the Agent for the benefit of the Banks and the Agent under
the Loan Documents other than customary anti-assignment provisions in leases and
licensing agreements entered into by such Borrower in the ordinary course of its
business
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Section 7.9. BUSINESS ACTIVITIES. No Borrower will engage directly or
indirectly (whether through Subsidiaries or otherwise) in any type of business
other than the businesses conducted by such Borrower on the Closing Date and in
related businesses.
Section 7.10. TRANSACTIONS WITH AFFILIATES. No Borrower will engage in
any transaction with any Affiliate (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such Affiliate or, to the knowledge of the Borrowers, any corporation,
partnership, trust or other entity in which any such Affiliate has a substantial
interest or is an officer, director, trustee or partner, on terms more favorable
to such Person than would have been obtainable on an arm's-length basis in the
ordinary course of business.
Section 8. FINANCIAL COVENANTS. The Borrowers covenant and agree that,
so long as any Loan, any Note, or any Reimbursement Obligation is outstanding or
the Banks have any obligation to make Loans or the Agent has any obligation to
issue, extend or renew any Letters of Credit hereunder:
Section 8.1. LEVERAGE RATIO. As of the end of any fiscal quarter of the
Borrowers commencing with the fiscal quarter ending September 30, 1998, the
ratio of (a) Funded Debt as at the end of such quarter to (b) EBITDA for the
period of four (4) consecutive fiscal quarters ending on such date shall not
exceed 3.50:1. For the fiscal quarter ending (i) December 31, 1997, the
denominator of such ratio shall be EBITDA for such quarter multiplied by four
(4), (ii) March 31, 1998, the denominator of such ratio shall be EBITDA for the
period of two consecutive fiscal quarters ending on such date multiplied by two
(2), and (iii) June 30, 1998, the denominator of such ratio shall be EBITDA for
the period of three consecutive fiscal quarters ending on such date multiplied
by 1.33.
Section 8.2. FUNDED DEBT TO CAPITALIZATION RATIO. The Borrowers shall
not at any time permit the ratio of (a) Funded Debt to (b) the sum of Funded
Debt plus Consolidated Net Worth to exceed 65%.
Section 8.3. INTEREST COVERAGE RATIO. As of the end of any fiscal
quarter of the Borrowers, the ratio of (a) EBIT to (b) Consolidated Total
Interest Expense shall not be less than 2.25:1 (i) for the fiscal quarter ending
on December 31, 1997, (ii) for the period of two (2) consecutive fiscal quarters
ending on March 31, 1998, (iii) for the period of three (3) consecutive fiscal
quarters ending on June 30, 1998, and (iv) for the period of four (4)
consecutive fiscal quarters ending thereafter.
Section 8.4. PROFITABLE OPERATIONS. The Borrowers will not permit
Consolidated Net Income to be less than $1.00 for any fiscal quarter, provided
that Consolidated Net Income for the fiscal quarters ending December 31, 1997
and March 31, 1998 may exclude (a) start-up or organizational expenses taken as
a special charge of up to
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$400,000 (pre-tax) in the aggregate, (b) non-cash charges for interest expense
attributable to loan fees paid, and warrants issued to, Imperial Bank in
connection with the Imperial Credit Agreement of up to $650,000 in the
aggregate, and (c) non-cash stock compensation charges of up to $3,500,000 in
the aggregate.
Section 8.5. CONSOLIDATED NET WORTH. The Borrowers will not permit
Consolidated Net Worth at any time to be less than (i) $6,750,000 from the
Closing Date to March 31, 1998 or (ii) thereafter, $6,750,000 plus the sum of
(A) 100% of positive Consolidated Net Income for each fiscal quarter on a
cumulative basis, beginning with the fiscal quarter ended March 31, 1998, and
(B) 100% of the proceeds of any sale by the Borrowers of equity securities
issued by the Borrowers or warrants or subscription rights for equity securities
issued by the Borrowers.
Section 8.6. CAPITAL EXPENDITURES. The Borrowers will not make Capital
Expenditures in any fiscal year that exceed $1,000,000 in the aggregate;
provided, however, that, if during any fiscal year the amount of Capital
Expenditures permitted for that fiscal year is not so utilized, such unutilized
amount may be utilized in the next succeeding fiscal year but not in any
subsequent fiscal year.
Section 9. CLOSING CONDITIONS. The obligations of the Banks to make the
Loans and the Agent to issue Letters of Credit on the Closing Date and otherwise
be bound by the terms of this Credit Agreement shall be subject to the
satisfaction of each of the following conditions precedent:
Section 9.1. CORPORATE ACTION. All corporate action necessary for the
valid execution, delivery and performance by the Borrowers of the Loan Documents
shall have been duly and effectively taken, and satisfactory evidence thereof
shall have been provided to the Agent.
Section 9.2. LOAN DOCUMENTS, ETC. Each of the Loan Documents shall have
been duly and properly authorized, executed and delivered by the respective
parties thereto and shall be in full force and effect in a form satisfactory to
the Banks.
Section 9.3. CERTIFICATE OF SECRETARY; GOOD STANDING CERTIFICATES. The
Agent shall have received from each Borrower a certificate as to the good
standing of each from the Secretary of State or other appropriate official of
the state of its organization, dated as of a recent date. The Agent shall also
have received from each Borrower a certificate of its Secretary certifying the
following attachments thereto: (a) a copy of its certificate or articles of
incorporation or constitutive documents, in each case as amended to date,
certified as of a recent date by the Secretary of State or other appropriate
official of the state of its organization, (b) a true and correct copy of its
by-laws, including all amendments thereto, (c) a true and correct copy of the
resolutions of its board of directors authorizing the transactions contemplated
hereunder and under the other Loan Documents. Such Secretary's Certificate shall
also give the name and bear a specimen signature of each individual who shall be
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authorized (i) to sign the Loan Documents on behalf of the Borrowers; (ii) to
make Loan and Letter of Credit Requests; and (iii) to give notices and to take
other action on the Borrowers' behalf under the Loan Documents.
Section 9.4. VALIDITY OF LIENS. The Security Documents shall be
effective to create in favor of the Agent a legal, valid and enforceable first
(except for Permitted Liens entitled to priority under applicable law) security
interest in and lien upon the Collateral. All filings, recordings, deliveries of
instruments and other actions necessary or desirable in the opinion of the Agent
to protect and preserve such security interests shall have been duly effected.
The Agent shall have received evidence thereof in form and substance
satisfactory to the Agent.
Section 9.5. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Agent
shall have received from each Borrower a completed and fully executed Perfection
Certificate and the results of UCC searches with respect to the Collateral,
indicating no liens other than Permitted Liens and otherwise in form and
substance satisfactory to the Agent.
Section 9.6. CERTIFICATES OF INSURANCE. The Agent shall have received a
certificate of insurance signed by the insurer or an agent authorized to bind
the insurer dated as of the Closing Date, or within 15 days prior thereto,
identifying insurers, types of insurance, insurance limits, and policy terms,
and otherwise describing the Borrowers' insurance coverage.
Section 9.7. LEGAL OPINIONS. The Agent shall have received a favorable
legal opinion from counsel to the Borrowers, addressed to the Agent and each
Bank, dated as of the Closing Date, in form and substance satisfactory to the
Agent, including but not limited to an opinion regarding the Borrowers' Material
Contracts.
Section 9.8. ENVIRONMENTAL PERMIT CERTIFICATE. The Banks shall have
received an environmental permit certificate from the Borrowers satisfactory to
the Agent concerning principal operating permits at the Borrowers' principal
operating facilities.
Section 9.9. PAYMENT OF FEES. The Borrowers shall have paid any fees
owing to any of the Banks.
Section 9.10. PAYOFF LETTERS. The Agent shall have received payoff
letters from (a) Imperial Bank with respect to the Imperial Credit Agreement and
(b) BFI with respect to the BFI Notes, each indicating the amount of the loan
obligations of the Borrowers under such agreement or instrument to be discharged
on the Closing Date and an acknowledgment by Imperial Bank and BFI, as
applicable, that upon receipt of such funds it will forthwith execute and
deliver to the Agent for filing all termination statements and take such other
actions as may be necessary to discharge all mortgages, deeds of trust and
security interests granted by any Borrower in favor of such lenders.
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Section 9.11. CLOSING CERTIFICATE. The Borrowers shall have delivered to
the Agent a certificate, dated as of the Closing Date, stating that, as of such
date (a) the representations and warranties set forth herein or in any other
Loan Document are true and correct (b) no Default or Event of Default has
occurred and is continuing, and (c) each Material Contract is in full force and
effect, and no default or event of default has occurred and is continuing under
any Material Contract.
Section 9.12. AUDIT. The Borrowers shall have delivered to the Agent an
audit conducted by the Accountants, acceptable to the Agent, certifying the
Borrowers' consolidated balance sheet as of the Interim Balance Sheet Date and
the Borrowers' operations through such date.
Section 9.12. CONTRACTS. The Agent shall have received copies of all
Material Contracts.
Section 9.14. CONSENTS. Evidence that all requisite third-party consents
to the transactions contemplated hereunder and under the other Loan Documents
have been received.
Section 10. CONDITIONS OF ALL LOANS. The obligations of the Banks to
make any Loan (including without limitation the obligation of the Agent to
issue, extend or renew any Letter of Credit) on and subsequent to the Closing
Date is subject to the following conditions precedent:
Section 10.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of the Borrowers contained in this Credit
Agreement or in any document or instrument delivered pursuant to or in
connection with this Credit Agreement shall be true as of the date as of which
they were made and shall also be true at and as of the time of any Drawdown Date
or the issuance of any Letter of Credit with the same effect as if made at and
as of that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and changes occurring in the
ordinary course of business which singly or in the aggregate are not materially
adverse, or to the extent that such representations and warranties relate solely
and expressly to an earlier date) and no Default or Event of Default shall have
occurred and be continuing.
Section 10.2. PERFORMANCE; NO EVENT OF DEFAULT. The Borrowers shall have
performed and complied with all terms and conditions herein required to be
performed or complied with by the Borrowers prior to or at the time of any Loan,
and at the time of any Loan, there shall exist no Event of Default or condition
which would result in an Event of Default upon consummation of such Loan
(including without limitation any amounts to be drawn under a Letter of Credit).
Each request by the Borrowers for a Loan (including without limitation each
request for issuance of a Letter of Credit) subsequent to the first Loan shall
constitute certification by the Borrowers
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that the conditions specified in Sections 10.1 and 10.2 will be duly satisfied
on the date of such Loan or Letter of Credit issuance.
Section 10.3. NO LEGAL IMPEDIMENT. No change shall have occurred in any
law or regulations thereunder or interpretations thereof which in the reasonable
opinion of the Banks would make it illegal for the Banks to make Loans
hereunder.
Section 10.4. GOVERNMENTAL REGULATION. The Banks shall have received
such statements in form and substance reasonably satisfactory to the Banks as
they shall require for the purpose of compliance with any applicable regulations
of the Comptroller of the Currency or the Board of Governors of the Federal
Reserve System.
Section 10.5. PROCEEDINGS AND DOCUMENTS. All proceedings in connection
with the transactions contemplated by this Credit Agreement and all documents
incident thereto shall have been delivered to the Banks as of the date hereof in
form and substance satisfactory to the Banks, including without limitation a
Loan and Letter of Credit Request in the form attached hereto as Exhibit B, and
the Banks shall have received all information and such counterpart originals or
certified or other copies of such documents as the Banks may reasonably request.
Section 11. COLLATERAL SECURITY.
Section 11.1. SECURITY OF BORROWERS. The Obligations shall
be secured by a (i) perfected first priority security interest (subject only to
Permitted Liens entitled to priority under applicable law) in all of the assets
of the Borrowers (other than moneys due under the Excluded Contracts), whether
now owned or hereafter acquired, pursuant to the terms of the Security Documents
to which the Borrowers are a party, (ii) a pledge of all of the stock of each
Subsidiary pursuant to the terms of the Stock Pledge Agreements, and (iii) a
pledge of all of the Parent's stock held by the Trustee, provided that the
stock of the Parent shall be released by the Agent in connection with an initial
public offering of such stock.
Section 12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT.
Section 12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the
following events ("Events of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice and/or lapse of time,
"Defaults") shall occur:
(a) if the Borrowers shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable, whether at
the Maturity Date or any accelerated date of maturity or at any other date fixed
for payment;
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(b) if the Borrowers shall fail to pay any interest or fees or other
amounts owing hereunder within five (5) Business Days after the same shall
become due and payable whether at the Maturity Date or any accelerated date of
maturity or at any other date fixed for payment;
(c) if the Borrowers shall fail to comply with the covenants contained
in Sections 6.1, 6.7, 6.8, 6.10, 6.13, 6.14, 6.17, 6.18, 6.20, 7 or 8;
(d) if the Borrowers shall fail to comply with the covenants contained
in (i) Sections 6.2, 6.3, 6.5, 6.6, 6.9, 6.11, 6.12, 6.15, 6.16 or 6.19
within thirty (30) days of the Borrowers' knowledge of a violation of such
covenants or (ii) Section 6.4 within five (5) days of the Borrowers' knowledge
of a violation of such covenant;
(e) if the Borrowers shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other than
those specified in subsections (a), (b), (c) and (d) above) within 30 days after
written notice of such failure has been given to the Borrowers by the Agent or
any Bank;
(f) if any representation or warranty contained in this Credit Agreement
or in any document or instrument delivered pursuant to or in connection with
this Credit Agreement shall prove to have been false in any material respect
upon the date when made or repeated;
(g) if any Borrower shall fail to pay at maturity, or within any
applicable period of grace, any and all obligations for borrowed money (other
than the Obligations) or any guaranty with respect thereto in an aggregate
amount greater than $250,000 or fail to observe or perform any material term,
covenant or agreement contained in any agreement by which it is bound,
evidencing or securing borrowed money in an aggregate amount greater than
$250,000 for such period of time as would, or would have permitted (assuming the
giving of appropriate notice if required) the holder or holders thereof or of
any obligations issued thereunder to accelerate the maturity thereof, unless the
same shall have been waived by the holder(s) thereof; or
(h) if any Borrower makes an assignment for the benefit of creditors, or
admits in writing its inability to pay or generally fails to pay its debts as
they mature or become due, or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of any Borrower or of any
substantial part of the assets of any Borrower or commences any case or other
proceeding relating to any Borrower under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, or takes any action
to authorize or in furtherance of any of the foregoing, or if any such petition
or application is filed or any such case or other proceeding is commenced
against any Borrower or such Borrower indicates its approval thereof, consent
thereto or acquiescence therein, or such petition or
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application shall not have been dismissed within sixty (60) days following the
filing thereof;
(i) a decree or order is entered appointing any such trustee, custodian,
liquidator or receiver or adjudicating any Borrower bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree or order
for relief is entered in respect of any Borrower in an involuntary case under
federal bankruptcy laws as now or hereafter constituted;
(j) if there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any final
judgment against any Borrower which, with other outstanding final judgments
against the Borrowers, exceeds in the aggregate $250,000 after taking into
account any undisputed insurance coverage;
(k) any Borrower or any ERISA Affiliate incurs any liability to the PBGC
or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate
amount exceeding $250,000, or any Borrower or any ERISA Affiliate is assessed
withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan
requiring aggregate annual payments exceeding $250,000, or any of the following
occurs with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable Event,
or a failure to make a required installment or other payment (within the meaning
of Section 302(f)(1) of ERISA), provided that the Agent determines in its
reasonable discretion that such event (A) could be expected to result in
liability of any Borrower to the PBGC or such Guaranteed Pension Plan in an
aggregate amount exceeding $250,000 and (B) could constitute grounds for the
termination of such Guaranteed Pension Plan by the PBGC, for the appointment by
the appropriate United States District Court of a trustee to administer such
Guaranteed Pension Plan or for the imposition of a lien in favor of such
Guaranteed Pension Plan; or (ii) the appointment by a United States District
Court of a trustee to administer such Guaranteed Pension Plan; or (iii) the
institution by the PBGC of proceedings to terminate such Guaranteed Pension
Plan;
(l) if any of the Loan Documents shall be cancelled, terminated, revoked
or rescinded or the Agent's security interests or liens in a substantial portion
of the Collateral shall cease to be perfected, or shall cease to have the
priority contemplated by the Security Documents, in each case otherwise than in
accordance with the terms thereof or with the express prior written agreement,
consent or approval of the Banks, or any action at law, suit or in equity or
other legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of any Borrower or any stockholder of any
Borrower who is an officer or director of such Borrower, or any court or any
other governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order, decree or ruling to
the effect that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
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(m) (i) the Parent shall at any time, legally or beneficially own less
than one hundred percent (100%) of the shares of the capital stock of each other
Borrower (indirectly through W.C. of Washington in the case of W.C.
International), as adjusted pursuant to any stock split, stock dividend or
recapitalization or reclassification of the capital of such Borrower; or (ii)
any person or group of persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934, as amended) other than existing shareholders of
the Parent as of the Closing Date shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under said Act) of 20% or more of the outstanding shares of common
stock of the Parent; or, during any period of twelve consecutive calendar
months, individuals who were directors of the Parent on the first day of such
period shall cease to constitute a majority of the board of directors; provided,
however, that any such change of control resulting from an acquisition permitted
under Section 7.4 shall not constitute a Default or an Event of Default
hereunder, and provided further, that any change in the composition of the board
of directors of the Parent which occurs between the Closing Date and April 1,
1998 with the approval of Ron J. Mittelstaedt shall not constitute a Default or
an Event of Default hereunder; or
(n) the early termination or cancellation of, or any material default by
a Borrower under, any Material Contract;
then, and in any such event, so long as the same may be continuing, the Agent
may, and at the request of the Majority Banks shall, by notice in writing to the
Borrowers, declare all amounts owing with respect to this Credit Agreement, the
Notes and the other Loan Documents and all Reimbursement Obligations to be, and
they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrowers; provided that in the event of any
Event of Default specified in Sections 12.1(h) or 12.1(i), all such amounts
shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Bank. Upon demand by the Banks after
the occurrence of any Event of Default, the Borrowers shall immediately provide
to the Agent cash in an amount equal to the Maximum Drawing Amount, to be held
by the Agent as collateral security for the Obligations, provided that in the
event of any Event of Default specified in Sections 12.1(h) or 12.1(i), all such
amounts shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Bank.
Section 12.2. TERMINATION OF COMMITMENTS. If any Event of Default shall
occur, the Agent may, and at the request of the Majority Banks shall, by notice
to the Borrowers, terminate the unused portion of the Total Commitment
hereunder, and upon such notice being given, such unused portion of the Total
Commitment hereunder shall terminate immediately and the Banks shall be relieved
of all further obligations to make Loans to or issue Letters of Credit for the
account of the Borrowers hereunder, provided that in the event of any Event of
Default specified in
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Sections 12.1(h) or 12.1(i), all such amounts shall become immediately due and
payable automatically and without any requirement of notice from the Agent or
any Bank. No termination of any portion of the Total Commitment hereunder shall
relieve the Borrowers of any of their existing Obligations to the Banks
hereunder or elsewhere.
Section 12.3. REMEDIES. Subject to Section 13, in case any one or more
Events of Default shall have occurred and be continuing, and whether or not the
Banks shall have accelerated the maturity of the Loans pursuant to Section 12.1,
each Bank, if owed any amount with respect to the Loans or the Reimbursement
Obligations, may, with the consent of the Majority Banks but not otherwise, and
if the Agent shall have received opinions of nationally recognized law firms
specializing in California law, Louisiana law, and the law of any other state,
as applicable, having a one form of action rule to the effect that actions by
such Bank under such circumstances shall not constitute an action for purposes
of such state's one form of action rule or in any other way impair the
Collateral or the other Banks' rights hereunder or under the other Loan
Documents, proceed to protect and enforce its rights by suit in equity, action
at law or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Credit Agreement and the other Loan
Documents or any instrument pursuant to which the Obligations to such Bank are
evidenced, including, without limitation, as permitted by applicable law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any legal or equitable right of such Bank. No remedy herein conferred
upon any Bank or the Agent or the holder of any Note or purchaser of any Letter
of Credit Participation is intended to be exclusive of any other remedy and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or any other provision of law.
Section 13. SETOFF. Regardless of the adequacy of any collateral, during
the continuance of an Event of Default, any deposits or other sums credited by
or due from any Bank to the Borrowers and any securities or other property of
the Borrowers in the possession of such Bank may be applied to or set off
against the payment of the Obligations and any and all other liabilities, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrowers to the Banks. The Banks agree among
themselves that, if a Bank shall obtain payment on any Obligation outstanding
under this Credit Agreement through the exercise of a right of offset, banker's
lien or counterclaim, or from any other source including under Section 12.3
(other than by way of a pro rata payment under this Credit Agreement), it shall
promptly make such adjustments with the other Banks as shall be equitable to the
end that all the Banks shall share the benefits of such payments pro rata in
accordance with the aggregate unpaid amount of the Revolving Credit Notes held
by each Bank immediately prior to the payment obtained by such Bank as
aforesaid. The Banks further agree among themselves that if any payment to a
Bank obtained by such Bank through the exercise of a right of offset, banker's
lien
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or counterclaim, or from any other source (other than by way of a pro rata
payment) as aforesaid shall be rescinded or must otherwise be restored, the
Banks who shall have shared the benefit of such payment shall return their share
of that benefit to the Bank whose payment shall have been rescinded or otherwise
restored.
Section 14. THE AGENT.
Section 14.1. APPOINTMENT OF AGENT, POWERS AND IMMUNITIES. Each Bank
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the other Loan Documents, provided, however, the Agent is
hereby authorized to serve only as an administrative and collateral agent for
the Banks and to exercise such powers as are reasonably incidental thereto and
as are set forth in this Credit Agreement and the other Loan Documents. The
Agent hereby acknowledges that it does not have the authority to negotiate any
agreement which would bind the Banks or agree to any amendment, waiver or
modification of any of the Loan Documents or bind the Banks except as set forth
in this Credit Agreement or the Loan Documents. Except as provided in this
Section 14 and in the other Loan Documents, the Agent shall take action or
refrain from acting only upon instructions of the Banks and no action taken or
failure to act without the consent of the Banks shall be binding on any Bank
which has not consented. Each Bank irrevocably authorizes the Agent to execute
the Security Documents and all other instruments relating thereto and to take
such action on behalf of each of the Banks and to exercise all such powers as
are expressly delegated to the Agent under the Loan Documents and all related
documents, together with such other powers as are reasonably incidental thereto.
It is agreed that the duties, rights, privileges and immunities of BKB, in its
capacity as issuer of Letters of Credit hereunder, shall be identical to its
duties, rights, privileges and immunities as a Bank as provided in this Section
14. The Agent shall not have any duties or responsibilities or any fiduciary
relationship with any Bank except those expressly set forth in this Credit
Agreement. Neither the Agent nor any of its affiliates shall be responsible to
the Banks for any recitals, statements, representations or warranties made by
the Borrowers or any other Person whether contained herein or otherwise or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Credit Agreement, the other Loan Documents or any other document
referred to or provided for herein or therein or for any failure by the
Borrowers or any other Person to perform its obligations hereunder or thereunder
or in respect of the Notes. The Agent may employ agents and attorneys-in-fact
and shall not be responsible for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. The Agent shall
exercise the same care in administering the Loans as it exercises with respect
to similar transactions entered into solely for its own account; however,
neither the Agent nor any of its directors, officers, employees or agents shall
be responsible for any action taken or omitted to be taken in good faith by it
or them hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct. The Bank in its separate capacity as a Bank
shall have the same rights and powers hereunder as any other Bank.
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Section 14.2. ACTIONS BY AGENT. The Agent shall be fully justified in
failing or refusing to take any action under this Credit Agreement as it
reasonably deems appropriate unless it shall first have received such advice or
concurrence of the Banks and shall be indemnified to its reasonable satisfaction
by the Banks against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Credit Agreement or any of the Loan Documents in accordance with a request of
the Majority Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Banks and all future holders of the
Notes or any Letter of Credit Participation.
Section 14.3. INDEMNIFICATION. Without limiting the obligations of the
Borrowers under this Credit Agreement or any other Loan Document, the Banks
ratably agree hereby to indemnify and hold harmless the Agent, the Arranger, and
their affiliates from and against any and all claims, actions and suits (whether
groundless or otherwise), losses, damages, costs, expenses (including any
expenses for which the Agent, the Arranger or such affiliate has not been
reimbursed by the Borrowers as required by Section 15), and liabilities of every
nature and character arising out of or related to this Credit Agreement, the
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence, it being the intent of
the parties hereto that all such indemnified parties shall be indemnified for
their ordinary sole or contributory negligence.
Section 14.4. REIMBURSEMENT. Without limiting the provisions of Section
14.3, the Banks and the Agent hereby agree that the Agent shall not be obliged
to make available to any Person any sum which the Agent is expecting to receive
for the account of that Person until the Agent has determined that it has
received that sum. The Agent may, however, disburse funds prior to determining
that the sums which the Agent expects to receive have been finally and
unconditionally paid to the Agent, if the Agent wishes to do so. If and to the
extent that the Agent does disburse funds and it later becomes known that the
Agent did not then receive a payment in an amount equal to the sum paid out,
then any Person to whom the Agent made the funds available shall, on demand from
the Agent, refund to the Agent the sum paid to that Person. If, in the opinion
of the Agent, the distribution of any amount received by it in such capacity
hereunder or under the Loan Documents might involve it in liability, it may
refrain from making distribution until its right to make distribution shall have
been adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the Agent
is to be repaid, each Person to whom any such distribution shall have been made
shall either repay to the Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
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Section 14.5. DOCUMENTS.
Section 14.5.1 CLOSING DOCUMENTATION. Section 14.5.1.
CLOSING DOCUMENTATION. For purposes of determining compliance with the
conditions set forth in Section 9, each Bank that has executed this Credit
Agreement shall be deemed to have consented to, approved or accepted, or to be
satisfied with, each document and matter either sent, or made available, by the
Agent or the Arranger to such Bank for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by or
acceptable or satisfactory to such Bank, unless the Agent shall have received
notice from such Bank prior to the Closing Date specifying such Bank's objection
thereto and such objection shall not have been withdrawn by notice to the Agent
to such effect on or prior to the Closing Date.
Section 14.5.2. OTHER DOCUMENTS. The Agent will forward to
each Bank, promptly after the Agent's receipt thereof, a copy of each notice or
other document furnished to the Agent for such Bank hereunder; provided,
however, that notwithstanding the foregoing, the Agent may furnish to the Banks
a monthly summary with respect to Letters of Credit issued hereunder in lieu of
copies of the related Letter of Credit Applications.
Section 14.6. NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank
represents that it has, independently and without reliance on the Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own appraisal of the financial condition and affairs of
the Borrowers and decision to enter into this Credit Agreement and the other
Loan Documents and agrees that it will, independently and without reliance upon
the Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own appraisals and
decisions in taking or not taking action under this Credit Agreement or any
other Loan Document. The Agent shall not be required to keep informed as to the
performance or observance by the Borrowers of this Credit Agreement, the other
Loan Documents or any other document referred to or provided for herein or
therein or by any other Person of any other agreement or to make inquiry of, or
to inspect the properties or books of, any Person. Except for notices, reports
and other documents and information expressly required to be furnished to the
Banks by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning any person which may come into the possession of the Agent or any of
its affiliates. Each Bank shall have access to all documents relating to the
Agent's performance of its duties hereunder at such Bank's request. Unless any
Bank shall promptly object to any action taken by the Agent hereunder (other
than actions to which the provisions of Section 14.8 are applicable and other
than actions which constitute gross negligence or willful misconduct by the
Agent), such Bank shall conclusively be presumed to have approved the same.
Section 14.7. RESIGNATION OR REMOVAL OF AGENT. The Agent may resign at
any time by giving 60 days' prior written notice thereof to the Banks and the
Borrowers. Upon
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any such resignation, the Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Banks (and,
provided that no Default or Event of Default shall have occurred and be
continuing, approved by the Borrowers, such approval not to be unreasonably
withheld) and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent, which shall be a financial
institution having a combined capital and surplus in excess of $150,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation, the provisions of this Credit Agreement shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Agent. Any new Agent appointed pursuant to
this Section 14.7 shall immediately issue new Letters of Credit in place of
Letters of Credit previously issued by the Agent (to the extent such Letters of
Credit are returned by the beneficiaries for purposes of such exchange).
Section 14.8. CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or
approval required or permitted by this Credit Agreement to be given by the Banks
may be given, and any term of this Credit Agreement, the other Loan Documents or
any other instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrowers of any terms of this Credit
Agreement, the other Loan Documents or such other instrument or the continuance
of any Default or Event of Default may be waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the written consent of the Borrowers and the written consent of the
Majority Banks, provided however, that the Agent may, in its reasonable
discretion, release Collateral with an aggregate value of $500,000 or less in
any calendar year. Notwithstanding the foregoing, no amendment, waiver or
consent shall do any of the following unless in writing and signed by the
Borrowers and each of the Banks affected thereby: (a) increase the Commitments
of the Banks or subject any Bank to any additional obligations, or (b) reduce
the principal of or the rate of interest on the Notes (including, without
limitation, interest on overdue amounts) or any fees payable hereunder; and
FURTHER, no amendment, waiver or consent shall do any of the following unless in
writing and signed by ALL of the Banks: (c) postpone the Maturity Date or any
date fixed for any payment in respect of principal or interest (including,
without limitation, interest on overdue amounts) on the Notes, (d) change the
definition of "Majority Banks" or the number of Banks which shall be required
for the Banks or any of them to take any action under the Loan Documents; (e)
amend this Section 14.8 or Section 18; (f) release any Collateral with an
aggregate value exceeding $500,000 in any calendar year or (g) release any
Borrower from its obligations hereunder.
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No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Agent or any Bank in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or
demand upon the Borrowers shall entitle the Borrowers to other or further notice
or demand in similar or other circumstances.
Section 14.9. DELINQUENT BANKS. Notwithstanding anything to the contrary
contained in this Credit Agreement or any of the other Loan Documents, any Bank
that fails (i) to make available to the Agent its pro rata share of any Loan or
to purchase any Letter of Credit Participation or (ii) to comply with the
provisions of Section 13 with respect to making dispositions and arrangements
with the other Banks, where such Bank's share of any payment received, whether
by setoff or otherwise, is in excess of its pro rata share of such payments due
and payable to all of the Banks, in each case as, when and to the full extent
required by the provisions of this Credit Agreement, shall be deemed delinquent
(a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as
such delinquency is satisfied. A Delinquent Bank shall be deemed to have
assigned any and all payments due to it from the Borrowers, whether on account
of outstanding Loans, Reimbursement Obligations, interest, fees or otherwise, to
the remaining nondelinquent Banks for application to, and reduction of, their
respective pro rata shares of all outstanding Loans and Reimbursement
Obligations. The Delinquent Bank hereby authorizes the Agent to distribute such
payments to the nondelinquent Banks in proportion to their respective pro rata
shares of all outstanding Loans and Reimbursement Obligations. A Delinquent Bank
shall be deemed to have satisfied in full a delinquency when and if, as a result
of application of the assigned payments to all outstanding Loans and
Reimbursement Obligations of the nondelinquent Banks, the Banks' respective pro
rata shares of all outstanding Loans and Reimbursement Obligations have returned
to those in effect immediately prior to such delinquency and without giving
effect to the nonpayment causing such delinquency.
Section 15. EXPENSES AND INDEMNIFICATION.
Section 15.1. EXPENSES. Whether or not the transactions contemplated
herein shall be consummated, the Borrowers agree to pay (i) the reasonable costs
of producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (ii) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrowers hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (iii) the reasonable fees, expenses and disbursements of counsel to
the Agent incurred in connection with the preparation, syndication,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder, any amendments,
<PAGE> 71
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modifications, approvals, consents or waivers hereto or hereunder, or the
cancellation of any Loan Document upon payment in full in cash of all of the
Obligations or pursuant to any terms of such Loan Document providing for such
cancellation, (iv) the fees, expenses and disbursements of the Agent, the
Arranger, or any of their affiliates incurred by the Agent, the Arranger, or
such affiliate in connection with the preparation, syndication, administration
or interpretation of the Loan Documents and other instruments mentioned herein,
including all title insurance premiums and surveyor, engineering and appraisal
charges, (v) all reasonable out-of-pocket expenses (including without limitation
reasonable attorneys' fees and costs, which attorneys may be employees of any
Bank or the Agent, and reasonable consulting, accounting, appraisal, investment
banking and similar professional fees and charges) incurred by any Bank or the
Agent in connection with (A) the enforcement of or preservation of rights under
any of the Loan Documents against the Borrowers or the administration thereof
after the occurrence of a Default or Event of Default and (B) any litigation,
proceeding or dispute whether arising hereunder or under any of the other Loan
Documents, in any way related to any Bank's or the Agent's relationship with the
Borrowers and (vi) all reasonable fees, expenses and disbursements of the Agent
incurred in connection with UCC searches and UCC filings.
Section 15.2. INDEMNIFICATION. The Borrowers agree to indemnify and hold
harmless the Agent, its affiliates and the Banks from and against any and all
claims, actions and suits whether groundless or otherwise, and from and against
any and all liabilities, losses, damages and expenses of every nature and
character arising out of this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without limitation,
(i) any actual or proposed use by the Borrowers of the proceeds of any of the
Loans or Letters of Credit, (ii) the Borrowers entering into or performing this
Credit Agreement or any of the other Loan Documents or (iii) with respect to the
Borrowers and their respective properties and assets, the violation of any
Environmental Law, the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release or threatened release of any Hazardous Substances
or any action, suit, proceeding or investigation brought or threatened with
respect to any Hazardous Substances (including, but not limited to, claims with
respect to wrongful death, personal injury or damage to property), in each case
including, without limitation, the reasonable fees and disbursements of counsel
and allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding. In litigation, or the preparation
therefor, the Banks and the Agent, the Arranger, and their affiliates shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrowers agree to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that the obligations of the Borrowers
under this Section 15.2 are unenforceable for any reason, the Borrowers hereby
agree to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law.
<PAGE> 72
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Section 15.3. SURVIVAL. The covenants contained in this Section 15 shall
survive payment or satisfaction in full of all other Obligations.
Section 16. SURVIVAL OF COVENANTS, ETC. Unless otherwise stated herein,
all covenants, agreements, representations and warranties made herein, in the
other Loan Documents or in any documents or other papers delivered by or on
behalf of the Borrowers pursuant hereto shall be deemed to have been relied upon
by the Banks and the Agent, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Banks of the
Loans and the issuance, extension or renewal of any Letters of Credit, as herein
contemplated, and shall continue in full force and effect so long as any amount
due under this Credit Agreement, any Letter of Credit or the Notes remains
outstanding and unpaid or any Bank has any obligation to make any Loans or issue
any Letters of Credit hereunder. All statements contained in any certificate or
other paper delivered by or on behalf of the Borrowers pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrowers hereunder.
Section 17. ASSIGNMENT AND PARTICIPATION. It is understood and agreed
that each Bank shall have the right to assign or participate at any time all or
a portion of its Commitment and interests in the risk relating to any Loans and
outstanding Letters of Credit hereunder in an amount equal to or greater than
$5,000,000 (which assignment shall be of an equal percentage of such Bank's
Commitment, the Revolving Credit Loans and outstanding Letters of Credit) to
Eligible Assignees with the prior written consent of the Agent and, unless a
Default or an Event of Default shall have occurred and be continuing, the
Borrowers, which approvals shall not be unreasonably withheld. It is further
agreed that each Eligible Assignee which executes and delivers to the Banks and
the Borrowers an Assignment and Acceptance in substantially the form of Exhibit
E (an "Assignment and Acceptance") shall, on the date specified in such
Assignment and Acceptance, become a party to this Credit Agreement and the other
Loan Documents for all purposes of this Credit Agreement and the other Loan
Documents, and its Commitment shall be as set forth in such Assignment and
Acceptance. Upon the execution and delivery of such Assignment and Acceptance
and payment by the assigning bank of an assignment fee in the amount of $3,500
to the Agent, (a) the Borrowers shall issue to such Eligible Assignee a
Revolving Credit Note in the amount of such Eligible Assignee's Commitment dated
the Closing Date or such other date as may be specified by the Agent and
otherwise completed in substantially the form of Exhibit A hereto and, to the
extent any assigning Bank has retained a portion of its obligations hereunder, a
replacement Revolving Credit Note to the assigning Bank; (b) the Agent shall
distribute to the Borrowers, the Banks and such Eligible Assignee a schedule
reflecting such changes; (c) this Credit Agreement shall be appropriately
amended to reflect (i) the status of such Eligible Assignee as a party hereto
and (ii) the status and rights of the Banks and Agent hereunder; and (d) the
Borrowers shall take such action as the Agent may reasonably request to perfect
any security interests in favor of the Banks, including any Eligible Assignee
<PAGE> 73
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which becomes a party to this Credit Agreement. The documents evidencing any
such participation may provide that, except with the consent of the bank or
financial institution that is a party thereto, such Bank will not consent to (a)
the reduction in or forgiveness of the stated principal of or rate of interest
on or Commitment Fee with respect to the portion of any Loan subject to such
participation or assignment, (b) the extension or postponement of any stated
date fixed for payment of principal or interest or Commitment Fee with respect
to the portion of any Loan subject to such participation or assignment, or (c)
the waiver or reduction of any right to indemnification of such Bank hereunder.
Notwithstanding the foregoing, no syndication or participation shall operate to
increase the Total Commitment hereunder or otherwise alter the substantive terms
of this Credit Agreement. Anything contained in this Section 17 to the contrary
notwithstanding, any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Notes) to any of the twelve Federal Reserve Banks organized under Section 4
of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the
enforcement thereof shall release the pledgor Bank from its obligations
hereunder or under any of the other Loan Documents.
Section 18. PARTIES IN INTEREST. All the terms of this Credit Agreement
and the other Loan Documents shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto and thereto; provided that the Borrowers shall not assign or transfer
their rights hereunder without the prior written consent of each Bank.
Section 19. NOTICES, ETC. Except as otherwise expressly provided in this
Credit Agreement, all notices and other communications made or required to be
given pursuant to this Credit Agreement or the other Loan Documents shall be in
writing and shall be delivered in hand, mailed by United States first-class
mail, postage prepaid, or sent by telex or facsimile and confirmed by letter,
addressed as follows:
(a) if to the Borrowers, at Waste Connections, Inc., 2260 Douglas
Boulevard, Suite 280, Roseville, California 95661, Attention: Ron J.
Mittelstaedt, President and CEO, telephone number 916-772-2221, fax number
916-772-2920;
(b) if to the Agent or BKB, at 100 Federal Street, Boston, Massachusetts
02110, Attention: Timothy M. Laurion, Director, telephone number 617-434-9689,
telecopy number 617-434-2160;
or such other address for notice as shall have last been furnished in
writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (a) if delivered by hand to a responsible
officer of the party to which it is directed, at the time of the receipt thereof
by such officer, (b) if sent by registered or certified first-class mail,
postage prepaid, five Business Days
<PAGE> 74
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after the posting thereof, (c) if sent by telex or cable, at the time of the
dispatch thereof, if in normal business hours in the country of receipt, or
otherwise at the opening of business on the following Business Day, and (d) if
sent by facsimile, when transmitted, confirmation received.
Section 20. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
Section 20.1. SHARING OF INFORMATION WITH SECTION 20
SUBSIDIARY. The Borrowers acknowledge that from time to time financial advisory,
investment banking and other services may be offered or provided to the
Borrowers, in connection with this Credit Agreement or otherwise, by a Section
20 Subsidiary. The Borrowers hereby authorize (a) such Section 20 Subsidiary to
share with the Agent and each Bank any information delivered to such Section 20
Subsidiary by the Borrowers, and (b) the Agent and each Bank to share with such
Section 20 Subsidiary any information delivered to the Agent or such Bank by the
Borrowers pursuant to this Credit Agreement, or in connection with the decision
of such Bank to enter into this Credit Agreement; it being understood, in each
case, that any such Section 20 Subsidiary receiving such information shall be
bound by the confidentiality provisions of this Credit Agreement. Such
authorization shall survive the payment and satisfaction in full of all of the
Obligations.
Section 20.2. CONFIDENTIALITY. Each of the Banks and the
Agent agrees, on behalf of itself and each of their affiliates, directors,
officers, employees and representatives, to use reasonable precautions to keep
confidential, in accordance with their customary procedures for handling
confidential information of the same nature and in accordance with safe and
sound banking practices, any non-public information supplied to it by the
Borrowers pursuant to this Credit Agreement that is identified by such Person as
being confidential at the time the same is delivered to the Banks or the Agent,
provided that nothing herein shall limit the disclosure of any such information
(a) after such information shall have become public other than through a
violation of this Section 20, (b) to the extent required by statute, rule,
regulation or judicial process, (c) to counsel for any of the Banks or the
Agent, (d) to bank examiners or any other regulatory authority having
jurisdiction over any Bank or the Agent, or to auditors or accountants, (e) to
the Agent, any Bank or any Section 20 Subsidiary, (f) in connection with any
litigation to which any one or more of the Banks, the Agent or any Section 20
Subsidiary is a party, or in connection with the enforcement of rights or
remedies hereunder or under any other Loan Document, (g) to a subsidiary or
affiliate of such Bank as provided in Section 20.1 or (h) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant agrees to be bound by the provisions of this Section 20.
Section 20.3. PRIOR NOTIFICATION. Unless specifically
prohibited by applicable law or court order, each of the Banks and the Agent
shall, prior to disclosure thereof, notify the Borrowers of any request for
disclosure of any such non-public information
<PAGE> 75
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by any governmental agency or representative thereof (other than any such
request in connection with an examination of the financial condition of such
Bank by such governmental agency) or pursuant to legal process.
Section 20.4. OTHER. In no event shall any Bank or the Agent
be obligated or required to return any materials furnished to it or any Section
20 Subsidiary by the Borrowers. The obligations of each Bank under this Section
20 shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of this financing signed and delivered by such
Bank to the Borrowers prior to the date hereof and shall be binding upon any
assignee of, or purchaser of any participation in, any interest in any of the
Loans or Reimbursement Obligations from any Bank.
Section 21. MISCELLANEOUS. The rights and remedies herein expressed are
cumulative and not exclusive of any other rights which the Banks or Agent would
otherwise have. The captions in this Credit Agreement are for convenience of
reference only and shall not define or limit the provisions hereof. This Credit
Agreement and any amendment hereof may be executed in several counterparts and
by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
instrument. In proving this Credit Agreement it shall not be necessary to
produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
Section 22. ENTIRE AGREEMENT, ETC. The Loan Documents and any other
documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Credit Agreement nor any term hereof may be changed,
waived, discharged or terminated, except as provided in Section 14.8. No waiver
shall extend to or affect any obligation not expressly waived or impair any
right consequent thereon. No course of dealing or omission on the part of the
Agent or any Bank in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrowers
shall entitle the Borrowers to other or further notice or demand in similar or
other circumstances.
Section 23. WAIVER OF JURY TRIAL. EACH BORROWER HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE
OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION
REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
<PAGE> 76
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ACTUAL DAMAGES. THE BORROWERS (A) CERTIFY THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY BANK OR THE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH BANK OR THE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVERS AND (B) ACKNOWLEDGE THAT THE AGENT AND THE BANKS HAVE BEEN
INDUCED TO ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS TO
WHICH THEY ARE A PARTY BECAUSE OF, AMONG OTHER THINGS, THE BORROWERS' WAIVERS
AND CERTIFICATIONS CONTAINED HEREIN.
Section 24. GOVERNING LAW. This Credit Agreement and each of the other
Loan Documents are contracts under the laws of the Commonwealth of Massachusetts
and shall for alL purposes be construed in accordance with and governed by the
laws of said commonwealth (excluding the laws applicable to conflicts or choice
of law). The Borrowers consent to the jurisdiction of any of the federal or
state courts located in the Commonwealth of Massachusetts in connection with any
suit to enforce the rights of any Bank or the Agent under this Credit Agreement
or any of the other Loan Documents.
Section 25. SEVERABILITY. The provisions of this Credit Agreement are
severable and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or iN part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this Credit
Agreement in any jurisdiction.
[Signature Pages Follow]
<PAGE> 77
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement under seal as of the date first set forth above.
THE BORROWERS:
- --------------
WASTE CONNECTIONS, INC.
WASTE CONNECTIONS OF WASHINGTON, INC.
WASTE CONNECTIONS OF IDAHO, INC.
WASTE CONNECTIONS INTERNATIONAL, INC.
By: _________________________________________
Ron J. Mittelstaedt
President and Chief Executive Officer
THE LENDERS:
BANKBOSTON, N.A.,
individually and as Agent
By: _________________________________________
Timothy M. Laurion, Director
<PAGE> 78
FIRST AMENDMENT
TO REVOLVING CREDIT AGREEMENT
AND SECURITY DOCUMENTS
This FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT AND SECURITY
DOCUMENTS (this "Amendment") is made and entered into as of February 23, 1998,
by and among (a) WASTE CONNECTIONS, INC., a Delaware corporation (the "Parent"),
the subsidiaries of the Parent identified on Schedule 2 hereto (the
"Subsidiaries," and collectively with the Parent, the "Borrowers"), (b)
BankBoston, N.A., a national banking association having its principal place of
business at 100 Federal Street, Boston, Massachusetts 02110 (acting in its
individual capacity, "BKB") and the other BANKS and lending institutions which
become parties to the Credit Agreement, defined below (collectively, the
"Banks"), and (C) BANKBOSTON, N.A., as agent for the Banks (the "Agent").
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Credit Agreement, defined below.
WHEREAS, the Borrowers, the Banks and the Agent are parties to a
Revolving Credit Agreement dated as of January 30, 1998 (as amended and in
effect from time to time, the "Credit Agreement"), pursuant to which the Banks
have extended credit to the Borrowers on the terms set forth therein;
WHEREAS, the Borrowers have informed the Banks that the Parent is
entering into an agreement to acquire all of the capital stock of Madera
Disposal Systems, Inc., a California corporation ("Madera"), in exchange for the
following consideration: (a) $8,185,000 in cash, as adjusted pursuant to Section
1.2 of the Stock Purchase Agreement (defined below), (b) 1,000,000 shares of
common stock of the Parent, and (c) warrants to purchase an aggregate of 200,000
shares of common stock of the Parent, plus (d) any additional contingent
purchase price pursuant to Section 1.3 of the Stock Purchase Agreement
(collectively, the "Total Consideration");
WHEREAS, the acquisition of Madera (the "Madera Acquisition") is to be
consummated substantially in accordance with the terms set forth in the Stock
Purchase Agreement dated as of February 4, 1998 (the "Stock Purchase Agreement")
among (a) Madera, (b) Alma Sciacqua, as trustee of the Sciacqua Family Trust B,
(c) Eugene Dupreau, (d) Melvin G. Dias, (e) Charles B. Youngclaus, (f) Alma
Sciacqua, and (g) the Parent;
WHEREAS, the Borrowers have requested that the Banks consent to the
Madera Acquisition, and the Banks are willing to consent thereto on the terms
set forth herein;
<PAGE> 79
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WHEREAS, the Banks, the Agent, and the Borrowers have agreed to further
amend the Credit Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. CONSENT TO MADERA ACQUISITION. Each of the undersigned Banks hereby
consents to the Madera Acquisition, provided that the total aggregate purchase
price paid by the Borrowers in connection therewith shall not exceed the Total
Consideration.
2. AMENDMENT TO DEFINITIONS.
(b) Section 1.1 of the Credit Agreement is hereby amended by adding the
following new definitions in the proper alphabetical order:
Madera. Madera Disposal Systems, Inc., a California corporation.
Madera Adjustment. The applicable amount set forth in the
following table for the respective period, provided that such amount shall be
added to EBITDA for purposes of calculating the financial covenants under
Section 8 only, and not for calculation of the Pricing Ratio:
<TABLE>
<CAPTION>
- ------------------------------ -------------------------------
<S> <C>
Fiscal Quarter Ending: Adjustment
- ------------------------------ -------------------------------
March 31, 1998 $726,667
- ------------------------------ -------------------------------
June 30, 1998 $726,667
- ------------------------------ -------------------------------
September 30, 1998 $726,667
- ------------------------------ -------------------------------
December 31, 1998 $181,667
- ------------------------------ -------------------------------
</TABLE>
(b) The definition of "Consolidated Earnings Before Interest, Taxes,
Depreciation and Amortization or EBITDA" is hereby amended to read as follows:
Consolidated Earnings Before Interest, Taxes, Depreciation and
Amortization or EBITDA. For any period, EBIT plus (a) depreciation expense for
such period and (b) amortization expense relating to intangible assets for such
period, to the extent that each was deducted in determining Consolidated Net
Income (or Deficit), plus the Madera Adjustment, if applicable, provided that,
for purposes of calculating the financial covenants under Section 8 (but not the
Pricing Ratio), EBITDA (excluding any projected cost savings or adjustments
other than nonrecurring private company expenses that are discontinued upon
acquisition by the Parent or its Subsidiaries, such as owner compensation and
insurance and benefit cost reductions, and that are approved by the Agent and
the Majority Banks) of Subsidiaries (other than Madera) acquired since the date
of the most recent financial statements
<PAGE> 80
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delivered to the Banks pursuant to Section 6.4 shall be included in the
calculation of EBITDA if (i) the financial statements of such acquired
Subsidiaries have been audited for the period sought to be included by the
Accountants or (ii) the Agent and the Majority Banks consent to such inclusion
after being furnished with unaudited financial statements, together with a
Compliance Certificate and other appropriate documentation certifying the
historical operating results and balance sheet of the acquired companies.
3. AMENDMENT TO THE CREDIT AGREEMENT. The Credit Agreement is hereby
amended by deleting Schedule 2 attached thereto and substituting therefor the
Schedule 2 attached hereto.
4. AMENDMENT TO PARENT STOCK PLEDGE AGREEMENT. The Stock Pledge
Agreement between the Agent and the Parent (the "Parent Stock Pledge Agreement")
is hereby amended by deleting Annex A thereto and substituting therefor the
Annex A attached hereto. The Parent hereby pledges, assigns, grants a security
interest in, and delivers to the Agent for the benefit of the Banks and the
Agent all of the Parent's shares of capital stock of Madera listed on Annex A
attached hereto, and Madera hereby agrees to be bound by the applicable
provisions of the Parent Stock Pledge Agreement.
5. AMENDMENT TO SECURITY AGREEMENT.
(a) Madera is hereby added as a party to the Security Agreement, and
agrees to be bound by all of its terms and conditions, in all respects as if it
were an original signatory thereto.
(b) Madera hereby unconditionally, and jointly and severally with the
Borrowers, grants to the Agent, for the benefit of the Banks and the Agent, to
secure the payment and performance in full of all of the Obligations, a security
interest in, and so pledges and assigns to the Agent, for the benefit of the
Banks and the Agent, the Collateral, as defined in the Security Agreement, on
the terms set forth therein. Madera expressly acknowledges that it has reviewed
the definition of the term "Collateral" contained in the Security Agreement,
including the description of the existing and after-acquired assets of Madera
included and to be included therein.
6. AFFIRMATION AND ACKNOWLEDGMENT OF THE BORROWERS.
(a) Madera acknowledges that it has received and reviewed a copy of the
Credit Agreement and each of the other Loan Documents. Madera hereby agrees to
become a Borrower under the Credit Agreement and to be bound by all of the
terms, conditions and provisions thereof as if it were an original signatory
thereto. Madera acknowledges, without limitation, that such terms include
provisions concerning joint and several liability contained in Section 4.12 of
the Credit Agreement, the environmental
<PAGE> 81
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indemnification contained in Section 6.11 of the Credit Agreement, the expense
and indemnification provisions contained in Sections 14 and 15 of the Credit
Agreement, the waiver of jury trial contained in Section 23 of the Credit
Agreement, and the governing law contained in Section 24 of the Credit
Agreement. In consideration therefor, the Banks and the Agent agree that, as a
Borrower under the Credit Agreement, Madera will be entitled to the benefits
thereof afforded to Borrowers under the Credit Agreement, upon the terms and
subject to the conditions contained therein.
(b) Each of the Borrowers and Madera hereby ratifies and confirms all of
its Obligations to the Agent and the Banks including, without limitation, the
Loans and the Reimbursement Obligations, and each of the Borrowers and Madera
hereby affirms its absolute and unconditional promise to pay to the Banks and
the Agent the Loans, Reimbursement Obligations and all other amounts due or to
become due and payable to the Banks and the Agent under the Credit Agreement and
the other Loan Documents, as amended hereby. Each of the Borrowers and Madera
hereby confirms that the Obligations are and remain secured pursuant to the
Security Documents and pursuant to all other instruments and documents executed
and delivered by such Borrower as security for the Obligations.
(c) The Credit Agreement, the other Loan Documents and all documents,
instruments and agreements related thereto are hereby ratified and confirmed in
all respects and shall continue in full force and effect. This Amendment and the
Credit Agreement shall hereafter be read and construed together as a single
document, and all references in the Credit Agreement or any related agreement or
instrument to the Credit Agreement shall hereafter refer to the Credit Agreement
as amended by this Amendment. This Amendment and the Parent Stock Pledge
Agreement shall hereafter be read and construed together as a single document,
and all references in the Parent Stock Pledge Agreement or any related agreement
or instrument to the Parent Stock Pledge Agreement shall hereafter refer to the
Parent Stock Pledge Agreement as amended by this Amendment.
7. REPRESENTATIONS. The Borrowers represent and warrant to the Agent and
the Banks that:
(a) as of the date hereof, no Default or Event of Default has occurred
and is continuing, and the Madera Acquisition will not otherwise create a
Default or an Event of Default under the Credit Agreement; and
(b) the Borrowers have delivered to the Agent all items required under
Section 7.4 of the Credit Agreement.
8. EFFECTIVENESS. This Amendment shall become effective upon the
execution and delivery of this Amendment by the Borrowers and Majority Banks and
the satisfaction of the following conditions (the "Effective Date"):
<PAGE> 82
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(i) Allonge to Revolving Credit Note. The Agent shall have
received an executed allonge to the Revolving Credit Note, in form and
substance satisfactory to the Agent, adding Madera as a maker of the
Revolving Credit Note.
(ii) Certified Copies of Charter Documents. The Agent shall have
received from Madera a certificate as to the good standing of Madera
from the Secretary of State or other appropriate official of the state
of its organization, dated as of a recent date. The Agent shall also
have received from Madera a certificate of its Secretary certifying the
following attachments thereto: (a) a copy of its certificate or articles
of incorporation or constitutive documents, in each case as amended to
date, certified as of a recent date by the Secretary of State or other
appropriate official of the state of its organization, (b) a true and
correct copy of its by-laws, including all amendments thereto, (c) a
true and correct copy of the resolutions of its board of directors
authorizing the execution and delivery of this Amendment, the allonge to
the Revolving Credit Note, and all related documents. Such Secretary's
Certificate shall also give the name and bear a specimen signature of
each individual who shall be authorized (i) to sign this Amendment and
related documents on behalf of Madera; (ii) to make Loan and Letter of
Credit Requests; and (iii) to give notices and to take other action on
Madera's behalf under the Loan Documents.
(iii) Delivery of Stock. The stock certificates evidencing all of
the issued and outstanding shares of capital stock of Madera, together
with undated stock powers thereto duly executed in blank, shall have
been delivered to the Agent to be held upon the terms of the Parent
Stock Pledge Agreement.
(iv) Perfection Certificate and UCC Search Results. The Agent
shall have received from Madera a completed and fully executed
Perfection Certificate and the results of UCC searches with respect to
the Collateral, indicating no liens other than Permitted Liens and
otherwise in form and substance satisfactory to the Agent.
(v) Environmental Permit Certificate. The Agent shall have
received an environmental permit certificate from the Parent
satisfactory to the Agent, concerning principal operating permits of
Madera's principal operating facilities.
(vi) Consummation of Purchase Agreements. The Madera Acquisition
(other than the exchange of consideration) shall have been completed on
terms no less favorable to Madera and the Parent than those set forth in
the Stock Purchase Agreement dated as of February 4, 1998 among (a)
Madera,
<PAGE> 83
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(
b) Alma Sciacqua, as trustee of the Sciacqua Family Trust, Trust B,
under a Trust Agreement dated March 8, 1997, (c) Gene Dupreau, (d) Mel
Dias, (e) The Administrators, as trustee of the Charles B. Youngclaus
Living Trust under a Trust Agreement dated 1/1/96, and (f) the Parent, a
copy of which was delivered to the Agent in connection with the Consent.
(vii) Legal Opinion. The Agent shall have received an opinion of
counsel to the Borrowers and Madera as to the due authorization and
enforceability of this Amendment as it relates to Madera, the allonge to
the Revolving Credit Note, the due organization, legal existence, and
good standing of Madera, the consummation of the Madera Acquisition, and
all other matters as the Agent may reasonably request;
(viii) Payoff Letters. The Agent shall have received payoff
letters, in form and substance satisfactory to the Agent, with respect
to all Indebtedness of Madera which is not permitted under the Credit
Agreement.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE
EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
[Signature Pages Follow]
<PAGE> 84
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Amendment under seal as of the date first set forth above.
THE BORROWERS:
WASTE CONNECTIONS, INC.
WASTE CONNECTIONS OF WASHINGTON, INC.
WASTE CONNECTIONS OF IDAHO, INC.
WASTE CONNECTIONS INTERNATIONAL, INC.
By:
---------------------------------
Ronald J. Mittelstaedt
President and Chief Executive Officer
MADERA DISPOSAL SYSTEMS, INC.
By:
---------------------------------
Ronald J. Mittelstaedt
President
THE LENDERS:
BANKBOSTON, N.A.,
individually and as Agent
By:
---------------------------------
Timothy M. Laurion, Director
<PAGE> 85
SCHEDULE 2
SUBSIDIARIES
<TABLE>
<CAPTION>
- --------------------------------- ------------------------ ----------------------------
Jurisdiction of
Subsidiary Incorporation 100% Owned By:
- --------------------------------- ------------------------ ----------------------------
<S> <C> <C>
Waste Connections of Idaho, Inc. Delaware Parent
- --------------------------------- ------------------------ ----------------------------
Waste Connections of Washington Parent
Washington, Inc.
- --------------------------------- ------------------------ ----------------------------
Waste Connections Washington Waste Connections of
International, Inc. Washington, Inc.
- --------------------------------- ------------------------ ----------------------------
Madera Disposal Systems, Inc. California Parent
- --------------------------------- ------------------------ ----------------------------
</TABLE>
<PAGE> 86
ANNEX A TO PLEDGE AGREEMENT
None of the issuers has any authorized, issued or outstanding shares of
its capital stock of any class or any commitments to issue any shares of its
capital stock of any class or any securities convertible into or exchangeable
for any shares of its capital stock of any class except as otherwise stated in
this Annex A.
<TABLE>
<CAPTION>
- ---------------- ----------- ----------- ------------ ----------- ----------- ------------
Number of Number of Number of Par or
Record Class of Authorized Issued Outstanding Liquidation
Issuer Owner Shares Shares Shares Shares Value
- ---------------- ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Waste Connections
of Idaho, Inc. Parent Common 10,000 300 300 $0.01
- ---------------- ----------- ----------- ------------ ----------- ----------- ------------
Waste Connections
of Washington,
Inc. Parent Common 1,000 1,000 1,000 $1.00
- ---------------- ----------- ----------- ------------ ----------- ----------- ------------
Madera Disposal
Systems, Inc. Parent Common 1,000,000 500 500 None
- ---------------- ----------- ----------- ------------ ----------- ----------- ------------
</TABLE>
<PAGE> 1
EXHIBIT 10.2
WASTE CONNECTIONS, INC.
1997 STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Plan is to provide a means for the Company and any
Subsidiary, through the grant of Incentive Stock Options and Nonqualified Stock
Options to selected Employees, Consultants and Directors, to attract and retain
persons of ability as Employees, Consultants and Directors, and to motivate such
persons to exert their best efforts on behalf of the Company and any Subsidiary.
2. DEFINITIONS.
(a) "BOARD" means the Company's Board of Directors.
(b) "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
(c) "COMMITTEE" means a committee appointed by the Board in accordance
with section 4(b) of the Plan.
(d) "COMPANY" means Waste Connections, Inc., a Delaware corporation.
(e) "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Subsidiary to render consulting services and who is compensated for
such services; provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE, CONSULTANT OR DIRECTOR" means the
employment or relationship as a Consultant or Director is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Consultant or Director shall be considered interrupted in
the case of (i) any leave of absence approved by the Board, including sick
leave, military leave or any other personal leave, or (ii) transfers between
locations of the Company or between the Company and a Subsidiary or their
successors.
(g) "DIRECTOR" means a member of the Company's Board.
(h) "DISABILITY" means permanent and total disability within the meaning
of section 422(c)(6) of the Code.
1
<PAGE> 2
(i) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Subsidiary of the Company. Neither service as a
Consultant or a Director nor receipt of a director's fee from the Company shall
be sufficient to constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "INCENTIVE STOCK OPTIONS" means Options that are intended to qualify
as incentive stock options within the meaning of section 422 of the Code.
(l) "NON-EMPLOYEE DIRECTOR" means a Director who satisfies the
requirements established from time to time by the Securities and Exchange
Commission for non-employee directors under Rule 16b-3.
(m) "NONQUALIFIED STOCK OPTIONS" means Options that are not intended to
qualify as Incentive Stock Options.
(n) "OFFICER" means a person who is an officer of the Company or a
Subsidiary within the meaning of section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.
(o) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(p) "OPTIONEE" means an Employee, Consultant or Director who holds an
outstanding Option.
(q) "OPTIONS" means, collectively, Incentive Stock Options and
Nonqualified Stock Options.
(r) "OUTSIDE DIRECTOR" means a member of the Board who satisfies the
requirements established from time to time for outside directors under section
162(m) of the Code.
(s) "PLAN" means this Waste Connections, Inc., 1997 Stock Option Plan.
(t) "RULE 16B-3" means Rule 16b-3 under the Exchange Act or any
successor to Rule 16b-3, as amended from time to time and as in effect when
discretion is being exercised with respect to the Plan.
(u) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(v) "STOCK" means the Common Stock of the Company.
2
<PAGE> 3
(w) "SUBSIDIARY" means any corporation that at the time an Option is
granted under the Plan qualifies as a subsidiary of the Company under the
definition of "subsidiary corporation" contained in section 424(f) of the Code,
or any similar provision hereafter enacted.
(x) "TEN PERCENT SHAREHOLDER" means an individual who, at the time of an
Option grant, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company.
3. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in section 6 for changes in Stock, the
Stock that may be sold pursuant to Options shall not exceed in the aggregate
1,200,000 shares. That number of shares shall be reserved for Options (subject
to adjustment as provided in section 6). If any Option for any reason
terminates, expires or is cancelled without having been exercised in full, the
Stock not purchased under such Option shall revert to and again become available
for issuance under the Plan.
4. ADMINISTRATION.
(a) The Plan shall be administered by the Board or, at the election of
the Board, by a Committee, as provided in subsection (b). Subject to the Plan,
the Board shall:
(i) determine and designate from time to time those Employees,
Consultants and Directors to whom Options are to be granted, and whether the
Options granted will be Incentive Stock Options or Nonqualified Stock Options;
(ii) authorize the granting of Incentive Stock Options,
Nonqualified Stock Options or combinations thereof;
(iii) determine the number of shares subject to each Option and the
Exercise Price of each Option;
(iv) determine the time or times when and the manner in which each
Option shall be exercisable and the duration of the exercise period;
(v) construe and interpret the Plan and the Options, and
establish, amend and revoke rules and regulations for the Plan's administration,
and correct any defect, omission or inconsistency in the Plan or any Option
Agreement in a manner and to the extent it deems necessary or expedient to make
the Plan fully effective; and
(vi) make such other determinations as it may be authorized to make
in the Plan and as it may deem necessary and desirable for the purposes of the
Plan.
3
<PAGE> 4
Notwithstanding the foregoing, however, (1) no Option shall be granted after the
expiration of ten years from the effective date of the Plan specified in section
9 below, (2) the aggregate fair market value (determined as of the date the
Option is granted) of the Stock subject to Options that become exercisable for
the first time by any Employee during any calendar year under all Incentive
Stock Options of the Company and its Subsidiaries shall not exceed $100,000, and
(3) no person who is not an Employee of the Company or a Subsidiary shall be
entitled to receive Incentive Stock Options under the Plan.
(b) The Board may delegate administration of the Plan to a Committee of
the Board. The Committee shall consist of not less than three members appointed
by the Board. Subject to the foregoing, the Board may from time to time increase
the size of the Committee and appoint additional members, remove members (with
or without cause) and appoint new members in substitution therefor, or fill
vacancies, however caused. If the Board delegates administration of the Plan to
a Committee, the Committee shall have the powers theretofore possessed by the
Board with respect to the administration of the Plan (and references in this
Plan to the Board shall apply to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan.
(c) Notwithstanding anything in this section 4 to the contrary,
beginning at such time as the Company first registers a class of equity
securities under section 12 of the Exchange Act, all decisions to grant Options
shall be made by the Board or by a Committee comprised solely of two or more
Directors, each of whom is both a Non-Employee Director and an Outside Director,
or shall be made in another manner that satisfies the requirements of Section
16b-3, so that transactions between the Company and any Officer or Director
relating to such Options may be exempt from section 16(b) of the Exchange Act.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted shall be evidenced by an Option Agreement in
substantially the form attached hereto as Annex A or Annex B or such other form
as may be approved by the Board. Each Option Agreement shall include the
following terms and conditions and such other terms and conditions as the Board
may deem appropriate:
(a) OPTION TERM. Each Option Agreement shall specify the term for which
the Option thereunder is granted and shall provide that such Option shall expire
at the end of such term. The Board may extend such term; provided that, in the
case of an Incentive Stock Option, such extension shall not in any way
disqualify the Option as an Incentive Stock Option. The term of any Option,
including any such extensions, shall not exceed ten years from the date of
grant; provided that, in the case of an Incentive Stock Option granted to a Ten
Percent Shareholder, such term, including extensions, shall not exceed five
years from the date of grant.
4
<PAGE> 5
(b) EXERCISE PRICE. Each Option Agreement shall specify the exercise
price per share, as determined by the Board at the time the Option is granted;
provided that the exercise price of an Incentive Stock Option shall be not less
than the fair market value, or if granted to a Ten Percent Shareholder, 110
percent of the fair market value, of one share of Stock on the date the Option
is granted, as such fair market value is determined by the Board.
(c) VESTING. Each Option Agreement shall specify when it is exercisable.
The total number of shares of Stock subject to an Option may, but need not, be
allotted in periodic installments (which may, but need not be, equal). An Option
Agreement may provide that from time to time during each of such installment
periods, the Option may become exercisable ("vest") with respect to some or all
of the shares allotted to that period, and may be exercised with respect to some
or all of the shares allotted to such period or any prior period as to which the
Option shall have become vested but shall not have been fully exercised. An
Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other criteria)
as the Board deems appropriate.
(d) PAYMENT OF PURCHASE PRICE ON EXERCISE. Each Option Agreement shall
provide that the purchase price of the shares as to which such Option may be
exercised shall be paid to the Company at the time of exercise either (i) in
cash, or (ii) in the absolute discretion of the Board (which discretion may be
exercised in a particular case without regard to any other case or cases), at
the time of the grant or thereafter, (A) by the withholding of shares of Stock
issuable on exercise of the Option or the delivery to the Company of other Stock
owned by the Optionee, provided in either case that the Optionee has owned
shares of Stock equal in number to the shares so withheld for a period
sufficient to avoid a charge to the Company's reported earnings, (B) according
to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of Stock) with the person to whom the
Option is granted or to whom the Option is transferred pursuant to section 5(e),
or (C) in any other form of legal consideration that may be acceptable to the
Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate necessary to avoid
the treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement, or if less, the maximum rate permitted by law.
(e) NONTRANSFERABILITY. An Option shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of by the Optionee
during his or her lifetime, whether by operation of law or otherwise, other than
by will or the laws of descent and distribution applicable to the Optionee, and
shall not be made subject to execution, attachment or similar process; provided
that the Board may in its discretion at the time of approval of the grant of an
Option or thereafter permit an Optionee to transfer an Option to a trust or
other entity established by the Optionee for estate planning purposes, and may
permit further transferability or impose conditions or limitations on any
permitted transferability. Otherwise, during the lifetime of an Optionee, an
Option shall be exercisable only by such Optionee.
5
<PAGE> 6
(f) CONDITIONS ON EXERCISE OF OPTIONS AND ISSUANCE OF SHARES.
(i) SECURITIES LAW COMPLIANCE. The Plan, the grant and exercise of
Options thereunder and the obligation of the Company to sell and deliver shares
on exercise of Options shall be subject to all applicable Federal and state
laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required, in the opinion of the Board. Shares shall
not be issued on exercise of an Option until (1) the listing of such shares on
any stock exchange on which the Stock may then be listed and compliance with all
requirements of such exchange, and (2) the completion of any registration or
qualification of such shares under any Federal or state law, including without
limitation the Securities Act and the Exchange Act, or any rule or regulation of
any government body which the Company determines in its sole discretion to be
necessary or advisable.
(ii) INVESTMENT REPRESENTATION. The Company may require any
Optionee, or any person to whom an Option is transferred, as a condition of
exercising such Option, to (1) give written assurances satisfactory to the
Company as to the Optionee's knowledge and experience in financial and business
matters or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters,
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the Stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the Stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall not apply if (A) the issuance of the Stock on the exercise
of the Option has been registered under a then currently effective registration
statement under the Securities Act, or (B) counsel for the Company determines as
to any particular requirement that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, with
the advice of its counsel, place such legends on stock certificates issued under
the Plan as the Company deems necessary or appropriate to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the Stock.
(g) EXERCISE AFTER DEATH OF OPTIONEE. If an Optionee dies (i) while an
Employee, Consultant or Director, or (ii) within three months after termination
of the Optionee's Continuous Status as an Employee, Consultant or Director
because of his or her Disability or retirement, his or her Options may be
exercised (to the extent that the Optionee was entitled to do so on the date of
death or termination) by the Optionee's estate or by a person who shall have
acquired the right to exercise the Options by bequest or inheritance, but only
within the period ending on the earlier of (1) one year after the Optionee's
death (or such shorter or longer period specified in the Option Agreement, which
period shall not be less than six months), or (2) the expiration date specified
in the Option Agreement. If after the Optionee's death, the Optionee's estate or
the person who acquired the right to exercise the Optionee's Options does not
exercise
6
<PAGE> 7
the Options within the time specified herein, the Options shall terminate and
the shares covered by such Options shall revert to and again become available
for issuance under the Plan.
(h) EXERCISE AFTER TERMINATION OF OPTIONEE'S CONTINUOUS STATUS AS AN
EMPLOYEE, CONSULTANT OR DIRECTOR AS A RESULT OF DISABILITY OR RETIREMENT. If an
Optionee's Continuous Status as an Employee, Consultant or Director terminates
as a result of the Optionee's Disability or retirement, and the Optionee does
not die within the following three months, the Optionee may exercise his or her
Options (to the extent that the Optionee was entitled to exercise them on the
date of termination), but only within the period ending on the earlier of (i)
six months after such termination (or such longer period specified in the Option
Agreement), or (ii) the expiration of the term set forth in the Option
Agreement. If after termination, the Optionee does not exercise his or her
Options within the time specified herein, the Options shall terminate, and the
shares covered by such Options shall revert to and again become available for
issuance under the Plan.
(i) NO EXERCISE AFTER TERMINATION OF OPTIONEE'S CONTINUOUS STATUS AS AN
EMPLOYMENT, CONSULTANT OR DIRECTOR OTHER THAN AS A RESULT OF DEATH, DISABILITY
OR RETIREMENT. If an Optionee's Continuous Status as an Employee, Consultant or
Director terminates other than as a result of the Optionee's death, Disability
or retirement, all right of the Optionee to exercise his or her Options shall
terminate on the date of termination of such Continuous Status as an Employee,
Consultant or Director. The Options shall terminate on such termination date,
and the shares covered by such Options shall revert to and again become
available for issuance under the Plan.
(j) EXCEPTIONS. Notwithstanding subsections (h), (i) and (j), the Board
shall have the authority to extend the expiration date of any outstanding Option
in circumstances in which it deems such action to be appropriate, provided that
no such extension shall extend the term of an Option beyond the expiration date
of the term of such Option as set forth in the Option Agreement.
(k) INCENTIVE STOCK OPTIONS. Each Option Agreement that provides for the
grant of an Incentive Stock Option shall contain such terms and conditions as
the Board determines to be necessary or desirable to qualify such Option as an
Incentive Stock Option within the meaning of section 422 of the Code.
(l) COMPANY'S REPURCHASE RIGHT. Each Option Agreement may, but is not
required to, include provisions whereby the Company shall have the right to
repurchase any and all shares acquired by an Optionee on exercise of any Option
granted under the Plan, at such price and on such other terms and conditions as
the Board may approve and as may be set forth in the Option Agreement. Such
right shall be exercisable by the Company after termination of an Optionee's
Continuous Status as an Employee, Consultant or Director, whenever such
termination may occur and whether such termination is voluntary or involuntary,
with cause or without cause, without regard to the reason therefor, if any.
7
<PAGE> 8
6. ADJUSTMENTS ON CHANGES IN STOCK.
(a) If any change in the Stock subject to the Plan or subject to any
Option occurs (through stock dividend, dividend in property other than cash,
recapitalization, reorganization, reclassification, stock split or reverse stock
split, liquidating dividend, combination or exchange of shares, merger or
consolidation, any direct or indirect offering of Stock at a price substantially
below fair market value, or any similar change affecting the Stock), the Board
will appropriately adjust the class(es) and maximum number of shares subject to
the Plan and the class(es) and number of shares and price per share of Stock
subject to the outstanding Options.
(b) In the event of (i) a merger or consolidation in which the Company
is not the surviving corporation, or (ii) a reverse merger in which the Company
is the surviving corporation but the shares of the Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise, then to the extent
permitted by applicable law: (1) any surviving corporation shall assume any
Options outstanding under the Plan or shall substitute similar options for those
outstanding under the Plan, or (2) any Options outstanding under the Plan shall
continue in full force and effect. If any surviving corporation refuses to
assume or continue such Options, or to substitute similar options for those
outstanding under the Plan, then such Options shall be terminated if not
exercised prior to the merger or reverse merger. If the Company dissolves or is
liquidated, any Options outstanding under the Plan shall terminate if not
exercise prior to such event.
7. AMENDMENT OF THE PLAN.
(a) The Board may from time to time amend or modify the Plan for any
reason; provided that the Company will seek shareholder approval for any change
if and to the extent required by applicable law, regulation or rule.
(b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to cause the Plan
or Incentive Stock Options to comply therewith.
(c) Rights and obligations under any Option granted before amendment of
the Plan shall not be altered or impaired by any amendment, unless the Optionee
consents in writing.
8. TERMINATION OR SUSPENSION OF THE PLAN.
The Board may suspend or terminate the Plan at any time for any reason.
Unless sooner terminated, the Plan shall terminate on the day prior to the tenth
anniversary of the earlier of the date the Plan is adopted by the Board or the
date the Plan is approved by the Company's
8
<PAGE> 9
shareholders. No Options may be granted under the Plan while the Plan is
suspended or after it is terminated. Rights and obligations under any Option
granted while the Plan is in effect shall not be altered or impaired by
suspension or termination of the Plan, except with the written consent of the
Optionee.
9. EFFECTIVE DATE OF THE PLAN.
The effective date of the Plan shall be determined by the Board, subject
to approval by the shareholders of the Company holding not less than a majority
of the shares present and voting at an annual or special meeting or by written
consent. Notwithstanding the foregoing, if the Plan is approved by the Board
prior to such meeting or the giving of such consent, Options may be granted by
the Board as provided herein subject to such subsequent shareholder approval.
9
<PAGE> 10
10. WITHHOLDING TAXES.
Whenever the Company proposes or is required to issue or transfer shares
of Stock under the Plan, the Company shall have the right to require the grantee
to remit to the Company an amount sufficient to satisfy any Federal, state or
local withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. Alternatively, the Company may issue or transfer
such shares net of the number of shares sufficient to satisfy the withholding
tax requirements. For withholding tax purposes, the shares of Stock shall be
valued on the date the withholding obligation is incurred.
11. MISCELLANEOUS.
(a) NO RIGHTS AS SHAREHOLDER. No Optionee, as such, shall have any
rights as a shareholder of the Company.
(b) NO RIGHTS TO CONTINUED EMPLOYMENT OR ENGAGEMENT. The Plan and any
Options granted under the Plan shall not confer on any Optionee any right with
respect to continuation of employment by the Company or any Subsidiary or
engagement as a Consultant or Director, nor shall they interfere in any way with
the right of the Company or any Subsidiary that employs or engages an Optionee
to terminate the Optionee's employment or engagement at any time.
(c) COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT. Beginning at such
time as the Company first registers a class of equity securities under section
12 of the Exchange Act, the Company intends that the Plan shall comply in all
respects with Rule 16b-3. If after such time any provision of this Plan is found
not to be in compliance with Rule 16b-3, that provision shall be deemed to have
been amended or deleted as and to the extent necessary to comply with Rule
16b-3, and the remaining provisions of the Plan shall continue in full force and
effect without change. All transactions under the Plan after such time shall be
executed in accordance with the requirements of section 16 of the Exchange Act
and the applicable regulations promulgated thereunder.
10
<PAGE> 1
EXHIBIT 10.3
THE SECURITIES TO WHICH THIS AGREEMENT RELATES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. SUCH SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT THEREFOR UNDER
SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
INCENTIVE STOCK OPTION AGREEMENT
__________________, Optionee:
Waste Connections., Inc. (the "Company"), pursuant to its 1997 Stock
Option Plan (the "Plan"), has this ______________, 19___, granted to you, the
optionee named above, an option to purchase shares of the common stock of the
Company ("Stock"). This option is intended to qualify as an "incentive stock
option" within the meaning of section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
The grant under this Incentive Stock Option Agreement (the "Agreement")
is in connection with and in furtherance of the Company's compensatory benefit
plan for participation of the Company's Employees (including Officers),
Directors or Consultants and is intended to comply with Rule 701 promulgated by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"). Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Plan. The option granted
hereunder shall be subject to and governed by the following terms and
conditions:
1. The total number of shares of Stock subject to this option is
______________ shares. Subject to the limitations herein and in the Plan, this
option shall become exercisable (vest) as follows:
Number of Shares Date of Earliest Exercise
(Installment) (Vesting)
1.
<PAGE> 2
The installments provided for are cumulative. Each such installment that becomes
exercisable shall remain exercisable until expiration or earlier termination of
the option.
2. (a) The exercise price of this option is $_____________________
per share, being not less than 100 percent of [110 percent if Optionee is a Ten
Percent Shareholder] the fair market value of the Stock on the date of grant of
this option.
(b) Payment of the exercise price per share is due in full in
cash (including check) on exercise of all or any part of each installment that
has become exercisable by you; provided that, if at the time of exercise the
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment of the exercise price, to the extent permitted by the Company and
applicable statutes and regulations, may be made by having the Company withhold
shares of Stock issuable on such exercise, by delivering shares of Stock already
owned by you, or by delivering a combination of cash and such shares. Such Stock
(i) shall be valued at its fair market value at the close of business on the
date of exercise, (ii) if originally acquired from the Company, must have been
held for the period required to avoid a charge to the Company's reported
earnings, and (iii) must be owned free and clear of any liens, claims,
encumbrances or security interests.
(c) Notwithstanding the foregoing, this option may be exercised
pursuant to a program developed under Regulation T as promulgated by the Federal
Reserve Board which results in the receipt of cash (or check) by the Company
prior to the issuance of Stock.
3. (a) Subject to the provisions of this Agreement, you may elect
at any time during your Continuous Status as an Employee, Consultant or Director
to exercise this option as to any part or all of the shares subject to this
option at any time during the term hereof, including, without limitation, a time
prior to the date of earliest exercise (vesting) stated in paragraph 1 hereof;
provided that:
(i) a partial exercise of this option shall be deemed to
cover first vested shares and then unvested shares next vesting;
(ii) any shares so purchased that shall not have vested as
of the date of exercise shall be subject to the purchase option in favor of the
Company as described in the Early Exercise Stock Purchase Agreement available
from the Company;
(iii) you shall enter into an Early Exercise Stock
Purchase Agreement in the form available from the Company with a vesting
schedule that will result in the same vesting as if no early exercise had
occurred; and
(iv) you acknowledge that the aggregate fair market value
(determined as of the date options are granted) of any Stock subject to
Incentive Stock Options granted to you by the Company or any parent or
Subsidiary that become exercisable for the first time during any
2.
<PAGE> 3
calendar year may not exceed $100,000, and agree that to the extent that the
aggregate fair market value of Stock with respect to which such Incentive Stock
Options are exercisable by you for the first time in a calendar year exceeds
$100,000, the options or portions thereof in excess of such limit shall be
treated (according to the order in which they were granted) as Nonqualified
Stock Options.
(b) The election provided in this paragraph 3 to purchase shares
on the exercise of this option prior to the vesting dates shall cease on
termination of your Continuous Status as an Employee, Consultant or Director and
may not be exercised from or after the date thereof.
4. This option may not be exercised for any number of shares that would
require the issuance of anything other than whole shares.
5. Notwithstanding anything to the contrary herein, this option may not
be exercised unless the shares issuable on exercise of this option are then
registered under the Act or, if such shares are not then so registered, the
Company shall have determined that such exercise and issuance would be exempt
from the registration requirements of the Act.
6. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on
___________________ (which date shall be no more than [ten years] [five years if
Optionee is a Ten Percent Shareholder] from the date this option is granted). In
no event may this option be exercised on or after the date on which it
terminates. This option shall terminate prior to the expiration of its term on
the day after the termination of your Continuous Status as an Employee,
Consultant or Director for any reason or for no reason, unless:
(a) such termination is due to your retirement or Disability and
you do not die within the three months after such termination, in which event
the option shall terminate on the earlier of the termination date set forth
above or six months after such termination of your Continuous Status as an
Employee, Consultant or Director; or
(b) such termination is due to your death, or such termination is
due to your retirement or Disability and you die within three months after such
termination, in which event the option shall terminate on the earlier of the
termination date set forth above or the first anniversary of your death.
Notwithstanding any of the foregoing provisions to the contrary
however, this option may be exercised following termination of your Continuous
Status as an Employee, Consultant or Director only as to that number of shares
as to which it shall have been exercisable under paragraph 1 of this Agreement
on the date of such termination.
3.
<PAGE> 4
7. (a) This option may be exercised, to the extent specified above,
by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subsection 5(f) of the Plan.
(b) By exercising this option you agree that:
(i) the Company may require you to enter into an arrangement
providing for the cash payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired on
such exercise;
(ii) you will notify the Company in writing within fifteen
days after the date of any disposition of any of the shares of the Stock issued
on exercise of this option that occurs within two years after the date of this
option grant or within one year after such shares of Stock are issued on
exercise of this option; and
(iii) the Company (or a representative of the underwriters)
may, in connection with an underwritten registration of the offering of any
securities of the Company under the Act, require that you not sell or otherwise
transfer or dispose of any shares of Stock or other securities of the Company
during such period (not to exceed 180 days) following the effective date (the
"Effective Date") of the registration statement of the Company filed under the
Act as may be requested by the Company or the representative of the
underwriters. For purposes of this restriction, you will be deemed to own
securities which (i) are owned directly or indirectly by you, including
securities held for your benefit by nominees, custodians, brokers or pledgees;
(ii) may be acquired by you within sixty days of the Effective Date; (iii) are
owned directly or indirectly, by or for your brothers or sisters (whether by
whole or half blood) spouse, ancestors and lineal descendants; or (iv) are
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust of which you are a shareholder, partner or beneficiary, but only to the
extent of your proportionate interest therein as a shareholder, partner or
beneficiary thereof. You further agree that the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
8. You hereby represent and warrant to and agree with the Company as
follows:
(a) You have been granted access to, and have reviewed carefully,
the Plan and such records of the Company as may be necessary to permit you to
evaluate the option and, before any exercise of the option, you will review such
records of the Company as may be necessary to permit you to evaluate the merits
and risks of an investment in Stock. You are entering into this Agreement and
the transactions contemplated hereby solely in reliance on your own
investigation and such review. You have had an opportunity to meet with the
officers of the
4.
<PAGE> 5
Company subsequent to review of such information to discuss with them your
questions concerning the Company and the terms and conditions of the
acquisitions hereunder.
(b) You are acquiring the option and will acquire the Stock, if
at all, pursuant to this Agreement with your own funds, and not with the funds
of anyone else. You are acquiring the option and will acquire the Stock, if at
all, for your own account, not as a nominee or agent and not for the account of
any other person or firm. No one else has or will have on any exercise of the
option any interest, beneficial or otherwise, in the option or, on the exercise
of the option, in any of the shares of Stock to be acquired on such exercise.
You are not, and prior to any exercise of the option will not be, obligated to
transfer the option or any Stock or any interest therein to anyone else, and you
do not and will not have any agreement or understanding to do so. You are
acquiring the option and will purchase Stock on the exercise hereof, if at all,
for investment for an indefinite period and not with a view to the sale or
distribution of the option or any Stock or any part or all thereof, by public or
private sale or other disposition, and you have no intention of selling,
granting any participation in or otherwise distributing or disposing of any or
all of the option or any Stock or any interest therein. You do not, and on any
exercise of the option will not, intend to subdivide the option or any shares
purchased on exercise thereof with anyone.
(c) At the time of any acquisition of Stock you will be able to
bear the economic risk of the investment in any Stock purchased. You are aware
that if you exercise the option, you must be prepared to hold any Stock received
for an indefinite period. You understand that neither the option nor the Stock
has been registered under the Act, on the ground, among others, that no
distribution or public offering of the Company's securities is to be effected
and any Stock acquired on exercise thereof will be acquired in connection with
transactions not involving any public offering within the meaning of section
4(2) of the Act. The Stock, if and when issued, will be "restricted securities",
as that term is defined in Rule 144 under the Act, and, accordingly, apart from
exercise of the option, the option and such Stock must be held indefinitely
unless they are subsequently registered under the Act or an exemption from such
registration is available. You understand and agree that the Company is not
under any obligation to register the option or any Stock under the Act or to
comply with any exemption under the Act.
You understand that the Company is relying in part on your
representations as set forth herein for purposes of claiming the exemption from
registration under the Act provided in section 3(b) or 4(2) thereof and that the
basis for such exemption may not be present if, notwithstanding your
representations herein, you have in mind merely acquiring the option or shares
for resale on the occurrence or nonoccurrence of some predetermined event. You
do not have in mind merely acquiring the option or any shares for resale on the
occurrence or nonoccurrence of any predetermined event.
(d) You have such knowledge and experience in financial and
business matters that the you are capable of evaluating the merits and risks of
the prospective investment contemplated by this Agreement, and you have
carefully reviewed and will carefully review all
5.
<PAGE> 6
the information regarding the Company, access to which has been and will be
accorded to you hereunder, are thoroughly familiar with the business, operations
and properties of the Company by virtue of such review and of your relationship
with the Company and have discussed with the officers of the Company any
questions you have with respect to the Company.
(e) Without in any way limiting your representations as set forth
herein, you further agree that you shall in no event make any disposition of all
or any part of or interest in the Stock or the option and that the Stock and the
option shall not be encumbered, pledged, hypothecated, sold, assigned or
transferred by you nor shall you receive any consideration for the option or any
Stock or for any interest therein from any person, unless and until prior to any
proposed encumbrance, pledge, hypothecation, sale, assignment, transfer or other
disposition of the option or any Stock, either (i) a registration statement on
Form S-1 (or any other form replacing such form or appropriate for the purpose
under the Act) with respect to the option or the Stock, as the case may be,
proposed to be transferred or otherwise disposed of shall be then effective or
(ii)(1) you have notified the Company of the proposed disposition and have
furnished the Company with a detailed statement of the circumstances surrounding
the proposed disposition, (2) you have furnished the Company with an opinion of
counsel (obtained at your expense) in form and substance satisfactory to the
Company to the effect that such disposition will not require registration of the
option or any Stock, as the case may be, under the Act or qualification of the
option or any Stock, as the case may be, under any other securities law and (3)
counsel for the Company shall have concurred in such opinion and the Company
shall have advised you of such concurrence.
(f) If the Company proposes to sell Stock in a public offering
registered under the Act or exempt from registration under the Act, the
administrators of the securities laws of certain states may require as a
condition of registration or such exemption that some or all of the Shares be
deposited in an escrow or be subject to waivers of rights to dividends and
assets on liquidation, or both, for an extended period of time, subject to
release if specified financial or market requirements are met and partial
cancellation if such requirements are not met. You agree that you will enter
into any such escrow or waiver agreement that the Company may consider necessary
for the successful completion of such public offering.
(g) If, in the opinion of counsel for the Company, you at any
time act in any manner not consistent with your representations, warranties and
agreements in this Agreement, the Company may refuse to transfer the option or
any Stock until such time as counsel for the Company is of the opinion that such
transfer may be effected in compliance with all provisions of this Agreement and
such transfer will not require registration of the option or any Stock under the
Act or qualification of the option or any Stock under any other securities law.
(h) You hereby agree to indemnify and defend the Company and its
directors, officers, employees and agents and hold them harmless from and
against any and all claims, liabilities, damages or expenses incurred on account
of or arising out of (i) any inaccuracy in or breach of any of your
representations, warranties or agreements in this Agreement, including,
6.
<PAGE> 7
without limitation, the defense of any claim based on any allegation of fact
inconsistent with any of such representations, warranties or agreements; (ii)
the disposition of the option or any Stock that you may receive, contrary to any
of such representations, warranties and agreements; or (iii) any action, suit or
proceeding based on a claim that any of such representations, warranties or
agreements were inaccurate or misleading or otherwise cause for obtaining
damages or redress from the Company under the Act or any other securities law.
(i) Certificates representing any Stock received on exercise of
the option will bear a legend on the face thereof (or on the reverse thereof
with a reference to such legend on the face thereof) substantially in the form
set forth below, which legend restricts the sale, transfer or disposition of the
Stock otherwise than in accordance with this Agreement:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
ENCUMBERED, PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND CONCURRED IN BY
THE CORPORATION'S COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR SUCH TRANSACTION COMPLIES WITH RULES PROMULGATED BY THE SECURITIES
AND EXCHANGE COMMISSION UNDER SAID ACT. IN ADDITION, SALE, TRANSFER,
ENCUMBRANCE, HYPOTHECATION, GIFT OR OTHER DISPOSITION OR ALIENATION OF SUCH
SHARES OR ANY INTEREST THEREIN IS RESTRICTED BY AND SUBJECT TO AN INCENTIVE
STOCK OPTION AGREEMENT DATED ________________, 19__, A COPY OF WHICH MAY BE
INSPECTED AT THE PRINCIPAL OFFICE OF THE CORPORATION AND ALL OF THE
PROVISIONS OF WHICH ARE INCORPORATED BY REFERENCE IN THIS CERTIFICATE.
(j) If Stock acquired on exercise of this option is transferred
other than by will or by the laws of descent and distribution within two years
after the date this option is granted or within one year after the issuance of
such Stock on exercise of this option, such transfer shall be a "disqualifying
disposition" under the Code, and you must bear the tax consequences thereof.
(k) The Company may require you to furnish to the Company, prior
and as a condition to the issuance of any Stock on any exercise of the option,
an agreement (in such form as the Company may specify) in which you confirm the
foregoing representations, warranties and agreements or make similar or
additional representations, warranties and agreements with respect to such
Stock.
7.
<PAGE> 8
9. This option is generally not transferable, except by will or by the
laws of descent and distribution, unless the Company expressly permits a
transfer, such as to a trust or other entity for estate planning purposes.
Unless the Company approves such a transfer, this option is exercisable during
your life only by you.
10. This Agreement is not an employment contract and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company, or of the Company to continue
your employment with the Company.
11. Any notice or other communication to be given under or in
connection with this Agreement or the Plan shall be given in writing and shall
be deemed effectively given on receipt or, in the case of notices from the
Company to you, five days after deposit in the United States mail, postage
prepaid, addressed to you at the address specified below or at such other
address as you may hereafter designate by notice to the Company.
12. This Agreement is subject to all provisions of the Plan, a copy
of which is attached hereto and made a part of this Agreement, including,
without limitation, the provisions of section 5 of the Plan relating to option
provisions, and is further subject to all interpretations, amendments, rules
and regulations which may from time to time be promulgated and adopted pursuant
to the Plan. In the event of any conflict between the provisions of this
Agreement and those of the Plan, the provisions of the Plan shall control.
WASTE CONNECTIONS, INC.
By
---------------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1997 Stock Option Plan
Notice of Exercise
8.
<PAGE> 9
The undersigned:
(a) Acknowledges receipt of the foregoing Incentive Stock Option
Agreement and the attachments referenced therein and understands that all rights
and liabilities with respect to the option granted under the Agreement are set
forth in such Agreement and the Plan; and
(b) Acknowledges that as of the date of grant set forth in such
Agreement, the Agreement sets forth the entire understanding between the
undersigned optionee and the Company and its Subsidiaries regarding the
acquisition of Stock pursuant to the option and supersedes all prior oral and
written agreements on that subject with the exception of (i) the options, if
any, previously granted and delivered to the undersigned under stock option
plans of the Company, and (ii) the following agreements only:
NONE:
-------------
(Initial)
OTHER:
-------------------------
-------------------------
-------------------------
-------------------------------------
OPTIONEE
Address:
-----------------------------
-----------------------------
9.
<PAGE> 1
EXHIBIT 10.4
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK PURCHASABLE ON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE ENCUMBERED, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT THEREFOR UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION AND CONCURRED IN BY
THE CORPORATION'S COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR SUCH TRANSACTION COMPLIES WITH RULES
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT.
Warrant No. ___ Warrant to Purchase
________ shares of
Common Stock (Subject
to Adjustment)
WARRANT TO PURCHASE COMMON STOCK
of
WASTE CONNECTIONS, INC.
Void after December 14, 2008
This certifies that for value received,____, ("Holder") is entitled,
subject to the terms set forth below, at any time or from time to time before
5:00 p.m., Pacific standard time, on December 14, 2008, to purchase from Waste
Connections, Inc., a Delaware corporation (the "Company"), up to ____ fully paid
and nonassessable shares of the common stock, par value $0.01 per share, of the
Company (the "Common Stock") as constituted on December 15, 1998 (the "Issue
Date"), upon surrender hereof at the principal office of the Company, with the
subscription form attached hereto properly completed and duly executed, and
simultaneous payment therefor in lawful money of the United States at the price
of $2.80 per share, subject to adjustment as provided in Section 4 hereof (the
"Purchase Price"). The number and character of such shares of Common Stock are
also subject to adjustment as provided below. Such number shall be reduced at
such time or times as this Warrant is exercised in part by the number of shares
as to which this Warrant is then exercised. The term "Warrant Stock" shall mean,
unless the context otherwise requires, the stock and other securities and
property at any time receivable upon the exercise of this Warrant. The term
"warrant" as used herein shall include this Warrant and any warrants delivered
in substitution or exchange therefor as provided herein.
1. Method of Exercise; Payment. Subject to compliance with the
provisions of Section 7 hereof:
<PAGE> 2
A. Cash Exercise. This Warrant may be exercised as a whole, or in
part from time to time, by the Holder by delivering this Warrant, for
cancellation if it is exercised as a whole or for endorsement if it is exercised
in part, together with a Subscription in the form appearing at the end hereof
properly completed and duly executed by or on behalf of the Holder, to the
Company at its office in Roseville, California (or at the office of the agency
maintained for such purpose), accompanied by payment in cash or by certified or
official bank check payable to the order of the Company, in an aggregate amount
equal to the Purchase Price as then adjusted times the number of shares of
Warrant Stock as to which this Warrant is then being exercised. In the event of
any such exercise that is partial, the Company shall endorse this Warrant as
having been exercised to that extent and return this Warrant to the Holder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Warrant Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date.
B. Net Issue Exercise. In lieu of exercising this Warrant
pursuant to Section 1.A, Holder may elect to receive shares equal to the value
of this Warrant (or the portion thereof being cancelled) by surrender of this
Warrant at such office together with notice of such election, in which event the
Company shall issue to Holder a number of shares of Warrant Stock computed using
the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Warrant Stock to be issued to Holder.
Y = the number of shares of Warrant Stock purchasable under this
Warrant at the date of such calculation or, if only a portion of
this Warrant is being exercised, the portion of this Warrant being
cancelled at the date of such calculation.
A = the fair market value of one share of Warrant Stock purchasable
under this Warrant at the date of such calculation.
B = Purchase Price (as adjusted to the date of such calculations).
For purposes of this Warrant, fair market value of one share of Warrant Stock
shall mean:
(1) The average of the closing bid and asked prices of the Common
Stock quoted on the NASDAQ Stock Market or the closing price quoted on any
national securities
2
<PAGE> 3
exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the ten trading
days prior to the date of determination of fair market value; or
(2) If the Common Stock is not traded on the NASDAQ stock market
or on such an exchange, an amount reasonably determined in good faith by the
Board of Directors to be the fair market value.
C. Delivery of Stock Certificates. The Company will, or will
direct its transfer agent to, issue, as soon as practicable after any exercise
of this Warrant under Section 1 and in any event within thirty days thereafter,
at its expense (including the payment by it of any applicable issue taxes), in
the name of and deliver to the Holder, or as the Holder may direct (on payment
by the Holder of any applicable transfer taxes) a certificate or certificates
for the number of fully paid and nonassessable shares of Warrant Stock as to
which this warrant is so exercised.
2. Payment of Taxes. All shares of Warrant Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable,
and the Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issuance or delivery thereof. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Warrant Stock in
any name other than that of the Holder and, in such case, the Company shall not
be required to issue or deliver any stock certificate until such tax or other
charge has been paid, or it has been established to the Company's satisfaction
that no tax or other charge is due.
3. A. Transfer. Subject to Section 7, this Warrant and all rights
hereunder are transferable, as a whole or in part, on the books of the Company
maintained for such purpose at the office specified pursuant to Section 1.A, by
the Holder in person, or by duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer.
Upon any partial transfer, the Company will issue and deliver to the
Holder a new warrant or warrants of like tenor with respect to the shares of
Warrant Stock not so transferred. In lieu of any fraction of a share to which
the Holder would otherwise be entitled, the Company may deliver to the Holder
cash in an amount equal to such fraction of the current fair market value of one
full share determined in the manner provided in Section 1.B.
Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that this Warrant, when endorsed in blank, shall be
deemed negotiable and that when this Warrant shall have been so endorsed, the
person in possession of this Warrant may be treated by the Company, and all
other persons dealing with this Warrant, as the absolute owner
3
<PAGE> 4
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding, but until a
transfer of this Warrant on the books of the Company, the Company may treat the
Holder as the owner for all purposes.
B. Exchange. At the request of the Holder, the Company shall
exchange this Warrant for two or more Warrants of like tenor entitling the
Holder to purchase the same aggregate number of shares of Warrant Stock, each
new Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder shall designate at the time of such exchange; provided that
the Holder shall not be entitled so to exchange this Warrant or any warrant
received in any such exchange on more than an aggregate of five occasions.
4. A. Adjustment for Dividends in Other Stock or Property. In case at
any time, or from time to time, after the Issue Date the holders of the Common
Stock of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant), shall have received, or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive, without payment therefor:
(1) Other or additional stock or other securities or property
(other than cash) by way of a dividend;
(2) Any cash paid or payable out of capital, or capital surplus,
or surplus created as a result of a revaluation of property; or
(3) Other or additional stock or other securities or property
(including cash) by way of a stock-split, spin-off, reclassification,
combination of shares or similar corporate rearrangement;
then, and in each such case, the Holder, upon the exercise hereof (as provided
in Section 1), shall be entitled to receive the number of shares of Warrant
Stock and other securities and property (including cash in the cases referred to
in clauses (2) and (3) above) which the Holder would hold on the date of such
exercise if on the Issue Date the Holder had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the Issue Date to and including the date of
such exercise, retained such shares and/or all other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (2) and (3) above) receivable by the Holder as aforesaid during such
period, giving effect to all adjustments during such period pursuant to this
Section 4.
B. Merger, Sale of Assets, etc. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein),
4
<PAGE> 5
(ii) a merger or consolidation of the Company with or into another corporation
in which the Company is not the surviving entity, or a reverse triangular merger
in which the Company is the surviving entity but the shares of the Company's
capital stock outstanding immediately prior to the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash, or otherwise, or (iii) a sale or transfer of the Company's properties and
assets as, or substantially as, an entirety to any other person, then, as a part
of such reorganization, merger, consolidation, sale or transfer, lawful
provision shall be made so that the holder of this Warrant shall thereafter be
entitled to receive upon exercise of this Warrant, during the period specified
herein and upon payment of the Purchase Price then in effect, the number of
shares of stock or other securities or property of the successor corporation
resulting from such reorganization, merger, consolidation, sale or transfer that
a holder of the shares deliverable upon exercise of this Warrant would have been
entitled to receive in such reorganization, consolidation, merger, sale or
transfer if this Warrant had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all subject to further
adjustment as provided in this Section 4. The foregoing provisions of this
Section 4.B shall similarly apply to successive reorganizations, consolidations,
mergers, sales and transfers and to the stock or securities of any other
corporation that are at the time receivable upon the exercise of this Warrant.
If the per-share consideration payable to the holder hereof for shares in
connection with any such transaction is in a form other than cash or marketable
securities, then the value of such consideration shall be determined in good
faith by the Company's Board of Directors. In all events, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interests of the Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant.
C. Reclassification, etc. If the Company, at any time while this
Warrant, or any portion hereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change the Warrant Stock into
the same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the Warrant Stock immediately prior to such reclassification or other change
and the Purchase Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 4.
D. Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the Warrant Stock, into a different
number of securities of the same class, the Purchase Price for such securities
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
5
<PAGE> 6
E. Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of Warrant Stock receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such Holder would hold on the date of such
exercise had it been the holder of record of the Warrant Stock on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period, giving effect
to all adjustments called for during such period by the provisions of this
Section 4.
F. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 4, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder, furnish or cause to be
furnished to such Holder a like certificate setting forth: (i) such adjustments
and readjustments; (ii) the Purchase Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property that at the time
would be received upon the exercise of the Warrant.
G. No Dilution or Impairment. The Company will not by amendment
of its Articles of Incorporation, or through reorganization, consolidation,
merger, dissolution, issuance or sale of securities, sale of assets, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of Warrant Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares upon the exercise of this Warrant, and (c) will take no
action to amend its Articles of Incorporation which would change to the
detriment of the holders of Common Stock (whether or not any Common Stock be at
the time outstanding) the dividend or voting rights of the Company's Common
Stock (as constituted on the Issue Date).
H. Notices of Record Date. In case:
6
<PAGE> 7
(1) The Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution or any right to subscribe for or purchase any shares of stock of
any class or any other securities, or to receive any other right, or
(2) Of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any split or combination
of shares of any class of capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation, or
(3) Of any voluntary dissolution, liquidation or winding-up of the
Company, then, and in each such case, the Company will mail or cause to be
mailed to the Holder a notice specifying, as the case may be, (a) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, or (b) the date on which such reorganization, reclassification, split,
combination, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such stock or securities at the time
receivable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification, split,
combination, consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 90 days prior to the date
therein specified.
5. Loss or Mutilation. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new warrant of like tenor.
6. Reservation of Common Stock. The Company shall at all times reserve
and keep available for issue upon the exercise of this Warrant such number of
its authorized but unissued shares of Warrant Stock as will be sufficient to
permit the exercise in full of this Warrant.
7. Investment Intent. The Holder, by accepting this Warrant, represents
and warrants to the Company as follows:
A. Acquisition for Own Account. The Holder is acquiring this
Warrant and will acquire the shares of Warrant Stock on exercise of this Warrant
with the Holder's own funds, for the Holder's own account, not as a nominee or
agent. The Holder is not obligated to
7
<PAGE> 8
transfer this Warrant or any Warrant Stock to anyone else nor has any agreements
or understandings to do so. The Holder is purchasing or will purchase this
Warrant and the Warrant Stock for investment for an indefinite period and not
with a view to any sale or distribution thereof, by public or private sale or
other disposition, and has no intention of selling, granting any participation
in or otherwise distributing or disposing of any thereof. The Holder does not
intend to subdivide the Holder's purchase with anyone.
B. Restricted Securities. The Holder is able to bear the economic
risk of the Holder's investment in this Warrant and the Warrant Stock and is
aware that the Holder must be prepared to hold this Warrant and the Warrant
Stock for an indefinite period and that this Warrant and the Warrant Stock have
not been registered under the Securities Act of 1933, as amended (the "Act"), on
the ground that no distribution or public offering of this Warrant or the
Warrant Stock is to be effected and this Warrant or the Warrant Stock are being
or will be issued by the Company without any public offering within the meaning
of Section 4(2) of the Act.
C. Sophistication. The Holder is an "accredited investor" as that
term is defined in Regulation D under the Act. The Holder has such knowledge and
experience in financial and business matters that the Holder is capable of
evaluating the merits and risks of the Holder's investment in this Warrant and
the Warrant Stock.
D. Agreement to Refrain from Resales. Without in any way limiting
the Holder's representations herein, the Holder further agrees that the Holder
shall not encumber, pledge, hypothecate, sell, assign, transfer or otherwise
dispose of this Warrant or any Warrant Stock, unless and until, prior to any
proposed encumbrance, pledge, hypothecation, sale, assignment, transfer or other
disposition, either (i) a registration statement on Form S-l (or any other form
appropriate for the purpose or replacing such form) under the Act with respect
thereto shall be then effective (ii)(a) the Holder shall have furnished the
Company with a statement of the circumstances of the proposed disposition and an
opinion of counsel (obtained at the Holder's expense) satisfactory to the
Company to the effect that such disposition will not require registration under
the Act and (b) counsel for the Company shall have concurred in such opinion of
counsel and the Company shall have advised the Holder of such concurrence; or
(iii) the Warrant Stock can then be sold pursuant to Rule 144 under the Act.
E. Certificates to be Legended. The Holder understands and agrees
that this Warrant, any warrant issued to replace this Warrant and any
certificate representing Warrant Stock will bear a legend on the face thereof
(or on the reverse thereof with a reference to such legend on the face thereof)
in substantially the form set forth on the first page of this Warrant and any
other legend that the Company considers necessary or appropriate to comply with
any applicable securities law.
8
<PAGE> 9
8. Registration. The Company acknowledges that it has granted to
certain holders of its capital stock certain rights to registration of such
capital stock for resale under the Act, the terms and conditions of which rights
are set forth in an Investors' Rights Agreement dated as of September 30, 1997.
The Company covenants and agrees to seek an amendment to the Investors' Rights
Agreement to include the Warrant Stock in the Registrable Securities to which
the registration rights set forth in Section 1 of the Investors' Rights
Agreement so that the Holder shall be entitled to identical registration rights
pari passu with such holders of capital stock as if the Holder had acquired the
Warrant Stock concurrently with such holders and pursuant to the Investors'
Rights Agreement. If such amendment is not consented to by the holders of a
majority of the Registrable Securities as required by the Investors' Rights
Agreement, the Company shall promptly prepare and thereafter enter into with the
Holder a Registration Rights Agreement providing for the same registration
rights as the Investors' Rights Agreement, which rights shall be subject and
subordinate only to those set forth in the Investors' Rights Agreement.
9. Notices. All notices and other communications from the Company
to the Holder shall be mailed by first-class registered or certified mail,
postage prepaid, to the address furnished to the Company in writing by the last
Holder who shall have furnished an address to the Company in writing.
10. Change; Waiver. Neither this Warrant nor any term hereof may
be changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. Attorneys' Fees. In the event any party is required to engage
the services of attorneys for the purpose of enforcing this Warrant, or any
provision hereof, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and any other costs or expenses.
12. Headings. The headings in this Warrant are for purposes of
convenience in reference only, and shall not be deemed to constitute a part
hereof.
13. Law Governing. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of California.
DATED: December 15, 1997
WASTE CONNECTIONS, INC.
By: ____________________________________
9
<PAGE> 10
Ronald J. Mittelstaedt
President and
Chief Executive Officer
10
<PAGE> 11
ENDORSEMENTS
<TABLE>
<CAPTION>
Number of
Shares
Number of Shares Remaining
as to Which Available for Signature of Authorized Officer
Exercise Date Exercised Exercise of the Company
------------- ---------------- ------------- -------------------------------
<S> <C> <C> <C>
</TABLE>
11
<PAGE> 12
SUBSCRIPTION FORM
(To be executed only upon exercise of warrant)
The undersigned Holder of this Warrant irrevocably exercises this
Warrant for the purchase of _________ shares of Common Stock of Waste
Connections, Inc., purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant.
Dated: ___________________________
________________________________________
(signature of Holder)
________________________________________
(Street Address)
________________________________________
(city) (state) (zip Code)
12
<PAGE> 13
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned Holder of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:
Name of Assignee Address No. of Shares
---------------- ------- -------------
and does hereby irrevocably constitute and appoint ____________ [Attorney] to
make such transfer on the books of Waste Connections, Inc., maintained for the
purpose, with full power of substitution in the premises.
Dated: ____________________
[Holder]
By: ____________________________________
Name: ______________________________
Title: _____________________________
13
<PAGE> 1
EXHIBIT 10.5
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Company: WASTE CONNECTIONS, INC.
Number of Shares: 200,000
Class of Stock: Common
Initial Exercise Price: $0.01 per Share
Issue Date: September 30, 1997
Expiration Date: September 29, 2004
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, IMPERIAL BANK, or its designee ("Holder")
is entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share as of the date of conversion. The fair market value of
the Shares shall be determined pursuant Section 1.4.
1.3 Omitted.
1.4 Fair Market Value. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall negotiate in good faith for up to four days as
to the correct valuation. If they have not agreed upon such valuation after such
negotiation, Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1
<PAGE> 2
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1. "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. Upon the closing of any Acquisition
the successor entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. Purchase Right. Notwithstanding the foregoing, at the
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased, and vice
versa.
2
<PAGE> 3
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant shall be subject to
adjustment from time to time in the manner set forth in Holder's Anti-Dilution
Agreement.
2.5 No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional Shares shall be issuable
upon exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents
and warrants to the Holder as follows: All Shares which may be issued upon the
exercise of the purchase right represented by this Warrant, and all securities,
if any, issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws; the number of Shares that
may be purchased under this Warrant is equal to four percent (4.0%) of the
issued and outstanding stock of the Company on the Issue Date of this Warrant;
and the Initial Purchase Price is equal to the purchase price at which the
Company last sold its shares of Common Stock to any person.
3.2 Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3
<PAGE> 4
3.3 Information Rights. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 Registration Under Securities Act of 1933, as amended. The
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth on Exhibit A, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 Term; Notice of Expiration. This Warrant is exercisable, in
whole or in part, at any time and from time to time on or before the Expiration
Date set forth above.
4.2 Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and
the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company. If Holder proposes to transfer the Warrant before the Company has
sold the Shares under the Securities Act of 1933, as amended, Holder shall first
offer to transfer the Warrant to the Company on substantially the same terms and
for the same price. If the Company elects within five (5) days to accept such
offer, the Company shall promptly purchase the Warrant on such terms. If the
Company fails to accept such offer, then Holder may transfer the Warrant to the
proposed transferee in accordance with such terms.
4.5 Notices. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may be, in writing by the Company or such holder from
time to time.
4
<PAGE> 5
4.6 Waiver. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
4.7 Attorneys Fees. In the event of any dispute between the
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.
"COMPANY"
WASTE CONNECTIONS, INC.
By
-------------------------------------
Name
-----------------------------------
(Print)
Title: Chairman of the Board, President,
or Vice President
By
-------------------------------------
Name
-----------------------------------
(Print)
Title: Chief Financial Officer,
Secretary Assistant Treasurer, or
Assistant Secretary
5
<PAGE> 6
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares ____________________
of the Common Stock of __________________________ pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _____________________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
----------------------------------------
(Name)
----------------------------------------
----------------------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
----------------------------------------
(Signature)
- --------------------
(Date)
6
<PAGE> 7
EXHIBIT A
Registration Rights
The Shares (if common stock), or the common stock issuable upon
conversion of the Shares, shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
WASTE CONNECTIONS, INC. INVESTORS' RIGHTS AGREEMENT Dated as of September 30,
1997 by and among the Company and the investors party thereto.
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration rights thereunder
without the consent of Holder. By acceptance of the Warrant to which this
Exhibit A is attached, Holder shall be deemed to be a party to the Agreement.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
7
<PAGE> 8
EXHIBIT 10.5
WASTE CONNECTIONS, INC.
ANTIDILUTION AGREEMENT
THIS ANTIDILUTION AGREEMENT is entered into as of September 30, 1997, by
and between IMPERIAL BANK ("Purchaser") and WASTE CONNECTIONS, INC. (the
"Company").
RECITALS
A. Concurrently with the execution of this Antidilution Agreement, the
Purchaser is purchasing from the Company two Warrants to Purchase Stock (each, a
"Warrant') pursuant to which Purchaser has the right to acquire from the Company
the Shares (as defined in the Warrant).
B. By this Antidilution Agreement, the Purchaser and the Company desire
to set forth the adjustment in the number of Shares issuable upon exercise of
the Warrant as a result of a diluting issuance.
C. Capitalized terms used herein shall have the same meaning as set
forth in the Warrant.
NOW, THEREFORE, in consideration of the mutual promises, covenants
and conditions hereinafter set forth, the parties hereto mutually agree as
follows:
1. Definitions. As used in this Antidilution Agreement, the following
terms have the following respective meanings:
(a) "Option" means any right, option, or warrant to subscribe
for, purchase, or otherwise acquire common stock or Convertible Securities.
(b) "Convertible Securities" means any evidences of indebtedness,
shares of stock, or other securities directly or indirectly convertible into or
exchangeable for common stock.
(c) "Issue" means to grant, issue, sell, assume, or fix a record
date for determining persons entitled to receive, any security (including
Options), whichever of the foregoing is the first to occur.
(d) "Additional Common Shares" means any common stock (including
reissued shares) issued (or deemed to be issued pursuant to Section 2) after the
date of the Warrant. Additional Common Shares does not include, however, any
common stock issued in a transaction described in Sections 2.1 and 2.2 of the
Warrant; any common stock Issued upon conversion of preferred stock outstanding
on the date of the Warrant; the Shares; or common stock Issued as incentive or
in a nonfinancing transaction to employees, officers, directors, or consultants
to the Company; or the exercise of any Option.
(e) The shares of common stock ultimately Issuable upon exercise
of an Option (including the shares of common stock ultimately Issuable upon
conversion or exercise of a Convertible Security Issuable pursuant to an Option)
are deemed to be Issued when the Option is Issued. The shares of common stock
ultimately Issuable upon conversion or exercise of a Convertible Security (other
than a Convertible Security Issued pursuant to an Option) shall be deemed Issued
upon Issuance of the Convertible Security.
2. Deemed Issuance of Additional Common Shares. The shares of common
stock ultimately Issuable upon exercise of an Option (including the shares of
common stock ultimately Issuable upon conversion or exercise of a Convertible
Security Issuable pursuant to an Option) are
1
<PAGE> 9
deemed to be Issued when the Option is Issued. The shares of common stock
ultimately Issuable upon conversion or exercise of a Convertible Security (other
than a Convertible Security Issued pursuant to an Option) shall be deemed Issued
upon Issuance of the Convertible Security. The maximum amount of common stock
Issuable is determined without regard to any future adjustments permitted under
the instrument creating the Options or Convertible Securities.
3. Adjustment of Warrant Price for Diluting Issuances.
3.1 Weighted Average Adjustment. If the Company Issues Additional
Common Shares after the date of the Warrant and the consideration per Additional
Common Share (determined pursuant to Section 9) is less than the Warrant Price
in effect immediately before such Issue, the Warrant Price in effect immediately
before such Issue shall be reduced, concurrently with such Issue, to a price
(calculated to the nearest hundredth of a cent) determined by multiplying the
Warrant Price by a fraction:
(a) the numerator of which is the amount of common stock
outstanding immediately before such Issue plus the amount of common stock that
the aggregate consideration received by the Company for the Additional Common
Shares would purchase at the Warrant Price in effect immediately before such
Issue, and
(b) the denominator of which is the amount of common stock
outstanding immediately before such Issue plus the number of such Additional
Common Shares.
3.2 Adjustment of Number of Shares. Upon each adjustment of the
Warrant Price, the number of Shares issuable upon exercise of the Warrant shall
be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares issuable upon exercise of
the Warrant and (ii) the Warrant Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Warrant Price.
3.3 Securities Deemed Outstanding. For the purpose of this Section 3,
all securities issuable upon exercise of any outstanding Convertible Securities
or Options, warrants, or other rights to acquire securities of the Company shall
be deemed to be outstanding.
4. No Adjustment for Issuances Following Deemed Issuances. No adjustment
to the Warrant Price shall be made upon the exercise of Options or conversion of
Convertible Securities.
5. Adjustment Following Changes in Terms of Options or Convertible
Securities. If the consideration payable to, or the amount of common stock
Issuable by, the Company increases or decreases, respectively, pursuant to the
terms of any outstanding Options or Convertible Securities, the Warrant Price
shall be recomputed to reflect such increase or decrease. The recomputation
shall be made as of the time of the Issuance of the Options or Convertible
Securities. Any changes in the Warrant Price that occurred after such Issuance
because other Additional Common Shares were Issued or deemed Issued shall also
be recomputed.
6. Recomputation Upon Expiration of Options or Convertible Securities.
The Warrant Price computed upon the original Issue of any Options or Convertible
Securities, and any subsequent adjustments based thereon, shall be recomputed
when any Options or rights of conversion under Convertible Securities expire
without having been exercised. In the case of Convertible Securities or Options
for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities. In the case of
Options for Convertible Securities, the Warrant Price shall be recomputed as if
the only Convertible Securities
2
<PAGE> 10
Issued were the Convertible Securities actually Issued upon the exercise
thereof, if any, and as if the only consideration received therefor was the
consideration actually received by the Company (determined pursuant to Section
9), if any, upon the Issue of the Options for the Convertible Securities.
7. Limit on Readjustments. No readjustment of the Warrant Price pursuant
to Sections 5 or 6 shall increase the Warrant Price more than the amount of any
decrease made in respect of the Issue of any Options or Convertible Securities.
8. 30 Day Options. In the case of any Options that expire by their terms
not more than 30 days after the date of Issue thereof, no adjustment of the
Warrant Price shall be made until the expiration or exercise of all such
Options.
9. Computation of Consideration. The consideration received by the
Company for the Issue of any Additional Common Shares shall be computed as
follows:
(a) Cash shall be valued at the amount of cash received by the
Corporation, excluding amounts paid or payable for accrued interest or accrued
dividends.
(b) Property. Property other than cash shall be computed at the fair
market value thereof at the time of the Issue as determined in good faith by the
Board of Directors of the Company.
(c) Mixed Consideration. The consideration for Additional common
Shares Issued together with other property of the Company for consideration that
covers both shall be determined in good faith by the Board of Directors.
(d) Options and Convertible Securities. The consideration per
Additional Common Share for Options and Convertible Securities shall be
determined by dividing:
(i) the total amount, if any, received or receivable by the
Company for the Issue of the Options or Convertible Securities, plus the minimum
amount of additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to the Company upon exercise of the
Options or conversion of the Convertible Securities, by
(ii) the maximum amount of common stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) ultimately Issuable upon the
exercise of such Options or the conversion of such Convertible Securities.
10. General.
10.1 Governing Law. This Antidilution Agreement shall be governed in
all respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
10.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
10.3 Entire Agreement. Except as set forth below, this Antidilution
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
3
<PAGE> 11
10.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Purchaser at Purchaser's address as set forth below, or at
such other address as Purchaser shall have furnished to the Company in writing,
or (b) if to the Company, at the Company's address set forth below, or at such
other address as the Company shall have furnished to the Purchaser in writing.
10.5 Severability. In case any provision of this Antidilution
Agreement shall be invalid, illegal, or unenforceable, the validity, legality
and enforceability of the remaining provisions of this Antidilution Agreement
shall not in any way be affected or impaired thereby.
10.6 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Antidilution Agreement.
10.7 Counterparts. This Antidilution Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
PURCHASER COMPANY
IMPERIAL BANK WASTE CONNECTIONS, INC.
By: /s/ JAMES E. ELLISON By: /s/ RON J. MITTELSTAEDT
--------------------------------- ----------------------------------------
Name: James E. Ellison Name: Ron J. Mittelstaedt
------------------------------- ----------------------------------
(Print) (Print)
Title: Senior Vice President Title: President
------------------------------- ----------------------------------
4
<PAGE> 1
EXHIBIT 10.6
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK PURCHASABLE ON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE ENCUMBERED, PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT THEREFOR UNDER SAID ACT OR AN OPINION
OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION AND
CONCURRED IN BY THE CORPORATION'S COUNSEL TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR SUCH TRANSACTION COMPLIES
WITH RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER
SAID ACT.
Warrant No. 5 Warrant to Purchase
140,000 shares of
Common Stock (Subject
to Adjustment)
WARRANT TO PURCHASE COMMON STOCK
of
WASTE CONNECTIONS, INC.
Void after January 29, 2008
This certifies that for value received, FSC Corp. ("Holder"), is
entitled, subject to the terms set forth below, at any time or from time to time
before 5:00 p.m., Pacific standard time, on January 29, 2008, to purchase from
Waste Connections, Inc., a Delaware corporation (the "Company"), up to 140,000
fully paid and nonassessable shares of the common stock, par value $0.01 per
share, of the Company (the "Common Stock") as constituted on January 30, 1998
(the "Issue Date"), upon surrender hereof at the principal office of the
Company, with the subscription form attached hereto properly completed and duly
executed, and simultaneous payment therefor in lawful money of the United States
at the price of $2.80 per share, subject to adjustment as provided in Section 4
hereof (the "Purchase Price"). The number and character of such shares of Common
Stock are also subject to adjustment as provided below. Such number shall be
reduced at such time or times as this Warrant is exercised in part by the number
of shares as to which this Warrant is then exercised. The term "Warrant Stock"
shall mean, unless the context otherwise requires, the stock and other
securities and property at any time receivable upon the exercise of this
Warrant. The term "warrant" as used herein shall include this Warrant and any
warrants delivered in substitution or exchange therefor as provided herein.
1. Method of Exercise; Payment. Subject to compliance with the
provisions of Section 7 hereof:
<PAGE> 2
A. Cash Exercise. This Warrant may be exercised as a whole, or in
part from time to time, by the Holder by delivering this Warrant, for
cancellation if it is exercised as a whole or for endorsement if it is exercised
in part, together with a Subscription in the form appearing at the end hereof
properly completed and duly executed by or on behalf of the Holder, to the
Company at its office in Roseville, California (or at the office of the agency
maintained for such purpose), accompanied by payment in cash or by certified or
official bank check payable to the order of the Company, in an aggregate amount
equal to the Purchase Price as then adjusted times the number of shares of
Warrant Stock as to which this Warrant is then being exercised. In the event of
any such exercise that is partial, the Company shall endorse this Warrant as
having been exercised to that extent and return this Warrant to the Holder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Warrant Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date.
B. Net Issue Exercise. In lieu of exercising this Warrant
pursuant to Section 1.A, Holder may elect to receive shares equal to the value
of this Warrant (or the portion thereof being cancelled) by surrender of this
Warrant at such office together with notice of such election, in which event the
Company shall issue to Holder a number of shares of Warrant Stock computed using
the following formula:
X = Y (A-B)
------
A
Where X = the number of shares of Warrant Stock to be issued to Holder.
Y = the number of shares of Warrant Stock purchasable under this
Warrant at the date of such calculation or, if only a portion of
this Warrant is being exercised, the portion of this Warrant
being cancelled at the date of such calculation.
A = the fair market value of one share of Warrant Stock purchasable
under this Warrant at the date of such calculation.
B = Purchase Price (as adjusted to the date of such calculations).
For purposes of this Warrant, fair market value of one share of Warrant Stock
shall mean:
(1) The average of the closing bid and asked prices of the Common
Stock quoted on the NASDAQ Stock Market or the closing price quoted on any
national securities exchange on which the Common Stock is listed, whichever is
applicable, as published in the Western Edition of The Wall Street Journal for
the ten trading days prior to the date of determination of fair market value; or
<PAGE> 3
(2) If the Common Stock is not traded on the NASDAQ stock market
or on such an exchange, an amount jointly determined by the Board of Directors
and the Holder, or in the event such persons are unable to reach agreement upon
such fair market value within 10 days of the exercise of this Warrant, the fair
market value as determined by an independent third-party appraiser jointly
selected by the Company's Board of Directors and the Holder hereof.
C. Delivery of Stock Certificates. The Company will, or will
direct its transfer agent to, issue, as soon as practicable after any exercise
of this Warrant under Section 1 and in any event within thirty days thereafter,
at its expense (including the payment by it of any applicable issue taxes), in
the name of and deliver to the Holder, or as the Holder may direct (on payment
by the Holder of any applicable transfer taxes) a certificate or certificates
for the number of fully paid and nonassessable shares of Warrant Stock as to
which this warrant is so exercised.
2. Payment of Taxes. All shares of Warrant Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable,
and the Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issuance or delivery thereof. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Warrant Stock in
any name other than that of the Holder and, in such case, the Company shall not
be required to issue or deliver any stock certificate until such tax or other
charge has been paid, or it has been established to the Company's satisfaction
that no tax or other charge is due.
3. A. Transfer. Subject to Section 7, this Warrant and all rights
hereunder are transferable, as a whole or in part, on the books of the Company
maintained for such purpose at the office specified pursuant to Section 1.A, by
the Holder in person, or by duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer.
Upon any partial transfer, the Company will issue and deliver to
the Holder a new warrant or warrants of like tenor with respect to the shares of
Warrant Stock not so transferred. In lieu of any fraction of a share to which
the Holder would otherwise be entitled, the Company may deliver to the Holder
cash in an amount equal to such fraction of the current fair market value of one
full share determined in the manner provided in Section 1.B.
Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that this Warrant, when endorsed in blank, shall be
deemed negotiable and that when this Warrant shall have been so endorsed, the
person in possession of this Warrant may be treated by the Company, and all
other persons dealing with this Warrant, as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding, but until a transfer of this Warrant
on the books of the Company, the Company may treat the Holder as the owner for
all purposes.
<PAGE> 4
B. Exchange. At the request of the Holder, the Company shall
exchange this Warrant for two or more Warrants of like tenor entitling the
Holder to purchase the same aggregate number of shares of Warrant Stock, each
new Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder shall designate at the time of such exchange; provided that
the Holder shall not be entitled so to exchange this Warrant or any warrant
received in any such exchange on more than an aggregate of seven occasions.
4. A. Adjustment for Dividends in Other Stock or Property. In case at
any time, or from time to time, after the Issue Date the holders of the Common
Stock of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant), shall have received, or, on or
after the record date fixed for the determination of eligible stockholders,
shall have become entitled to receive, without payment therefor:
(1) Other or additional stock or other securities or property
(other than cash) by way of a dividend;
(2) Any cash paid or payable out of capital, or capital surplus,
or surplus created as a result of a revaluation of property; or
(3) Other or additional stock or other securities or property
(including cash) by way of a stock-split, spin-off, reclassification,
combination of shares or similar corporate rearrangement;
then, and in each such case, the Holder, upon the exercise hereof (as provided
in Section 1), shall be entitled to receive the number of shares of Warrant
Stock and other securities and property (including cash in the cases referred to
in clauses (2) and (3) above) which the Holder would hold on the date of such
exercise if on the Issue Date the Holder had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the Issue Date to and including the date of
such exercise, retained such shares and/or all other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (2) and (3) above) receivable by the Holder as aforesaid during such
period, giving effect to all adjustments during such period pursuant to this
Section 4.
B. Merger, Sale of Assets, etc. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the holder of this
<PAGE> 5
Warrant shall thereafter be entitled to receive upon exercise of this Warrant,
during the period specified herein and upon payment of the Purchase Price then
in effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 4. The foregoing
provisions of this Section 4.B shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
C. Reclassification, etc. If the Company, at any time while this
Warrant, or any portion hereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change the Warrant Stock into
the same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the Warrant Stock immediately prior to such reclassification or other change
and the Purchase Price therefor shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 4.
D. Split, Subdivision or Combination of Shares. If the Company at
any time while this Warrant, or any portion hereof, remains outstanding and
unexpired shall split, subdivide or combine the Warrant Stock, into a different
number of securities of the same class, the Purchase Price for such securities
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
E. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 4, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder, furnish or cause to be
furnished to such Holder a like certificate setting forth: (i) such adjustments
and readjustments; (ii) the Purchase Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property that at the time
would be received upon the exercise of the Warrant.
<PAGE> 6
F. No Dilution or Impairment. The Company will not by amendment
of its Articles of Incorporation, or through reorganization, consolidation,
merger, dissolution, issuance or sale of securities, sale of assets, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of Warrant Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares upon the exercise of this Warrant, and (c) will take no
action to amend its Articles of Incorporation which would change to the
detriment of the holders of Common Stock (whether or not any Common Stock be at
the time outstanding) the dividend or voting rights of the Company's Common
Stock (as constituted on the Issue Date).
G. Notices of Record Date. In case:
(1) The Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution or any right to subscribe for or purchase any shares of stock of
any class or any other securities, or to receive any other right, or
(2) Of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any split or combination
of shares of any class of capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation, or
(3) Of any voluntary dissolution, liquidation or winding-up of
the Company, then,
and in each such case, the Company will mail or cause to be mailed to the Holder
a notice specifying, as the case may be, (a) the date on which a record is to be
taken for the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, or (b) the date on
which such reorganization, reclassification, split, combination, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, split, combination, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 90 days prior to the date therein specified.
<PAGE> 7
H. Adjustments for Diluting Issuances. The Purchase Price and the
number of shares of Common Stock issuable upon exercise of this Warrant shall be
subject to adjustment from time to time in the manner set forth in the Holder's
Antidilution Agreement with the Company dated January 30, 1998.
5. Loss or Mutilation. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new warrant of like tenor.
6. Reservation of Common Stock. The Company shall at all times reserve
and keep available for issue upon the exercise of this Warrant such number of
its authorized but unissued shares of Warrant Stock as will be sufficient to
permit the exercise in full of this Warrant.
7. Investment Intent. The Holder, by accepting this Warrant, represents
and warrants to the Company as follows:
A. Acquisition for Own Account. The Holder is acquiring this
Warrant and will acquire the shares of Warrant Stock on exercise of this Warrant
with the Holder's own funds, for the Holder's own account, not as a nominee or
agent. The Holder is not obligated to transfer this Warrant or any Warrant Stock
to anyone else nor has any agreements or understandings to do so. The Holder is
purchasing or will purchase this Warrant and the Warrant Stock for investment
for an indefinite period and not with a view to any sale or distribution
thereof, by public or private sale or other disposition, and has no intention of
selling, granting any participation in or otherwise distributing or disposing of
any thereof. The Holder does not intend to subdivide the Holder's purchase with
anyone.
B. Restricted Securities. The Holder is able to bear the economic
risk of the Holder's investment in this Warrant and the Warrant Stock and is
aware that the Holder must be prepared to hold this Warrant and the Warrant
Stock for an indefinite period and that this Warrant and the Warrant Stock have
not been registered under the Securities Act of 1933, as amended (the "Act"), on
the ground that no distribution or public offering of this Warrant or the
Warrant Stock is to be effected and this Warrant or the Warrant Stock are being
or will be issued by the Company without any public offering within the meaning
of Section 4(2) of the Act.
C. Sophistication. The Holder is an "accredited investor" as that
term is defined in Regulation D under the Act. The Holder has such knowledge and
experience in financial and business matters that the Holder is capable of
evaluating the merits and risks of the Holder's investment in this Warrant and
the Warrant Stock.
D. Agreement to Refrain from Resales. Without in any way limiting
the Holder's representations herein, the Holder further agrees that the Holder
shall not encumber,
<PAGE> 8
pledge, hypothecate, sell, assign, transfer or otherwise dispose of this Warrant
or any Warrant Stock, unless and until, prior to any proposed encumbrance,
pledge, hypothecation, sale, assignment, transfer or other disposition, either
(i) a registration statement on Form S-l (or any other form appropriate for the
purpose or replacing such form) under the Act with respect thereto shall be then
effective (ii)(a) the Holder shall have furnished the Company with a statement
of the circumstances of the proposed disposition and an opinion of counsel
(obtained at the Holder's expense) satisfactory to the Company to the effect
that such disposition will not require registration under the Act and (b)
counsel for the Company shall have concurred in such opinion of counsel and the
Company shall have advised the Holder of such concurrence; or (iii) the Warrant
Stock can then be sold pursuant to Rule 144 under the Act.
E. Certificates to be Legended. The Holder understands and agrees
that this Warrant, any warrant issued to replace this Warrant and any
certificate representing Warrant Stock will bear a legend on the face thereof
(or on the reverse thereof with a reference to such legend on the face thereof)
in substantially the form set forth on the first page of this Warrant and any
other legend that the Company considers necessary or appropriate to comply with
any applicable securities law.
8. Registration. The Company acknowledges that it has granted to certain
holders of its capital stock certain rights to registration of such capital
stock for resale under the Act, the terms and conditions of which rights are set
forth in an Investors' Rights Agreement dated as of September 30, 1997. The
Company covenants and agrees to seek an amendment to the Investors' Rights
Agreement to include the Warrant Stock in the Registrable Securities to which
the registration rights set forth in Section 1 of the Investors' Rights
Agreement so that the Holder shall be entitled to identical registration rights
pari passu with such holders of capital stock as if the Holder had acquired the
Warrant Stock concurrently with such holders and pursuant to the Investors'
Rights Agreement. If such amendment is not consented to by the holders of a
majority of the Registrable Securities as required by the Investors' Rights
Agreement, the Company shall promptly prepare and thereafter enter into with the
Holder a Registration Rights Agreement providing for the same registration
rights as the Investors' Rights Agreement, which rights shall be subject and
subordinate only to those set forth in the Investors' Rights Agreement.
9. Notices. All notices and other communications from the Company to the
Holder shall be mailed by first-class registered or certified mail, postage
prepaid, to the address furnished to the Company in writing by the last Holder
who shall have furnished an address to the Company in writing.
10. Change; Waiver. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
<PAGE> 9
11. Attorneys' Fees. In the event any party is required to engage the
services of attorneys for the purpose of enforcing this Warrant, or any
provision hereof, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and any other costs or expenses.
12. Headings. The headings in this Warrant are for purposes of
convenience in reference only, and shall not be deemed to constitute a part
hereof.
13. Law Governing. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of California.
14. Conflict With Other Laws. Any other provisions hereof to the
contrary notwithstanding, no Bank Affiliate shall be entitled to exercise the
right under this Warrant to purchase any share or shares of the Common Stock if,
under any law or under any regulation, rule or other requirement of any
governmental authority at any time applicable to such Bank Affiliate, (a) as a
result of such purchase, such Bank Affiliate would own, control or have power to
vote a greater quantity of securities of any kind than the Bank Affiliate shall
be permitted to own, control or have power to vote, or (b) such purchase would
not be permitted. For purposes of this Section 14, a written statement of the
Bank Affiliate exercising this Warrant, delivered upon surrender of the Warrant,
to the effect that such Bank Affiliate is legally entitled to exercise its right
under this Warrant to purchase securities and that such purchase will not
violate the prohibitions set forth in the preceding sentence, shall be
conclusive and binding upon the Company and shall obligate the Company to
deliver certificates representing the shares of Common Stock so purchased in
accordance with the other provisions hereof and shall relieve the Company of any
liability under this Section 14. "Bank Affiliate" as used herein means any
person which is a bank holding company or a subsidiary of a bank holding company
as defined in the Bank Holding Company Act of 1956, as amended, or other
applicable banking laws of the United States of America and the rules and
regulations promulgated thereunder.
15. Delivery of Financial Statements. The Company shall deliver to the
Holder:
A. as soon as practicable, but in any event within one hundred
twenty (120) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles ("GAAP"),
and audited and certified by independent public accountants of nationally
recognized standing selected by the Company; and
B. as soon as practicable, but in any event within sixty (60)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company, an unaudited income statement for such fiscal quarter, statement
of cash flows for such fiscal quarter and an unaudited balance sheet as of the
end of such fiscal quarter.
<PAGE> 10
16. Inspection. The Company shall permit the Holder, at the Holder's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Holder; provided, however, that the Company shall not be obligated pursuant to
this Section 16 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
<PAGE> 11
DATED: January 30, 1998
WASTE CONNECTIONS, INC.
By:
-------------------------------------
Ronald J. Mittelstaedt
President and
Chief Executive Officer
<PAGE> 12
ENDORSEMENTS
<TABLE>
<CAPTION>
Number of
Shares
Number of Shares Remaining
as to Which Available for Signature of Authorized Officer
Exercise Date Exercised Exercise of the Company
------------- ----------------- ------------- --------------------------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 13
SUBSCRIPTION FORM
(To be executed only upon exercise of warrant)
The undersigned Holder of this Warrant irrevocably exercises this
Warrant for the purchase of _________ shares of Common Stock of Waste
Connections, Inc., purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant.
Dated:
--------------------------------
----------------------------------------
(signature of Holder)
----------------------------------------
(Street Address)
----------------------------------------
(city) (state) (zip Code)
<PAGE> 14
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned Holder of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
---------------- ------- -------------
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint ____________ [Attorney] to
make such transfer on the books of Waste Connections, Inc., maintained for the
purpose, with full power of substitution in the premises.
Dated:
--------------------------------
[Holder]
By:
-------------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 15
WASTE CONNECTIONS, INC.
ANTIDILUTION AGREEMENT
THIS ANTIDILUTION AGREEMENT is entered into as of January 30, 1998, by
and between FSC CORP. and WASTE CONNECTIONS, INC., a Delaware corporation (the
"Company").
RECITALS
A. Concurrently with the execution of this Antidilution Agreement, the
Company is issuing FSC Corp. a Warrant to purchase 140,000 shares (the "Shares")
of the Company's Common Stock (the "Common Stock") for $2.80 per share.
B. By this Antidilution Agreement, FSC Corp. and the Company desire to
set forth the adjustment in the number of Shares issuable upon exercise of the
Warrant as a result of a diluting issuance.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. Definitions. As used in this Antidilution Agreement, the following
terms have the following respective meanings:
1.1 "Option" means any right, option, or warrant to subscribe for,
purchase, or otherwise acquire Common Stock or Convertible Securities.
1.2 "Convertible Securities" means any evidences of indebtedness,
shares of stock, or other securities directly or indirectly convertible into or
exchangeable for Common Stock other than Options.
1.3 "Issue" means to grant, issue, sell, assume, or fix a record
date for determining persons entitled to receive, any security, whichever of the
foregoing is the first to occur.
1.4 "Additional Common Shares" means any of the Common Stock
(including reissued shares) issued after the date of the Warrant. Additional
Common Shares does not include, however, any Options; any Convertible
Securities; any Common Stock Issued upon conversion of preferred stock
outstanding on the date of the Warrant; the Shares; or Common Stock Issued as
incentive or in a nonfinancing transaction to employees, officers, directors, or
consultants to the Company; or the exercise of any Option or Convertible
Security.
2. Adjustment of Warrant Price for Diluting Issuances.
2.1 Weighted Average Adjustment. If the Company Issues Additional
Common Shares after the date of the Warrant and the consideration per Additional
Common
<PAGE> 16
Share (determined pursuant to Section 4) is less than the Purchase Price (as
defined in the Warrant) in effect immediately before such Issue, the Purchase
Price in effect immediately before such Issue shall be reduced, concurrently
with such Issue, to a price (calculated to the nearest hundredth of a cent)
determined by multiplying the Purchase Price by a fraction:
(a) the numerator of which is the amount of Common Stock
outstanding immediately before such Issue plus the amount of Common Stock that
the aggregate consideration received by the Company for the Additional Common
Shares would purchase at the Purchase Price in effect immediately before such
Issue, and
(b) the denominator of which is the amount of Common Stock
outstanding immediately before such Issue plus the number of such Additional
Common Shares.
2.2 Adjustment of Number of Shares. Upon each adjustment of the
Purchase Price, the number of Shares issuable upon exercise of the Warrant shall
be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares issuable upon exercise of
the Warrant and (ii) the Purchase Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Purchase Price.
3. No Adjustment for Issuances Following Deemed Issuances. No adjustment
to the Purchase Price shall be made upon the exercise of Options or conversion
of Convertible Securities.
4. Computation of Consideration. The consideration received by the
Company for the Issue of any Additional Common Shares shall be computed as
follows:
4.1 Cash shall be valued at the amount of cash received by the
Company, excluding amounts paid or payable for accrued interest or accrued
dividends.
4.2 Property. Property other than cash shall be computed at the fair
market value thereof at the time of the Issue as determined in good faith by the
Board of Directors of the Company.
4.3 Mixed Consideration. The consideration for Additional common
Shares Issued together with other property of the Company for consideration that
covers both shall be determined in good faith by the Board of Directors.
5. General.
5.1 Governing Law. This Antidilution Agreement shall be governed in
all respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
5.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
2
<PAGE> 17
5.3 Entire Agreement. Except as set forth below, this Antidilution
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
5.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to FSC Corp. at FSC Corp.'s address as set forth below, or at
such other address as FSC Corp. shall have furnished to the Company in writing,
or (b) if to the Company, at the Company's address set forth below, or at such
other address as the Company shall have furnished to FSC Corp. in writing.
5.5 Severability. In case any provision of this Antidilution
Agreement shall be invalid, illegal, or unenforceable, the validity, legality
and enforceability of the remaining provisions of this Antidilution Agreement
shall not in any way be affected or impaired thereby.
5.6 Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Antidilution Agreement.
5.7 Counterparts. This Antidilution Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
5.8 Initial Public Offering. This Antidilution Agreement will be
void upon the consummation of a bona fide, firmly underwritten public offering
of shares of the Company's common stock registered under the Securities Act of
1933, as amended (the "Act"), pursuant to a registration statement on Form S-1,
at an offering price of at least $5.00 per share (appropriately adjusted for any
stock split, dividend, combination or other recapitalization) with aggregate
gross proceeds to the Company of at least $5,000,000.
FSC CORP. COMPANY:
WASTE CONNECTIONS, INC.
By: By:
---------------------------------- -------------------------------------
Name: Name:
-------------------------------- -----------------------------------
(Print) (Print)
Title: Title:
------------------------------- ----------------------------------
3
<PAGE> 1
EXHIBIT 10.7
STOCK PURCHASE AGREEMENT
Dated as of September 30, 1997
among
Waste Connections, Inc.
and
the Purchasers Listed
on Exhibit A
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as
of September 30, 1997, by and among Waste Connections, Inc., a Delaware
corporation (the "Company"), and each of the Purchasers listed on Exhibit A
attached hereto (collectively the "Purchasers" and individually either a "Series
A Purchaser," if the purchaser buys Series A Preferred Stock, or a "Common
Purchaser," if the purchaser buys Common Stock, with reference to the following
facts:
The Company wishes to issue and sell to the Series A Purchasers an
aggregate of 2,500,000 shares of the Series A Preferred Stock of the Company
(the "Series A Preferred Stock") and to the Common Purchasers an aggregate of
2,500,000 shares of Common Stock of the Company (the "Common Stock"). Each of
the Purchasers wishes to purchase either the Series A Preferred Stock or the
Common Stock or both on the terms and subject to the conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth in this Agreement, the parties agree
as follows:
1. Purchase and Sale of the Series A Preferred Stock and the Common
Stock.
1.1 Sale and Issuance of the Series A Preferred Stock and the Common
Stock.
(a) The Company shall adopt and file with the Secretary of State of
the State of Delaware on or before the Closing (as defined below) the
Certificate of Designations, Preferences and Rights of Preferred Stock (the
"Certificate of Designation") in the form attached hereto as Exhibit B.
(b) Subject to the terms and conditions of this Agreement, each of
the Purchasers, severally and not jointly, agrees to purchase, the Company
agrees to sell and issue to the Purchasers, an aggregate of 2,500,000 shares of
Series A Preferred Stock at a price of $2.80 per share and an aggregate of
2,500,000 shares of Common Stock at a price of $0.01 per share, in consideration
for cash, which shares shall be issued to each Purchaser in such amount as
provided in Exhibit A.
1.2 Closing.
(a) The purchase and sale of the Series A Preferred Stock and the
Common Stock shall take place at Shartsis, Friese & Ginsburg LLP, One Maritime
Plaza, 18th Floor, San Francisco, CA 94111, on September 30, 1997, at 10:00
a.m., California time, or at such other time and place as the Company and the
Purchasers mutually agree upon (the "Closing").
<PAGE> 3
(b) At the Closing the Company shall deliver to each Purchaser a
certificate representing the number of shares of Series A Preferred Stock or
Common Stock as listed next to each Purchaser's name on Exhibit A and the
Purchaser shall pay to the Company $2.80 per share of Series A Preferred Stock
acquired and $0.01 per share for Common Stock acquired, in cash, in the form of
a check or federal funds wire transfer.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers that, except as set forth on
the Schedules attached hereto:
2.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own and
operate its properties and assets, to carry on its business as now and
heretofore conducted, to issue and sell the Series A Preferred Stock and the
Common Stock and to execute, deliver and carry out the terms of the Related
Documents. The Company has conducted no operations and was formed to acquire,
concurrent with the Closing hereunder, certain solid waste assets in the states
of Washington and Idaho ("the Acquisition"). The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership of its properties or the nature of its business make such
qualification necessary and where a failure to be so qualified would have a
material adverse effect on the business, operations, prospects or condition,
financial or otherwise, of the Company and its Subsidiaries taken as a whole
(the "Condition of the Company").
2.2 Capitalization.
(a) The Company has been recently formed and has not yet issued any
shares of capital stock.
(b) Except as set forth in Schedule 2.2 and pursuant to the
transactions contemplated by this Agreement, there are not on the date hereof
authorized, outstanding or contemplated any subscriptions, options, conversion
rights, warrants or other agreements, securities or commitments obligating the
Company to issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of capital stock of the Company or any securities convertible into or
exchangeable for shares of capital stock of the Company or obligating the
Company to grant, extend or enter into any such agreement or commitment.
(c) The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of authorized capital stock of the
Company are as set forth in the Certificate of Designation, and all such
designations, powers, preferences, rights, qualifications,
2
<PAGE> 4
limitations and restrictions are valid, binding and enforceable and in
accordance with all applicable laws.
(d) The Series A Preferred Stock and the Common Stock which is being
purchased hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable, subject to the truth and accuracy of the
representations and warranties of the Purchasers contained in Section 3 of this
Agreement.
2.3 Execution and Binding Effect. The execution and delivery of the
Related Documents, the adoption of the Company's Certificate of Incorporation
(the "Certificate of Incorporation") and the Certificate of Designation and the
consummation of the transactions contemplated hereby or thereby have been duly
authorized by all necessary corporate action on the part of the Company. The
Related Documents have been duly executed and delivered by the Company and the
Related Documents constitute legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their respective terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors. The Series A Preferred Stock and the Common Stock will be
free of restrictions on transfer other than under applicable federal and state
securities laws and as provided in the Related Documents.
2.4 Authorization and Filings. Except as set forth in Schedule 2.4,
no authorization, consent, approval, license, exemption or other action by, and
no registration, qualification, designation, declaration or filing with, any
Authority or any other Person is required to be made or obtained by the Company
in order to execute or deliver the Related Documents or to consummate the
transactions contemplated hereby or thereby.
2.5 Absence of Conflicts. Neither the execution and delivery of the
Related Documents nor the consummation of the transactions contemplated hereby
or thereby nor the performance of or compliance with the terms and conditions in
the Related Documents will (a) violate any Law; (b) conflict with or result in a
breach or violation of or a default or loss of benefit under or permit the
acceleration of any obligation under any provision of the Certificate of
Incorporation or Bylaws of the Company, or any agreement or instrument to which
the Company is a party or by which the Company is bound, or (c) result in the
creation or imposition of any Lien on any property or asset of the Company, in
each case or in the aggregate which would have a material adverse effect on the
Condition of the Company.
2.6 Taxes. The Company has filed on a timely basis, within the
original filing period or any applicable extension period, all returns and
reports of all Taxes, including, without limitation, federal income tax returns,
withholding tax returns and declarations of estimated Tax and Tax reports, that
are required to be filed with respect to the Company and or its income,
3
<PAGE> 5
properties or operations, except where the failure to so file would not have a
material adverse effect on the Condition of the Company.
2.7 Contracts. Except as set forth in Schedule 2.7, (a) the Company
is not in violation of or default under its Certificate of Incorporation,
Bylaws, any other governing document or any Material Contract, and no condition
or event exists that after notice or lapse of time or both, would result in a
breach or violation of, or a default or loss of benefit by the Company
thereunder; (b) to the best of the Company's knowledge, none of the other
parties to any Material Contract are in violation of or default under any
Material Contract in any material respect which would cause a material adverse
effect on the Condition of the Company; and (c) the Company has not received any
notice of cancellation or any written communication threatening cancellation of
any Material Contract by any party thereto. Schedule 2.7 lists all Material
Contracts.
2.8 Permits; Compliance with Laws. The Company has obtained or will
obtain and maintains or will maintain in full force and effect all permits,
licenses, consents, approvals, registrations, memberships, authorizations and
qualifications under all applicable Laws, and with all applicable Authorities,
required for the conduct by it of its businesses and the ownership or possession
by it of its properties and assets, except to the extent the failure to so
obtain and maintain would not have a material adverse effect, individually or in
the aggregate, on the Condition of the Company. The Company is in compliance in
all respects with all Laws applicable to it or to the conduct by it of its
businesses or to its ownership and possession of its properties and assets,
except where the failure to so comply, does not, individually or in the
aggregate, have a material adverse effect on the Condition of the Company.
2.9 Debt. Following the Closing of the Acquisition, the Company will
be indebted in the approximate amounts set forth on Schedule 2.9, which
indebtedness will be secured by all of the Company's assets.
2.10 Brokers and Finders. The Company has not employed any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by the Related Documents that would be entitled to a broker's,
finder's or similar fee or commission in connection therewith.
2.11 Reservation of Shares. The Common Stock issuable on conversion
of the Series A Preferred Stock has been duly and validly reserved for issuance
and upon conversion will be duly and validly issued, fully paid and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under applicable Federal and state securities laws and
as provided herein.
4
<PAGE> 6
2.12 Registration Rights. Except as required pursuant to the
Investors' Rights Agreement, the Company is presently not under any obligation,
and has not granted any rights, to register (as defined in Section 1.1 of the
Investors' Rights Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued.
2.13 Full Disclosure. This Agreement, the Exhibits hereto, the
Related Documents and all other documents delivered by the Company to the
Purchasers or their attorneys or agents in connection herewith or therewith at
the Closing or with the transactions contemplated hereby or thereby, do not
contain any untrue statement of a material fact, in the light of the
circumstances under which they were made, nor, to the Company's knowledge, omit
to state a material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which they were made,
not misleading. To the Company's knowledge, there are no facts which
(individually or in the aggregate) materially adversely affect the Condition of
the Company that have not been set forth in the Agreement, the Exhibits hereto,
the Related Documents or in other documents delivered to the Purchasers or their
attorneys or agents in connection herewith; provided that it is understood that
the level of disclosure to the Purchasers is less than that which would be
provided in a securities offering registered under the 1933 Act, including,
without limitation, the omission of risk factors, in reliance on the
sophistication and investment experience of the Purchasers.
3. Representations and Warranties of the Purchasers. This Agreement
is made with each Purchaser in reliance upon that Purchaser's representations to
the Company, which by that Purchaser's acceptance hereof that Purchaser
severally, but not jointly, represents and warrants, that:
3.1 Investment Intent. The Purchasers are acquiring the Series A
Preferred Stock and the Common Stock issuable hereunder or upon conversion of
the Series A Preferred Stock (collectively, "Securities") pursuant to this
Agreement with the Purchasers' own funds for the Purchasers' own account and not
as a nominee or agent. No one else has any interest, beneficial or otherwise, in
any of the Securities to be purchased by the Purchasers. Except as provided
herein, the Purchasers are not obligated to transfer any Securities to anyone
else nor do the Purchasers have any agreements or understandings to do so. The
Purchasers are purchasing the Securities for investment for an indefinite period
and not with a view to the sale or distribution of any Securities, by public or
private sale or other disposition, and the Purchasers have no intention of
selling, granting any participation in or otherwise distributing or disposing of
any Securities. The Purchasers do not intend to subdivide the Purchasers'
purchase of Securities with anyone. Notwithstanding the foregoing, the
disposition of the Purchasers' property shall be at all times within the
Purchasers' own control, and that the Purchasers' right to sell or otherwise
dispose of all or any part of the Securities purchased by the Purchasers
pursuant to an effective registration statement under the 1933 Act or under an
exemption
5
<PAGE> 7
available from such registration available under the 1933 Act shall not be
prejudiced; provided that the Purchasers comply with Section 6.11.
3.2 No Public Offering. The Purchasers are able to bear the economic
risk of the Purchasers' investment in the Securities. The Purchasers are aware
that the Purchasers must be prepared to hold the Securities for an indefinite
period and that the Securities have not been registered under the 1933 Act or
registered or qualified under any state securities law, on the ground, among
others, that no distribution or public offering of Securities is to be effected
and Securities are being issued by the Company without any public offering
within the meaning of Section 4(2) of the 1933 Act. The Purchasers have had an
opportunity to discuss the Company's business, management and financial affairs
with its management. The Purchasers are not subscribing for the Securities as a
result of or subsequent to any advertisement, article, notice, or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio or any solicitation of a subscription by a person not
previously known to the Purchasers in connection with investments in securities
generally.
3.3 Certificates to be Legended. The Purchasers understand that each
Security will bear a legend on the face thereof (or on the reverse thereof with
a reference to such legend on the face thereof) required by the Securities and
Exchange Commission or a state securities commission.
3.4 Securities Will be "Restricted Securities". The Purchasers
understand that the Securities will be "restricted securities" as that term is
defined in Rule 144 under the 1933 Act and, accordingly, that the Securities
must be held indefinitely unless they are subsequently registered under the 1933
Act or an exemption from such registration is available. The Purchasers
understand and agree that except as provided herein the Company is not under any
obligation to register Securities under the 1933 Act or to comply with
Regulation A or any other exemption and that Rule 144 is not currently available
for sales of the Securities.
3.5 Accredited Investor. The Purchasers have been advised or are
aware of the provisions of Regulation D under the 1933 Act relating to the
accreditation of investors, and by checking the appropriate boxes below, each of
the Purchasers represents that such Purchaser is an "accredited investor" as
defined in Regulation D under the 1933 Act.
___ (a) A natural person (not an entity) whose individual net worth, or
joint net worth with his or her spouse, at the time of his or her
purchase exceeds $1,000,000;
___ (b) A natural person (not an entity) who [initial appropriate
blank(s)] (i) ___ had an individual income in excess of $200,000 in
each of the preceding two years or (ii) ___ had joint income with his
or her spouse in excess of $300,000 in each of
6
<PAGE> 8
those years and (iii) in either case (i) or (ii), has a reasonable
expectation of reaching the same income level in the current year;
___ (c) An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, [initial appropriate
blank] (i) if the investment decision is made by a plan fiduciary, as
defined in section 3(21) thereof, which is (1) ___ a bank, (2) ___ a
savings and loan association, (3) ___ an insurance company or (4) ___
a registered investment adviser, or (ii) ___ if the employee benefit
plan has total assets in excess of $5,000,000, or (iii) ___ if the
employee benefit plan is a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
___ (d) A trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities of the Company being
offered, whose purchase is directed by a person who has such knowledge
and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of the prospective
investment in the Company;
___ (e) A bank as defined in section 3(a)(2) of the 1933 Act, whether
acting in its individual or fiduciary capacity;
___ (f) A savings and loan association or other institution as defined in
section 3(a)(5)(A) of the 1933 Act, whether acting in its individual
or fiduciary capacity;
___ (g) A broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934;
___ (h) An insurance company as defined in section 2(13) of the 1933 Act;
___ (i) An investment company registered under the Investment Company Act
of 1940 or a business development company as defined in section
2(a)(48) of the Investment Company Act of 1940;
___ (j) A Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958;
___ (k) A private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
7
<PAGE> 9
___ (l) [Initial applicable blank] (i) ___ An organization described in
section 501(c)(3) of the Internal Revenue Code, as amended December
29, 1981, or (ii) ___ a corporation, a Massachusetts or similar
business trust, or a partnership not formed for the specific purpose
of acquiring the securities of the Company being offered, or (iii) ___
a plan established or maintained by a state or its political
subdivisions or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, in either
case (i), (ii) or (iii) with total assets in excess of $5,000,000 (in
case (i), such total assets include endowment, annuity and life income
funds and are to be determined according to the investor's most recent
audited financial statements);
___ (m) A director or executive officer of the Company; or
___ (n) An entity in which all the equity owners are accredited investors.
If you have indicated category (c)(iii) or (n) above, please list below the
names and categories of accreditation of the accredited investors making the
investment decisions (category (c)(iii)) or who are the equity owners (category
(n)) (attach additional pages if necessary):
8
<PAGE> 10
<TABLE>
<CAPTION>
Accredited
Investor
Person Making Decision/Equity Owner Category
----------------------------------- --------
<S> <C>
- -------------------------------------------------------- --------------
- -------------------------------------------------------- --------------
- -------------------------------------------------------- --------------
- -------------------------------------------------------- --------------
</TABLE>
Special Note for Trusts, Partnerships and Certain Plans: The application of the
"accredited investor" categories to trusts (including Massachusetts or similar
business trusts), partnerships and self-employed individual retirement plans is
subject to complex regulatory interpretations and may differ under state and
federal law. Accordingly, such an entity attempting to qualify may be required
to deliver additional information, including a satisfactory opinion of its
counsel.
3.6 Sophistication of the Purchaser. The Purchasers have such
knowledge and experience in financial and business matters that the Purchasers
are capable of evaluating the merits and risks of the Purchasers' investment
contemplated by this Agreement and have the capacity to protect the Purchasers'
own interests. The Purchasers acknowledge that investment in the Securities is
highly speculative and involves a substantial and high degree of risk of loss of
the Purchasers' entire investment. The Purchasers have adequate means of
providing for current and anticipated financial needs and contingencies, are
able to bear the economic risk for an indefinite period of time and have no need
for liquidity of the investment in the Securities and could afford complete loss
of such investment.
3.7 Authorization. All partnership, limited liability or corporate
action on the part of the Purchasers (if applicable) necessary for the
authorization, execution and delivery of the Related Documents and the
performance of all obligations of the Purchasers under the Related Documents has
been taken or will be taken on or prior to the Closing, and the Related
Documents constitute legal, valid and binding agreements of the Purchasers,
enforceable against the Purchasers in accordance with their respective terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors.
3.8 Brokers' Fees. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Purchasers.
9
<PAGE> 11
3.9 Governmental Consents. No consent, approval, order or
authorization of, or representation, qualification, designation, declaration or
filings with, any United States federal, state, local or provincial government
authority on the part of the Purchasers is required in connection with the
Purchasers' valid execution, delivery or performance of the Related Documents or
the purchase of the Common Stock or the Series A Preferred Stock by the
Purchasers.
3.10 Review of Documents. The Purchasers have conducted a thorough
investigation of the Company. The Purchasers have carefully reviewed all the
information provided to them by the Company and are familiar with the proposed
business, operations, properties and management of the Company by virtue of such
review and of their relationship with the Company. The Purchasers are entering
into this Agreement and the transactions contemplated hereby in reliance on
their own investigation and review of the information concerning the Company
provided to it and the representations contained in this Agreement.
4. The Purchasers' Conditions to Closings. The Purchasers' obligation
to purchase and pay for the Common Stock and the Series A Preferred Stock to be
sold to the Purchasers at the Closing is subject to the fulfillment to the
Purchasers' satisfaction, prior to or at such Closing, of the following
conditions:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true in all material respects on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed by it or complied in all material respects with on or
before the Closing.
4.3 Certificate of Designation. The Company shall have adopted and
filed the Certificate of Designation with the Secretary of State of the State of
Delaware on or before the Closing.
4.4 Schedule of Exceptions. Any revisions to the schedules attached
hereto delivered by the Company after the date of this Agreement are signed by
the Purchasers and shall not contain anything which causes the Purchaser to
believe that it is imprudent for it to proceed with the Closing.
4.5 Investors' Rights Agreement. The Investors' Rights Agreement in
the form attached hereto as Exhibit C (the "Investors' Rights Agreement") shall
have been executed by all the parties thereto.
10
<PAGE> 12
4.6 Stockholders Agreement. The Stockholders Agreement in the form
attached hereto as Exhibit D (the "Stockholders Agreement") shall have been
executed by all the parties thereto.
4.7 BFI Purchase and Sale Agreement. The Company shall have entered
into a Purchase and Sale Agreement with Browning Ferris Industries ("BFI")
relating to the Acquisition.
4.8 Financing. The Company shall have arranged the financing described
on Schedule 2.9 or suitable alternate financing in the same amount.
4.9 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchasers, and the Purchasers shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.
4.10 Election of Directors. Effective upon the consummation of the
Closing, the members of the Board of Directors shall consist of: Ronald J.
Mittelstaedt; J. Bradford Bishop and James N. Cutler.
5. The Company's Conditions to Closing. The Company's obligation to
deliver the Series A Preferred Stock and the Common Stock at the Closing is
subject to the fulfillment to its satisfaction, prior to or at such Closing, of
the following conditions:
5.1 Representations and Warranties. The representations and warranties
of the Purchasers contained in Section 3 hereof shall be true in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.
5.2 Payment of Purchase Price. Each Purchaser shall have delivered the
purchase price specified in Section 1.2 for each share of Common Stock or Series
A Preferred Stock purchased by that Purchaser.
5.3 Certificate of Designation. The Company shall have adopted and
filed the Certificate of Designation with the Secretary of State of the State of
Delaware on or before the Closing.
5.4 Stockholders Agreement. The Stockholders Agreement shall have been
executed by all the parties thereto.
11
<PAGE> 13
5.5 Investors' Rights Agreement. The Investors' Rights Agreement shall
have been executed by all the parties thereto.
5.6 BFI Purchase and Sale Agreement. The Company shall have entered
into a Purchase and Sale Agreement with Browning Ferris Industries relating to
the Acquisition.
5.7 Financing. The Company shall have arranged the financing described
on Schedule 2.9 or suitable alternate financing in the same amount.
6. Miscellaneous.
6.1 Survival of Warranties. The warranties, representations and
covenants of the Company and the Purchasers contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing.
6.2 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and a Majority of the Investors. Any
amendment or waiver effective in accordance with this Section 6.2 shall be
binding upon each holder of any Common Stock and Series A Preferred Stock, each
future holder of all such Common Stock and Series A Preferred Stock and the
Company.
6.3 Notices. Any notice, consent, authorization or other communication
to be given hereunder shall be in writing and shall be deemed duly given and
received when delivered personally or transmitted by facsimile transmission with
receipt acknowledged by the addressee or three days after being mailed by first
class mail, or the next business day after being deposited for next-day delivery
with a nationally recognized overnight delivery service, charges and postage
prepaid, properly addressed to the party to receive such notice at the following
address for such party (or at such other address as shall be specified by like
notice):
(a) if to the Company, to:
Waste Connections, Inc.
3510 Trenton Way
El Dorado Hills, CA 95762
Attention: Ronald J. Mittelstaedt
Telephone: (916) 939-7986
Facsimile: (916) 939-7987
12
<PAGE> 14
with copies to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attention: Robert D. Evans, Esq.
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
(b) if to the Purchasers, to the address indicated on Exhibit A.
6.4 Entire Agreement. This Agreement (including the Schedules and
Exhibits), and the Related Documents contain the entire agreement of the parties
and supersede all prior negotiations, correspondence, agreements and
understandings, written and oral, between or among the parties, regarding the
subject matter hereof.
6.5 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Common Stock or Series A Preferred Stock). Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
6.6 Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision to Persons or circumstances other than those to which it is held
to be invalid or unenforceable, shall not be affected thereby.
6.7 Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the Law of the State of California, without
regard to that state's conflict of laws principles.
6.8 Interpretation. This Agreement shall be construed according to its
fair language. The rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
13
<PAGE> 15
6.9 Further Assurances. Each party shall execute such other and
further certificates, instruments and other documents as may be necessary and
proper to implement, complete and perfect the transactions contemplated by this
Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, and all of which
together shall be considered one and the same agreement.
6.11 Assignment. The Purchasers may assign or transfer all or any part
of the Securities provided that the conditions specified in this Section are
satisfied, which conditions are intended to insure compliance with the
provisions of the 1933 Act and state securities laws in respect of the transfer
of any of the Securities. Prior to any transfer or attempted transfer of any
Securities, the holder thereof shall give the Company written notice of its
intention to transfer, describing briefly the nature of any such proposed
transfer. If, in the written opinion of counsel for such holder, in form and
substance reasonably satisfactory to the Company and its counsel, the proposed
transfer may be effected without registration of such Securities, the Securities
proposed to be transferred may be transferred in accordance with the terms of
said notice and in compliance with applicable securities laws and regulations.
The Company shall not be required to effect any such transfer prior to the
receipt of such favorable opinion. The Company shall not assign this Agreement
or any rights hereunder or delegate any duties hereunder. Any attempted or
purported assignment or delegation in violation of the preceding sentence shall
be void.
6.12 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.13 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATION BY SECTION 25102(f) OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
14
<PAGE> 16
6.14 Exculpation Among Purchasers. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Common Stock or Series
A Preferred Stock or the Common Stock issuable upon conversion of such shares of
Series A Preferred Stock.
7. Definitions.
7.1 Glossary. For purposes of this Agreement, the following terms
shall have the following meanings, which shall be equally applicable to both the
singular and plural forms of any of such terms:
"AUTHORITY" shall mean any government or political subdivision, or any
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury, arbitrator or
mediator, in each case whether federal, state, local or foreign.
"LAW" shall mean any judgment, decree, order, statute, law, ordinance,
rule or regulation of any Authority (including common law), constitution,
statute, treaty, regulation, rule, ordinance, judgment, order, foreign
injunction, writ, decree or award of any Authority.
"LIEN" shall mean any voluntary or involuntary lien, security
interest, mortgage, pledge, charge, encumbrance, title defect or title retention
agreement that are entered into in the ordinary course of business.
"MAJORITY OF THE INVESTORS" means (i) holders of the Common Stock who
in the aggregate hold more than 50% of the Common Stock and (ii) holders of the
Preferred Stock who in the aggregate hold more than 50% of the Preferred Stock.
"MATERIAL CONTRACT" means any agreement to which the Company is a
party or by which any of its properties or assets are bound or affected material
to the Condition of the Company.
"PERSON" shall mean a natural person, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, limited
liability company, Authority, or any other entity.
15
<PAGE> 17
"RELATED DOCUMENTS" shall mean this Agreement, the Certificate of
Designation, the Investors' Rights Agreement and the Stockholders Agreement.
"TAX" or "TAXES" shall be understood to include any tax or similar
governmental charge, impost or levy (including, without limitation, income
taxes, franchise taxes, transfer taxes or fees, sales taxes, excise taxes, ad
valorem taxes, withholding taxes, minimum taxes, use taxes, occupancy taxes,
property taxes, employment taxes, stamp taxes or windfall profit taxes),
together with any related liabilities, penalties, fines, additions to tax or
interest, imposed by the United States or any state, county, local or foreign
government or subdivision or agency therefor.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
7.2 Index. The following terms shall have the respective meanings
specified on the indicated page of this Agreement:
<TABLE>
<S> <C>
Agreement........................................................1
Certificate of Designation.......................................1
Certificate of Incorporation.....................................2
Closing..........................................................1
Common Purchaser.................................................1
Company..........................................................1
Condition of the Company.........................................2
Investors' Rights Agreement......................................9
Purchasers.......................................................1
Securities.......................................................5
Series A Preferred Stock.........................................1
Series A Purchaser...............................................1
Stockholders Agreement...........................................9
</TABLE>
16
<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first set forth above.
WASTE CONNECTIONS, INC.
By:
-------------------------------------
Ronald J. Mittelstaedt
President and CEO
PURCHASER:
----------------------------------------
(Name of Purchaser)
By:
-------------------------------------
Name:
-----------------------------
Title:
----------------------------
NOTE: EACH PURCHASER SHOULD CHECK THE APPROPRIATE LINE IN SECTION 3.5 AND
FILL IN SUCH PURCHASER'S ADDRESS ON EXHIBIT A.
17
<PAGE> 19
EXHIBIT A
<PAGE> 20
EXHIBIT B
CERTIFICATE OF DESIGNATION
<PAGE> 21
EXHIBIT C
INVESTORS' RIGHTS AGREEMENT
<PAGE> 22
EXHIBIT D
STOCKHOLDERS AGREEMENT
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purchase and Sale of the Series A Preferred Stock and the Common
Stock................................................................ 1
1.1 Sale and Issuance of the Series A Preferred Stock and the Common
Stock............................................................ 1
1.2 Closing.......................................................... 1
2. Representations and Warranties of the Company........................ 2
2.1 Organization and Qualification................................... 2
2.2 Capitalization................................................... 2
2.3 Execution and Binding Effect..................................... 3
2.4 Authorization and Filings........................................ 3
2.5 Absence of Conflicts............................................. 3
2.6 Taxes............................................................ 3
2.7 Contracts........................................................ 3
2.8 Permits; Compliance with Laws.................................... 4
2.9 Debt............................................................. 4
2.10 Brokers and Finders............................................. 4
2.11 Reservation of Shares........................................... 4
2.12 Registration Rights............................................. 4
2.13 Full Disclosure................................................. 4
3. Representations and Warranties of the Purchasers..................... 5
3.1 Investment Intent................................................ 5
3.2 No Public Offering............................................... 5
3.3 Certificates to be Legended...................................... 6
3.4 Securities Will be "Restricted Securities........................ 6
3.5 Accredited Investor.............................................. 6
3.6 Sophistication of the Purchaser.................................. 8
3.7 Authorization.................................................... 8
3.8 Brokers' Fees.................................................... 8
3.9 Governmental Consents............................................ 8
3.10 Review of Documents............................................. 9
4. The Purchasers' Conditions to Closings............................... 9
4.1 Representations and Warranties................................... 9
4.2 Performance...................................................... 9
4.3 Certificate of Designation....................................... 9
4.4 Schedule of Exceptions........................................... 9
4.5 Investors' Rights Agreement...................................... 9
</TABLE>
i
<PAGE> 24
<TABLE>
<S> <C> <C>
4.6 Stockholders Agreement........................................... 9
4.7 BFI Purchase and Sale Agreement.................................. 10
4.8 Financing........................................................ 10
4.9 Proceedings and Documents........................................ 10
4.10 Election of Directors........................................... 10
5. The Company's Conditions to Closing.................................. 10
5.1 Representations and Warranties................................... 10
5.2 Payment of Purchase Price........................................ 10
5.3 Certificate of Designation....................................... 10
5.4 Stockholders Agreement........................................... 10
5.5 Investors' Rights Agreement...................................... 10
5.6 BFI Purchase and Sale Agreement.................................. 10
5.7 Financing........................................................ 11
6. Miscellaneous........................................................ 11
6.1 Survival of Warranties........................................... 11
6.2 Amendments and Waivers........................................... 11
6.3 Notices.......................................................... 11
6.4 Entire Agreement................................................. 12
6.5 Successors and Assigns........................................... 12
6.6 Severability..................................................... 12
6.7 Governing Law.................................................... 12
6.8 Interpretation................................................... 12
6.9 Further Assurances............................................... 12
6.10 Counterparts.................................................... 12
6.11 Assignment...................................................... 12
6.12 Titles and Subtitles............................................ 13
6.13 Corporate Securities Law........................................ 13
6.14 Exculpation Among Purchasers.................................... 13
7. Definitions.......................................................... 13
7.1 Glossary......................................................... 13
7.2 Index.............................................................14
</TABLE>
ii
<PAGE> 25
EXHIBIT A List of Purchasers
EXHIBIT B Certificate of Designation
EXHIBIT C Investors' Rights Agreement
EXHIBIT D Stockholders Agreement
SCHEDULE 2.2 Capitalization
SCHEDULE 2.4 Authorization and Filings
SCHEDULE 2.7 Material Contracts
SCHEDULE 2.9 Debt
iii
<PAGE> 26
<TABLE>
<S> <C>
Agreement....................................................................1
Certificate of Designation...................................................1
Certificate of Incorporation.................................................2
Closing......................................................................1
Common Purchaser.............................................................1
Company......................................................................1
Condition of the Company.....................................................2
Investors' Rights Agreement..................................................9
Purchasers...................................................................1
Securities...................................................................5
Series A Preferred Stock.....................................................1
Series A Purchaser...........................................................1
Stockholders Agreement.......................................................9
</TABLE>
iv
<PAGE> 27
Schedule 2.2
Capitalization
PRIOR TO CLOSING:
Common Stock: 15,000,000 shares authorized.
<TABLE>
<CAPTION>
Common Stockholders Amount of Common Stock Held
------------------- ---------------------------
<S> <C>
NONE NONE
</TABLE>
Series A Preferred Stock: 10,000,000 shares authorized.
<TABLE>
<CAPTION>
Series A Preferred Stockholders Amount of Series A Preferred Stock Held
------------------------------- ---------------------------------------
<S> <C>
NONE NONE
</TABLE>
AFTER CLOSING:
See Exhibit A
<PAGE> 28
SCHEDULE 2.4
Authorizations and Filings
State Blue Sky Filings
Federal Securities Laws Filings
Certificate of Designation
<PAGE> 29
SCHEDULE 2.7
Material Contracts
NONE
<PAGE> 30
SCHEDULE 2.9
Debt
<TABLE>
<CAPTION>
Lender Amount Rate Due Date
- ---------------- ---------------- -------------- --------------------------
<S> <C> <C> <C>
Imperial Bank $5,500,000 Prime + 2% 60 Month Term Loan
- ---------------- ---------------- -------------- --------------------------
Imperial Bank up to $2,000,000 Prime + 1.5% Revolving Line of Credit
- ---------------- ---------------- -------------- --------------------------
BFI $500,000 10% Six Months
- ---------------- ---------------- -------------- --------------------------
BFI $2,593,767 6% By December 1, 1997
- ---------------- ---------------- -------------- --------------------------
BFI $359,514 6% October 31, 1997
- ---------------- ---------------- -------------- --------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.8
WASTE CONNECTIONS, INC.
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
Dated as of
September 30, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Registration Rights............................................ 1
1.1 Definitions.............................................. 1
1.2 Request for Registration................................. 2
1.3 Company Registration..................................... 4
1.4 Obligations of the Company............................... 4
1.5 Furnish Information...................................... 6
1.6 Expenses of Company Registration......................... 6
1.7 Underwriting Requirements................................ 6
1.8 Delay of Registration.................................... 7
1.9 Indemnification.......................................... 7
1.10 Reports Under Securities Exchange Act of 1934............ 9
1.11 Form S-3 Registration.................................... 10
1.12 Assignment of Registration Rights........................ 11
1.13 "Market Stand-Off" Agreement............................. 11
1.14 Termination of Registration Rights....................... 12
1.15 Registration of Common Stock............................. 12
2. Covenants of the Company....................................... 12
2.1 Delivery of Financial Statements......................... 12
2.2 Inspection............................................... 13
2.3 Right of First Offer..................................... 13
2.4 Termination of Certain Covenants......................... 14
3. Miscellaneous.................................................. 14
3.1 Restrictive Legend....................................... 14
3.2 Notice of Proposed Transfer.............................. 15
3.3 Successors and Assigns................................... 15
3.4 Governing Law............................................ 15
3.5 Counterparts............................................. 15
3.6 Titles and Subtitles..................................... 15
3.7 Notices.................................................. 15
3.8 Expenses................................................. 16
3.9 Amendments and Waivers................................... 16
3.10 Severability............................................. 16
3.11 Aggregation of Stock..................................... 17
3.12 Entire Agreement......................................... 17
3.13 Further Assurances....................................... 17
3.14 Interpretation........................................... 17
3.15 Additional Investors..................................... 17
</TABLE>
i
<PAGE> 3
Exhibit A Schedule of Investors
ii
<PAGE> 4
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as of
September 30, 1997, by and among Waste Connections, Inc., a Delaware corporation
(the "Company"), and the investors listed on Exhibit A hereto, each of which is
herein referred to as an "Investor," with reference to the following facts:
The Company and the Investors are parties to the Stock Purchase Agreement
dated as of September 30, 1997 (the "Stock Purchase Agreement") with respect to
the purchase of shares of Series A Preferred Stock (the "Series A Preferred
Stock") and Common Stock (the "Common Stock") of the Company. In order to induce
the Company to enter into the Stock Purchase Agreement and to induce the
Investors to invest funds in the Company pursuant to the Stock Purchase
Agreement, the Investors and the Company hereby agree that this Agreement shall
govern the rights of certain of the Investors to cause the Company to register
shares of Common Stock issuable to such Investors and certain other matters as
set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth in this Agreement, the parties agree as
follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Agreement:
(a) The term "ACT" means the Securities Act of 1933, as
amended.
(b) The term "FORM S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "HOLDER" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12.
(d) The term "1934 ACT" shall mean the Securities Exchange Act
of 1934, as amended.
(e) The term "PREFERRED STOCK" shall mean the Series A
Preferred Stock of the Company.
(f) The terms "REGISTER", "REGISTERED" and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement or similar document in
<PAGE> 5
compliance with the Act, and the declaration or ordering of effectiveness of
such registration statement or document.
(g) The term "REGISTRABLE SECURITIES" means the Common Stock
sold pursuant to the Stock Purchase Agreement, the Common Stock issued pursuant
to the Stock Purchase Agreement dated as of February 4, 1998, by and among Waste
Connections, Inc., Madera Disposal Systems, Inc., Alma Sciacqua, as trustee of
the Sciacqua Family Trust B, Eugene Dupreau, Melvin G. Dias, and Charles B.
Youngclaus, the Common Stock issuable upon exercise of the Warrants to purchase
Common Stock issued to Eugene Dupreau, Melvin G. Dias, Charles B. Youngclaus,
Imperial Bank, FSC Corp., Ronald J. Mittelstaedt, J. Bradford Bishop, Frank W.
Cutler, James N. Cutler, Jr., Michael Harlan, Phil Rivard, Greg Popovich, Ed
Quinnan and Steven Bouck, the Common Stock issuable or issued upon conversion of
the Preferred Stock, and any other securities issued by the Company from time to
time that the Company's Board of Directors determines should be included in the
definition of "Registrable Securities", excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned; provided, however, that shares of Common
Stock or other securities shall not be treated as Registrable Securities for the
purposes of any registration if and so long as at the time of such registration
all transfer restrictions and restrictive legends with respect thereto have been
or, in the opinion of the Company's counsel, may be removed, and all the
Registrable Securities held by such Holder may be sold without restriction
(including any volume limitations) under Rule 144 under the Act.
(h) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(i) The term "SEC" shall mean the Securities and Exchange
Commission.
(j) The term "UNDERWRITTEN OFFERING" means an offering of
Common Stock to the public pursuant to an effective Registration Statement that
is firmly underwritten by a United States nationally recognized underwriter or
underwriters that are selected or approved by the Company in accordance with
this Agreement.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the earlier
of (i) four years after the Closing of the Series A Preferred Stock offering or
(ii) six (6) months after the effective date of the first registration statement
for a public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction), a written request from Holders holding at least fifty percent
(50%) of the
2
<PAGE> 6
Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Act covering the registration of
at least twenty percent (20%) of the Registrable Securities then outstanding (or
a lesser percent if the anticipated aggregate offering price would exceed
$100,000,000), then the Company shall, within twenty-one (21) days after the
receipt thereof, give written notice of such request to all Holders and shall,
subject to the limitations and pursuant to the provisions of this Section 1.2,
use reasonable efforts to file a registration statement under the Act covering
all Registrable Securities which the Holders request to be registered.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action to effect any such registration pursuant to this
Section 1.2:
(i) if the Initiating Holders propose to dispose of
shares of Registrable Securities which may be immediately registered on Form S-3
pursuant to a request made under Section 1.11;
(ii) if the Holders shall have initiated two
registrations pursuant to this Section 1.2, which have been declared or ordered
effective and pursuant to which securities have been sold or have been withdrawn
by the Holders other than as a result of a material adverse change to the
Company; or
(iii) if the Company has effected a registration
pursuant to this Section 1.2 within one year prior to receipt of a requested
pursuant to Section 1.2(a).
(c)(i) Subject to the provisions of this Agreement, including,
but not limited to, the foregoing Section 1.2(b) and Section 1.4(a), the Company
shall file a registration statement as soon as practicable after receipt of the
request or requests of the Initiating Holders under this Section 1.2, but in any
event within ninety (90) days after receipt of such request or requests.
(ii) Notwithstanding anything to the contrary herein, the
Company shall not be obligated to effect a registration pursuant to this Section
1.2 during the period starting with the date approximately 10 days prior to the
Company's good faith estimate of the date of filing of, and ending on the date
six months following the effective date of, a Company-initiated registration
statement pertaining to the initial registered underwritten public offering of
securities for the Company's account (the "Initial Offering"); provided that the
Company makes reasonable good faith efforts to cause such registration statement
to become effective.
(d) The right of any Holder to registration pursuant to this
Section 1.2 shall be conditioned on such Holder's participation in an
Underwritten Offering and the inclusion of such Holder's Registrable Securities
to be registered in the Underwritten Offering. The Company shall (together with
all Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the underwriter or
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underwriters selected by the Company, which underwriter or underwriters shall be
reasonably acceptable to a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.2, if the underwriters
advise the Initiating Holders and the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten and that the
total amount of securities that all Holders (initiating and noninitiating)
request pursuant to this Section 1.2(d) to be included in such offering exceeds
the amount of securities that the underwriters reasonably believe compatible
with the success of the offering, the Company shall so advise all Holders and
all of the Holders' shares to be included in the registration shall be allocated
among all Holders requesting inclusion (initiating and noninitiating) pro rata
according to the total amount of securities entitled to be included in such
registration owned by each Holder requesting inclusion (initiating or
noninitiating) or in such other proportions as shall be mutually agreed by such
selling shareholders. Shares of Registrable Securities held by the Holders shall
not be subject to cutback following the allocation unless shares of all other
selling shareholders have been eliminated from the offering.
If any Holder does not agree to the terms of any such underwriting,
that person shall be excluded therefrom by written notice from the Company or
the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
shares are so withdrawn from the registration and the number of shares of
Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion pro rata according
to the total amount of securities entitled to be included in such registration
owned by each such person or in such other proportions as shall be mutually
agreed by such selling shareholders. For purposes of the preceding sentence
concerning apportionment, for any selling shareholder which is a holder of
Registrable Securities and which is a partnership, limited liability company or
corporation, the partners, retired partners, members, retired members and
shareholders of such holder, or the estates and family members of any such
partners, retired partners, members, retired members and shareholders and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling shareholder," and any pro-rata reduction with respect to such
"selling shareholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling shareholder," as defined in this sentence.
1.3 Company Registration. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for any shareholders) any of its stock or other
securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the
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<PAGE> 8
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities which are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.7, the Company shall,
subject to the provisions of Section 1.7, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered.
1.4 Obligations of the Company. Whenever required under this Section
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or until the distribution contemplated in the Registration Statement
has been completed; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (i) includes any prospectus required by Section
10(a)(3) of the Act or (ii) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (i) and
(ii) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement. Notwithstanding anything to
the contrary in this Agreement, the Company may delay filing a Registration
Statement, and may withhold efforts to cause a Registration Statement to become
effective, for a period not to exceed 120 days, if the Company shall furnish to
Holders a certificate signed by the Chairman of the Board stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be effected at such time; provided that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period. If, after a Registration Statement becomes effective, the Company
advises the holders of registered shares that the Company considers it
appropriate for the Registration Statement to be amended or supplemented, the
holders of such shares shall suspend any further sales of their registered
shares, for a period not to exceed 90 days, until the Company advises them that
the registration statement has been amended or updated.
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<PAGE> 9
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
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<PAGE> 10
1.6 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to this Section 1 for each Holder (which right may be assigned as
provided in Section 1.12), including (without limitation) all registration,
filing, and qualification fees, printers and accounting fees relating or
apportionable thereto and the fees and disbursements of counsel for the Company
and one separate counsel for the selling Holders hereunder (selected by the
Holders of a majority of the Registrable Securities that are included in the
corresponding registration), but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.7 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under this Section 1 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities that the underwriters
determine in good faith is compatible with the success of the offering, the
number of shares that may be included in the underwriting shall be allocated,
first, to the Company; second, to the Holders on a pro rata basis based on the
total number of Registrable Securities held by the Holders; and third, to any
shareholder of the Company (other than a Holder) on a pro rata basis. No such
reduction shall reduce the amount of securities of the selling Holders included
in the registration below fifteen percent (15%) of the total amount of
securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
shareholders, in which event any or all of the Registrable Securities of the
Holders may be excluded in accordance with the immediately preceding sentence.
In no event will shares of any other selling shareholder be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of not less than two-thirds (66
2/3%) of the Registrable Securities proposed to be sold in the offering.
If any Holder does not agree to the terms of any such underwriting,
the holder shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
shares are so withdrawn from the registration and or if the number of shares of
Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion pro rata according
to the total amount of securities entitled to be included in such registration
owned by each such person or in such other proportions as shall be mutually
agreed by such selling shareholders. For
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<PAGE> 11
purposes of the preceding sentence concerning apportionment, for any selling
shareholder which is a holder of Registrable Securities and which is a
partnership, limited liability company or corporation, the partners, retired
partners, members, retired members and shareholders of such holder, or the
estates and family members of any such partners, retired partners, members,
retired members and shareholders and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling shareholder," and any
pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
this sentence.
1.8 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection 1.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person of
such Holder.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the
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registration statement, each person, if any, who controls the Company within the
meaning of the Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.9(b), in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this subsection 1.9(b) exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1,9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that
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<PAGE> 13
resulted in such loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.11 Form S-3 Registration. In case the Company shall receive
written request or requests from at least ten percent (10%) of the Holders of
the Registrable Securities that the
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Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 20
days after effectiveness of such written notice from the Company pursuant to
Section 3.7; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance pursuant to this
Section 1.11: (i) if Form S-3 is not available for such offering by the Holders;
(ii) if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at any aggregate price to the
public less than $1,000,000; or (iii) as provided in Section 1.4(a) or Section
1.4(d).
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 1.11 shall not be counted as demands for registration effected pursuant
to Section 1.2.
1.12 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned to a transferee or assignee (other than a competitor of the Company)
who acquires at least twenty-five percent (25%) of the shares held by a Holder
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement and the Stockholders
Agreement, including without limitation the provisions of Section 1.13 below;
(c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act; and (d) transfer of registration rights to
a limited or general partner of any Holder that is a partnership will be without
restriction as to minimum shareholding. For the purposes of determining the
number of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership or limited liability
company who are partners or retired partners of such partnership or members or
retired members of such limited liability company (including spouses and
ancestors, lineal descendants and siblings of such partners, members or spouses
who acquire Registrable Securities by gift, will or intestate
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succession) shall be aggregated together and with the partnership or limited
liability company; provided that all assignees and transferees who would not
qualify individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.
1.13 "Market Stand-Off" Agreement. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date of
a registration statement filed under the Act for the first public offering of
the Company's Common Stock, it shall not, to the extent requested by the Company
and such underwriter, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that:
(a) all officers and directors of the Company, all holders of
Common Stock and options to purchase Common Stock and all other persons with
registration rights (whether or not pursuant to this Agreement) enter into
similar agreements; and
(b) such market stand-off time period shall not exceed 180
days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.13 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-14 or Form 915 or similar forms which may be promulgated
in the future.
1.14 Termination of Registration Rights.
(a) No Holder shall be entitled to exercise any right provided
for in this Section 1 after five (5) years following the consummation of the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the Initial Offering.
(b) In addition, the right of any Holder to request
registration or inclusion in any registration pursuant to Section 1 shall
terminate on the closing of the first Company-initiated registered public
offering of Common Stock of the Company if all shares of Registrable Securities
held or entitled to be held upon conversion by such Holder may
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immediately be sold under Rule 144 during any 90 day period, or on such date
after the closing of the first Company-initiated registered public offering of
Common Stock of the Company as all shares of Registrable Securities held or
entitled to be held upon conversion by such Holder may immediately be sold under
Rule 144 during any 90 day period.
1.15 Registration of Common Stock. For purposes of Section 1 of this
Agreement, the only securities which the Company shall be required to register
pursuant hereto shall be shares of Common Stock, provided, however, that, in any
underwritten public offering contemplated by Section 1 hereof, the holders of
Preferred Stock shall be entitled to sell such Preferred Stock to the
underwriters for conversion and sale of the shares of Common Stock issued upon
conversion thereof.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall deliver to
each holder of Series A Preferred Stock (or Common Stock issued upon conversion
of Series A Preferred Stock):
(a) as soon as practicable, but in any event within one
hundred twenty (120) days after the end of each fiscal year of the Company, an
income statement for such fiscal year, a balance sheet of the Company and
statement of shareholder's equity as of the end of such year, and a statement of
cash flows for such year, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles
("GAAP"), and audited and certified by independent public accountants of
nationally recognized standing selected by the Company; and
(b) as soon as practicable, but in any event within sixty (60)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company, an unaudited income statement for such fiscal quarter, statement
of cash flows for such fiscal quarter and an unaudited balance sheet as of the
end of such fiscal quarter.
2.2 Inspection. The Company shall permit each Investor, at such
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.2 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
2.3 Right of First Offer. Subject to the terms and conditions
specified in this Section 2.3, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). For purposes of this Section 2.3, Investor includes
any general partners, managers and affiliates of an Investor. An
13
<PAGE> 17
Investor shall be entitled to apportion the right of first offer hereby granted
it among itself and its partners, members and affiliates in such proportions as
it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Investors stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the price and
terms, if any, upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within 20
calendar days after giving of the Notice, the Investor may elect to purchase or
obtain, at the price and on the terms specified in the Notice, up to that
portion of such Shares which equals the proportion that the number of shares of
common stock issued and held, or issuable upon conversion of the Preferred Stock
then held by such Investor bears to the total number of shares of common stock
of the Company then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities). The Company shall promptly, in writing,
inform each Investor which purchases all the shares available to it
("Fully-Exercising Investor") of any other Investor's failure to do likewise.
During the ten-day period commencing after such information is given, each
Fully-Exercising Investor shall be entitled to obtain that portion of the Shares
for which Investors were entitled to subscribe but which were not subscribed for
by the Investors which is equal to the proportion that the number of shares of
common stock issued and held, or issuable upon conversion of Preferred Stock
then held by such Fully-Exercising Investor bears to the total number of shares
of common stock issued and held, or issuable upon conversion of the Preferred
Stock then held, by all Fully-Exercising Investors who wish to purchase some of
the unsubscribed shares.
(c) If all Shares which Investors are entitled to obtain
pursuant to subsection 2.3(b) are not elected to be obtained as provided in
subsection 2.3(b) hereof, the Company may, during the 60-day period following
the expiration of the period provided in subsection 2.3(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 30 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Investors in accordance herewith.
(d) The right of first offer in this Section 2.3 shall not be
applicable (i) to consummation of a bona fide, firmly underwritten public
offering of shares of common stock registered under the Act pursuant to a
registration statement on Form S-1, at an offering price of
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<PAGE> 18
at least $5.00 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) with aggregate gross proceeds to the
Company of at least $5,000,000, (ii) the issuance of securities pursuant to the
conversion or exercise of convertible or exercisable securities, (iii) the
issuance of securities in connection with a bona fide business acquisition of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise, or (iv) the issuance of options or warrants to
purchase shares of Common Stock to officers, directors and employees of, or
consultants to, the Company, with an exercise price greater than the then
current conversion price of the Company's Series A Preferred Stock.
(e) The right of first offer set forth in this Section 2.3 may
be assigned or transferred to the same parties, subject to the same restrictions
pursuant to Section 1.12.
2.4 Termination of Certain Covenants. The covenants set forth in
this Section 2 shall terminate and be of no further force or effect upon the
consummation of a bona fide, firmly underwritten public offering of shares of
Common Stock registered under the Act pursuant to a registration statement on
Form S-1, at an offering price of at least $5.00 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
with aggregate gross proceeds to the Company of at least $5,000,000.
3. Miscellaneous.
3.1 Restrictive Legend. Each certificate representing Preferred
Stock or Common Stock issued upon conversion thereof shall, except as otherwise
provided in Section 3.2, be stamped or otherwise imprinted with a legend
substantially in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT
AND ALL SUCH OTHER APPLICABLE LAWS OR AN EXEMPTION FROM REGISTRATION
IS AVAILABLE.
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Act and any applicable state securities
laws.
3.2 Notice of Proposed Transfer. Prior to any proposed transfer of
any Preferred Stock or Common Stock issued upon conversion thereof (other than
under the circumstances described in Section 1), the holder thereof shall give
written notice to the Company of his or her intention to effect such transfer.
Each such notice shall describe the manner of the proposed transfer and, if
reasonably requested by the Company, shall be accompanied by an opinion of
counsel satisfactory to the Company to the effect that the proposed transfer may
be effected without registration under the Act and any applicable state
securities
15
<PAGE> 19
laws, whereupon the holder of such stock shall be entitled to transfer such
stock in accordance with the terms of the notice; provided, however, that no
such opinion of counsel shall be required for a transfer to one or more partners
or members of the transferor (in the case of a transferor that is a partnership
or limited liability company) or to an affiliated corporation (in the case of a
transferor that is a corporation). Each certificate for Preferred Stock or
Common Stock issued upon conversion thereof transferred as above provided shall
bear the legend set forth in Section 3.1, except that such certificate shall not
bear such legend if (i) such transfer is in accordance with the provisions of
Rule 144 (or any other rule permitting public sale without registration under
the Act) or (ii) the opinion of counsel referred to above is to the further
effect that the transferee and any subsequent transferee (other than an
affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Act. The restrictions provided for in
this Section 3.2 shall not apply to securities which are not required to bear
the legend prescribed by Section 3.1 in accordance with the provisions of that
Section.
3.3 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.4 Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of California, without
regard to that state's conflict of laws principles.
3.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
3.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.7 Notices. Any notice, consent, authorization or other
communication to be given hereunder shall be in writing and shall be deemed duly
given and received when delivered personally or transmitted by facsimile
transmission with receipt acknowledged by the addressee or three days after
being mailed by first class mail, or the next business day after being deposited
for next-day delivery with a nationally recognized overnight delivery service,
charges and postage prepaid, properly addressed to the party to receive such
notice at the following address for such party (or at such other address as
shall be specified by like notice):
16
<PAGE> 20
(a) if to the Company, to:
Waste Connections, Inc.
3510 Trenton Way
El Dorado Hills, CA 95762
Attention: Ronald J. Mittelstaedt
Telephone: (916) 939-7986
Facsimile: (916) 939-7987
with copies to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Attention: Robert D. Evans, Esq.
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
(b) if to the Investors, to the address indicated on Exhibit
A.
Unless otherwise provided, any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or upon deposit with the United States Post
Office, by registered or certified mail, postage prepaid and addressed to the
party to be notified at the address indicated for such part on the signature
page hereof, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties.
3.8 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this Section shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
17
<PAGE> 21
3.10 Severability. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those to which it is held
to be invalid or unenforceable, shall not be affected thereby.
3.11 Aggregation of Stock. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.12 Entire Agreement. This Agreement, the Stockholders Agreement
and the Stock Purchase Agreement of even date contain the entire agreement of
the parties and supersede all prior negotiations, correspondence, agreements and
understandings, written and oral, between or among the parties, regarding the
subject matter hereof.
3.13 Further Assurances. Each party shall execute such other and
further certificates, instruments and other documents as may be necessary and
proper to implement, complete and perfect the transactions contemplated by this
Agreement.
3.14 Interpretation. All parties have been assisted by counsel in
the preparation and negotiation of this Agreement and the transactions
contemplated hereby, and this Agreement shall be construed according to its fair
language. The rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
3.15 Additional Investors. If the Company shall at any future time
desire to issue or reissue any shares of Common Stock or Series A Preferred
Stock to any person or firm (including any Investors), all such issuees shall
become parties to this Agreement with respect to such shares of the Company's
stock by executing a counterpart of this Agreement or a writing agreeing to be
bound hereby. Such additional Investors shall be added to Exhibit A hereto.
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<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY: WASTE CONNECTIONS, INC.
By:
-------------------------------------
Ronald J. Mittelstaedt
President & CEO
INVESTOR:
----------------------------------------
(Name of Investor)
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
19
<PAGE> 23
Exhibit A
LIST OF COMMON AND SERIES A PREFERRED STOCKHOLDERS
<PAGE> 1
EXHIBIT 10.9
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT ("Agreement") is entered into as of September
30, 1997, by and among Waste Connections, Inc., a Delaware corporation (the
"Company"), the persons named on Exhibit A attached to this Agreement, each of
whom is a holder of shares of Series A Preferred Stock of the Company (each a
"Series A Preferred Stockholder") or a holder of shares of Common Stock of the
Company (each a "Common Stockholder"), (the Series A Preferred Stockholders and
the Common Stockholders sometimes shall be hereinafter collectively referred to
as "Investors"), with reference to the following facts:
As of the date of this Agreement, certain of the Series A Preferred
Stockholders have acquired 2,500,000 shares of Series A Preferred Stock of the
Company and certain of the Common Stockholders have acquired 2,500,000 shares of
Common Stock of the Company pursuant to the terms of the Stock Purchase
Agreement (the "Purchase Agreement") among the Series A Preferred Stockholders,
the Common Stockholders and the Company. It is a condition to the closing of the
transactions contemplated by the Purchase Agreement that this Agreement be
executed by the parties hereto.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth in this Agreement, the parties agree as
follows:
1. Voting Agreement. Each of the Investors hereby agrees with respect to
the election of directors of the Company that upon request of the holders of at
least 50% of the outstanding shares of Series A Preferred Stock of the Company,
the Investors shall vote the shares of the Company's stock then owned by them in
favor of the number of Series A Nominees (the "Series A Nominees") listed below
opposite the then applicable authorized number of directors, which nominees
shall be nominated by the holders of at least 50% of the outstanding shares of
Series A Preferred Stock of the Company:
<TABLE>
<CAPTION>
Authorized Number
of Directors Series A Nominees
------------ -----------------
<S> <C>
3 1
4 2
5 2
6 3
7 3
8 4
9 4
</TABLE>
If at the time such request is made, the authorized number of directors is
five or fewer, the Board of Directors of the Company shall promptly amend the
Bylaws of the Company to increase the number of directors to a number that would
allow the number of Series A Nominees derived from the above table to be
elected, and then shall promptly elect the Series A Nominees selected by the
holders of at least 50% of the outstanding shares of Series A Preferred Stock of
1
<PAGE> 2
the Company to fill the vacancies created by such increase in the authorized
number of directors. If at the time such request is made, the authorized number
of directors exceeds five, the Board of Directors of the Company shall promptly
amend the Bylaws of the Company to increase the number of directors to nine, and
one or more of the directors then in office shall resign so that the number of
directors then in office is five. Following such resignations, the Board of
Directors shall elect four Series A Nominees selected by the holders of at least
50% of the outstanding shares of Series A Preferred Stock of the Company to fill
the vacancies created by such increase. If any director refuses to resign after
being asked to do so by the Board, each of the Investors hereby agrees to vote
the shares of the Company's stock then owned by such Investor for the removal of
such director.
2. Co-Sale Agreement.
2.1 Definitions.
(a) "Co-Sale Shares" shall mean shares of the Company's Common Stock
and securities convertible (other than the Preferred Stock) into, exchangeable
for, or exercisable for, Common Stock now owned or subsequently acquired by the
Investors. The number of Co-Sale Shares relating to a convertible security shall
be the number of shares of Common Stock of the Company into which such security
is convertible, exchangeable or exercisable.
(b) "Preferred Stock" shall mean the Series A Preferred Stock of the
Company.
2.2 Sales by a Stockholder.
(a) Except for certain sales and gifts permitted by Section 3, if
any of the Investors or Permitted Transferees (as defined below) proposes to
sell or transfer any Co-Sale Shares (any one of such Investors and Permitted
Transferees being hereinafter sometimes called the "Transferring Stockholder"),
then the Transferring Stockholder shall promptly give written notice (the
"Co-Sale Notice") to the Company and to each of the Investors at least 20 days
prior to the closing of such sale or transfer. The Co-Sale Notice shall describe
in reasonable detail the proposed sale or transfer including, without
limitation, the number of Co-Sale Shares to be sold or transferred, the nature
of such sale or transfer, the consideration to be paid, and the name and address
of each prospective purchaser or transferee. In the event that the sale or
transfer is being made pursuant to the provisions of Section 3 hereof, the
Co-Sale Notice shall state under which subparagraph the sale or transfer is
being made.
(b) With respect to a proposed transfer by a Transferring
Stockholder, the Investors shall have the right, exercisable upon written notice
to the Transferring Stockholder within 15 days after receipt of the Co-Sale
Notice, to participate in such sale on the same terms and conditions specified
in the Co-Sale Notice. To the extent that Investors exercise such right
2
<PAGE> 3
of participation in accordance with the terms and conditions set forth below,
the number of Co-Sale Shares that the Transferring Stockholder may sell in the
transaction shall be reduced.
(c) Each Investor may sell all or any part of that number of Co-Sale
Shares at the same price per share and on the same terms and conditions as
involved in the sale by the Transferring Stockholder equal to the total number
of shares to be sold in the transaction multiplied by a fraction, the numerator
of which is the number of Co-Sale Shares held by such Investor and the
denominator of which is the total number of Co-Sale Shares outstanding.
(d) Each Investor to participate in the right of co-sale (a
"Participant") shall effect his, her or its participation in the sale by
promptly delivering to the Transferring Stockholder for transfer to the
prospective purchaser one or more certificates, properly endorsed for transfer,
which represent:
(i) the number of Co-Sale Shares which such Participant elects
to sell; or
(ii) that number of shares of Series A Preferred Stock which
is at such time convertible into the number of Co-Sale Shares which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Series A Preferred Stock in lieu of Co-Sale Shares,
such Participant shall convert such Series A Preferred Stock into Co-Sale Shares
and deliver Co-Sale Shares as provided above. The Company agrees to make any
such conversion concurrent with the actual transfer of such shares to the
purchaser.
(e) The stock certificate or certificates that the Participant
delivers to the Transferring Stockholder pursuant to Section 2.2(d) shall be
transferred to the prospective purchaser in consummation of the sale of the
Co-Sale Shares pursuant to the terms and conditions specified in the Co-Sale
Notice, and the Transferring Stockholder shall concurrently therewith remit to
such Participant the sale proceeds to which such Participant is entitled by
reason of his, her or its participation in such sale. To the extent that any
prospective purchaser or purchasers prohibits such assignment or otherwise
refuses to purchase shares or other securities from a Participant exercising
his, her or its rights of co-sale hereunder, the Transferring Stockholder shall
not sell to such prospective purchaser or purchasers any Co-Sale Shares unless
and until, simultaneously with such sale, the Transferring Stockholder shall
purchase such shares or other securities from such Participant.
(f) The exercise or non-exercise of the rights of the Participants
hereunder to participate in one or more sales of Co-Sale Shares made under this
Agreement shall not adversely affect their rights to participate in subsequent
sales of Co-Sale Shares subject to this Agreement.
(g) If none of the Investors elects to participate in the sale of
the Co-Sale Shares subject to the Co-Sale Notice, the Transferring Stockholder
may, not later than sixty (60) days following delivery to the Company and each
of the Investors of the Co-Sale Notice, enter
3
<PAGE> 4
into an agreement providing for the closing of the transfer of the Co-Sale
Shares covered by the Co-Sale Notice within thirty (30) days after the date of
such agreement on terms and conditions not more favorable to the Transferring
Stockholder than those described in the Co-Sale Notice. Any proposed transfer on
terms and conditions more favorable than those described in the Co-Sale Notice,
as well as any subsequent proposed transfer of any of the Co-Sale Shares by an
Investor, shall again be subject to the co-sale rights of the other Investors
and shall require compliance with the procedures described in this Section 2.2.
(h) Any Co-Sale Shares sold pursuant to this Section 2.2 shall no
longer be subject to this Agreement.
3. Exempt Transfers.
(a) Notwithstanding the foregoing, the provisions of Section 2 shall
not apply to (i) any transfer to the ancestors, descendants or spouse or to
trusts for the benefit of a Transferring Stockholder; or (ii) any bona fide gift
by an Investor; provided that (A) the Transferring Stockholder shall inform the
Investors of such transfer or gift prior to effecting it and (B) the transferee
or donee shall furnish the Investors with a written agreement to be bound by and
comply with all provisions of this Agreement, the Investors' Rights Agreement
and the Stock Purchase Agreement. Such transferred Co-Sale Shares shall remain
"Co-Sale Shares" hereunder and such transferee or donee shall be treated as a
"Transferring Stockholder" and as an "Investor". In addition, notwithstanding
the foregoing, the provisions of Section 2.2 shall not apply to any transfers
from an Investor to a partner, active or retired of an Investor, the estate of
any such partner or a parent or subsidiary corporation of an Investor, or a
corporation which has the same parent corporation as an Investor provided that
such Investor notifies the other Stockholders prior to effecting the transfer
and the transferee shall furnish the Stockholders with a written agreement to be
bound by and comply with all provisions of this Agreement, the Investors' Rights
Agreement and the Stock Purchase Agreement. Such transferred shares shall remain
"Co-Sale Shares" hereunder and such transferee (a "Permitted Transferee") shall
be treated as an additional "Transferring Stockholder" for purposes of this
Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2 of
this Agreement shall not apply to the sale of any Co-Sale Shares (i) to the
public pursuant to a registration statement filed with, and declared effective
by, the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act") or (ii) to the Company on termination of the
employment of a Transferring Stockholder pursuant to the terms of any agreement
between that Transferring Stockholder and the Company or as otherwise approved
by the Board of Directors of the Company.
4
<PAGE> 5
4. Prohibited Transfers.
(a) In the event a Transferring Stockholder should sell any Co-Sale
Shares in contravention of the co-sale rights of the Investors under this
Agreement (a "Prohibited Transfer"), each Investor who had co-sale rights in
connection with the Prohibited Transfer, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the put option
provided below, and the Transferring Stockholder shall be bound by the
applicable provisions of such option.
(b) In the event of a Prohibited Transfer, each Investor shall have
the right to sell to the Transferring Stockholder the type and number of shares
of Co-Sale Shares equal to the number of shares each Investor would have been
entitled to transfer to the purchaser had the Prohibited Transfer been effected
pursuant to and in compliance with the terms of Section 2.2 this Agreement. Such
sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Transferring Stockholder shall be equal to the price per share paid by the
purchaser to the Transferring Stockholder in the Prohibited Transfer. The
Transferring Stockholder shall also reimburse each Investor for any and all fees
and expenses, including legal fees and expenses, incurred pursuant to the
exercise or the attempted exercise of the Investor's rights under Section 2.2.
(ii) Within 90 days after the later of the dates on which the
Investor (A) received notice of the Prohibited Transfer or (B) otherwise became
aware of the Prohibited Transfer, each Investor shall, if exercising the option
created hereby, deliver to the Transferring Stockholder the certificate or
certificates representing shares to be sold, each certificate to be properly
endorsed for transfer.
(iii) The Transferring Stockholder shall, upon receipt of the
certificate or certificates for the shares to be sold by an Investor, pursuant
to this Section 4(b), pay the aggregate purchase price therefor and the amount
of reimbursable fees and expenses, as specified in Section 4(b)(i), in cash or
by other means acceptable to the Investor.
(c) Notwithstanding the foregoing, any attempt by a Transferring
Stockholder to transfer Co-Sale Shares in violation of Section 2.2 hereof shall
be void and the Company agrees it will not effect such a transfer nor will it
treat any alleged transferee as the holder of such shares without the prior
written consent of a majority-in-interest of the Investors.
5. Further Assurances. The parties shall do or perform any and all such
further acts and things and execute and deliver any and all such documents and
instruments as may be reasonably necessary to carry out the provisions of this
Agreement. Exercise of the parties' rights under this Agreement shall be subject
to and conditioned upon, and each Transferring
5
<PAGE> 6
Stockholder, Investor and the Company shall use their best efforts to assist
each Transferring Stockholder in, compliance with applicable laws.
6. Spousal Consents. Any natural person to whose benefit this Agreement
may now or hereafter inure shall use his or her best efforts to obtain the
acknowledgment and consent of his or her spouse, whether such party is now
married or marries or remarries hereafter, in substantially the form attached
hereto following the signature page hereof.
7. Stop Transfer Instructions. The parties agree that stop order
instructions prohibiting transfer of certificates for Shares will be issued and
filed by the Company on its records or with the Company's transfer agent to
prevent any disposition otherwise than strictly in accordance with this
Agreement and agree to cause the officers of the Company to refuse to record on
the books of the Company any assignments or transfers made or attempted to be
made except in accordance with this Agreement and to cause said officers to
refuse to cancel certificates, or issue or deliver new certificates therefor,
where the purchaser, assignee, pledgee, donee or other transferee has acquired
certificates or any Shares represented thereby otherwise than strictly in
accordance with this Agreement.
8. Additional Stockholders. If the Company shall at any future time desire
to issue or reissue Shares to any Investor, all such issuees shall become
parties to this Agreement (and their spouses shall acknowledge and consent
thereto as provided in Section 6) with respect to such Shares by executing a
writing agreeing to be bound hereby.
9. Legend. Each certificate representing shares of stock now or hereafter
owned by any Permitted Transferee shall include the following legend:
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER AND THE VOTING OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN STOCKHOLDERS AGREEMENT, BY AND BETWEEN THE
STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST
TO THE SECRETARY OF THE CORPORATION.
10. Repurchase Agreement. This Stockholder Agreement is subject to, and
shall in no manner limit the right of the Company to repurchase securities from
an Investor pursuant to any stock restriction agreement or other agreement
between the Company and the Investor.
11. Ownership. Each Transferring Stockholder represents and warrants that
such Transferring Stockholder is the sole legal and beneficial owner of the
shares of stock subject to this Agreement and that no other person has any
interest (other than a community property interest) in such shares.
6
<PAGE> 7
12. Notices. Any notice, consent, authorization or other communication to
be given hereunder shall be in writing and shall be deemed duly given and
received when delivered personally or transmitted by facsimile transmission with
receipt acknowledged by the addressee or three days after being mailed by first
class mail, or the next business day after being deposited for next-day delivery
with a nationally recognized overnight delivery service, charges and postage
prepaid, properly addressed to the party to receive such notice at the following
address for such party (or at such other address as shall be specified by like
notice):
(a) if to the Company, to:
Waste Connections, Inc.
3510 Trenton Way
El Dorado Hills, CA
95762 Attention: Ronald J. Mittelstaedt
Telephone: (916) 939-7986
Facsimile: (916) 939-7987
with copies to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Attention: Robert D. Evans, Esq.
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
(b) if to the Transferring Stockholders, to the address indicated
on the Company's records.
13. Severability. If any provision of this Agreement, or the application
of such provision to any person or circumstance, shall be held invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those to which it is held to be
invalid or unenforceable, shall not be affected thereby.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
15. Entire Agreement; Amendment; Waiver. This Agreement contain the entire
agreement of the parties and supersede all prior negotiations, correspondence,
agreements and understandings, written and oral, between or among the parties,
regarding the subject matter hereof.
7
<PAGE> 8
16. Successors and Assigns. Without limiting the restrictions on transfers
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by the parties hereto and their respective successors, permitted assigns,
personal or legal representatives, heirs and legatees, whether herein so
expressed or not, and this Agreement shall be binding on any person who acquires
any interest in any Shares, whether or not in accordance with this Agreement,
and on any executor, administrator, successor or assign of any such person.
17. Voting Trust. Notwithstanding anything herein to the contrary, Shares
may be transferred by one or more Transferring Stockholders to voting trustees
subject to all of the terms and conditions of this Agreement; provided that the
beneficial ownership of such Shares is not transferred, that any voting trust
certificates issued refer to the provisions of this Agreement and that such
Shares may not be transferred without the same being considered a transfer of
Shares within the scope of this Agreement.
18. Amendment. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
as to the Company, only by the Company, and (ii) as to each Investor, that
Investor. Any amendment or waiver effected in accordance with clauses (i) or
(ii) of this paragraph shall be binding upon that Investor, and the successors
and permitted assigns of that Investor, as the case may be.
19. Termination. This Agreement shall terminate on the earliest of (a) the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act covering the offer and
sale of the Company's Common Stock (A) at a price per share of not less than
$5.00 (as adjusted for stock splits, reverse stock splits and the like effected
after the date of this Agreement) and an aggregate offering price of not less
than $5,000,000 or (B) upon the request of Investors pursuant to the terms of
the Investors' Rights Agreement, dated as of September 30, 1997, to file a
registration statement with the Securities and Exchange Commission, (b) the
written agreement of the Company and parties hereto holding two-thirds or more
of the Shares then outstanding, (c) the dissolution, bankruptcy, insolvency or
receivership of the Company or (d) ten years from the date of this Agreement.
20. Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
21. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of California, without
regard to that state's conflict of laws principles.
22. Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
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23. Interpretation. This Agreement shall be construed according to its
fair language. The rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY: WASTE CONNECTIONS, INC.
By:
------------------------------
Ronald J. Mittelstaedt
President and CEO
INVESTOR:
---------------------------------
(Name of Investor)
By:
------------------------------
Name:
---------------------------
Title:
--------------------------
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Exhibit A
LIST OF COMMON AND SERIES A PREFERRED STOCKHOLDERS
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and effective as of October 1, 1997,
by and between Ronald J. Mittelstaedt (the "Employee"), Waste Connections, Inc.,
a Delaware corporation (the "Company"), and J. Bradford Bishop, Frank W. Cutler
and James N. Cutler, Jr. (the "Founders"), with reference to the following
facts.
The Company desires to engage the services and employment of the
Employee for the period provided in this Agreement, and the Employee is willing
to accept employment by the Company for such period, on the terms and conditions
set forth below.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein, the Company and the Employee agree as follows:
1. Employment. The Company agrees to employ the Employee, and the
Employee agrees to accept employment with the Company, for the Term stated in
Section 3 hereof and on the other terms and conditions herein.
2. Position and Responsibilities. During the Term, the Employee shall
serve as Chief Executive Officer and President of the Company, and perform such
other duties and responsibilities as the Board of Directors (the "Board") of the
Company may reasonably assign to the Employee from time to time. In addition,
the Employee shall serve as a member of the Board for an initial term of three
(3) years beginning on the date hereof. While the Employee is a member of the
Board, he shall serve on the Executive and Finance Committees of the Board. The
Employee shall devote such time and attention to his duties as are necessary to
the proper discharge of his responsibilities hereunder. The Employee agrees to
perform all duties consistent with (a) policies established from time to time by
the Company and (b) all applicable legal requirements.
3. Term. The period of the Employee's employment under this Agreement
shall commence on the effective date of this Agreement and shall continue
through September 30, 2002, unless terminated earlier as provided herein or
extended by the vote of a majority of the Board (the "Term"). At the end of the
Term, this Agreement shall be renewed automatically for successive periods of
one year, unless either party shall have given the other notice of termination
hereof as provided herein.
4. Compensation, Benefits and Reimbursement of Expenses.
(a) Compensation. The Company shall compensate the Employee
during the Term of this Agreement as follows:
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(1) Base Salary. The Employee shall be paid a base
salary ("Base Salary") of not less than One Hundred Seventy Thousand Dollars
($170,000) per year in installments consistent with the Company's usual
practices. The Board shall review the Employee's Base Salary on October 1 of
each year or more frequently, at the times prescribed in salary administration
practices applied generally to management employees of the Company. In addition,
if an IPO Closing (as defined below) with respect to the Company's Common Stock
occurs on or before October 1, 1998, the Employee's Base Salary shall be
adjusted on October 1, 1998, to the greater of (i) Two Hundred Fifty Thousand
Dollars ($250,000) per year, or (ii) the average of the annual base salaries of
Chief Executive Officers of comparable small- to mid-cap solid waste management
companies as determined and approved by the Board. An "IPO Closing" means (x)
the date the shares of the Company's Common Stock issued in an initial public
offering registered under the Securities Act of 1933, as amended (an "IPO"), are
sold to the underwriter, if the IPO is a fully underwritten offering, or (y) the
day following the closing of the Company's IPO, if the IPO is a best efforts
offering.
(2) Performance Bonus. The Employee shall be entitled
to an annual cash bonus (the "Bonus") based on the Company's attainment of
reasonable financial objectives to be determined annually by the Board. The
maximum annual Bonus will equal one hundred percent (100%) of the applicable
year's ending Base Salary and will be payable if a majority of the Board
determines, in its sole and exclusive discretion, that that year's financial
objectives have been fully met. Notwithstanding the foregoing, the Employee will
receive an aggregate minimum Bonus of One Hundred Twenty-Five Thousand Dollars
($125,000) for the 15-month period ending December 31, 1998, if the following
conditions are met:
(i) If by December 31, 1998, the Company
consummates the acquisition of another company or companies or businesses with
aggregate annual revenues of at least $10,000,000 (for this purpose, the annual
revenues of each such company or business acquired shall equal its revenues in
the most recent four full quarters before the acquisition), the Employee shall
receive a Bonus of at least Seventy-Five Thousand Dollars ($75,000), to be paid
in installments; each installment shall be paid within 30 days after the closing
of such an acquisition and shall be in an amount equal to the product of $75,000
multiplied by a fraction, the numerator of which is the annual revenues of the
company or business acquired, and the denominator of which is $10,000,000.
(ii) If the Company's income before
interest, depreciation and taxes for the six-month period ending March 31, 1998,
is at least $1,475,754, the Employee shall receive a Bonus of at least $25,000
by April 15, 1998. In addition, if the Company's income before interest,
depreciation and taxes for the twelve-month period ending September 30, 1998, is
at least $3,016,841, the Employee shall receive an additional Bonus of at least
$25,000 by October 15, 1998; provided, that if the Company's income before
interest, depreciation and taxes for the six-month period ending March 31, 1998,
is less than $1,475,754 but for the
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<PAGE> 3
twelve-month period ending September 30, 1998 is at least $3,016,841, the
Employee shall receive a Bonus of at least $50,000 by October 15, 1998.
The Bonus with respect to fiscal years beginning after
December 31, 1998 shall be paid in accordance with the Company's bonus plan, as
approved by the Board; provided that in no case shall any portion of the Bonus
with respect to any such fiscal year be paid more than seventy-five (75) days
after the end of such fiscal year.
(b) Other Benefits. During the Term, the Employee shall be
entitled to a vehicle allowance of Five Thousand Dollars ($5,000) per year net
after payment of all taxes. In addition, the Company shall pay or reimburse the
Employee for all fuel and maintenance on Employee's vehicle. During the Term,
the Company shall provide the Employee with a cellular telephone and will pay or
reimburse the Employee's monthly service fee and costs of calls attributable to
Company business. During the Term, the Company will also pay for the cost of a
fax line to Employee's residence. During the Term, the Employee shall be
entitled to receive all other benefits of employment generally available to
other management employees of the Company and those benefits for which
management employees are or shall become eligible, including, without limitation
and to the extent made available by the Company, medical, dental, disability and
prescription coverage, life insurance and tax-qualified retirement benefits. The
Employee shall be entitled to four (4) weeks of paid vacation each year of his
employment.
(c) Reimbursement of Other Expenses. The Company agrees to pay
or reimburse the Employee for all reasonable travel and other expenses incurred
by the Employee in connection with the performance of his duties under this
Agreement on presentation of proper expense statements or vouchers. All such
supporting information shall comply with all applicable Company policies
relating to reimbursement for travel and other expenses.
(d) Withholding. All compensation payable to the Employee
hereunder is subject to all withholding requirements under applicable law.
5. Confidentiality. During the Term of his employment, and at all times
thereafter, the Employee shall not, without the prior written consent of the
Company, divulge to any third party or use for his own benefit or the benefit of
any third party or for any purpose other than the exclusive benefit of the
Company, any confidential or proprietary business or technical information
revealed, obtained or developed in the course of his employment with the Company
and which is otherwise the property of the Company or any of its affiliated
corporations, including, but not limited to, trade secrets, customer lists,
formulae and processes of manufacture; provided, however, that nothing herein
contained shall restrict the Employee's ability to make such disclosures during
the course of his employment as may be necessary or appropriate to the effective
and efficient discharge of his duties to the Company.
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<PAGE> 4
6. Property. Both during the Term of his employment and thereafter, the
Employee shall not remove from the Company's offices or premises any Company
documents, records, notebooks, files, correspondence, reports, memoranda and
similar materials or property of any kind unless necessary in accordance with
the duties and responsibilities of his employment. In the event that any such
material or property is removed, it shall be returned to its proper file or
place of safekeeping as promptly as possible. The Employee shall not make,
retain, remove or distribute any copies, or divulge to any third person the
nature or contents of any of the foregoing or of any other oral or written
information to which he may have access, except as disclosure shall be necessary
in the performance of his assigned duties. On the termination of his employment
with the Company, the Employee shall leave with or return to the Company all
originals and copies of the foregoing then in his possession or subject to his
control, whether prepared by the Employee or by others.
7. Termination By Company.
(a) Termination for Cause. The employment of the Employee may
be terminated for Cause at any time by the vote of a majority of the Board;
provided, however, that before the Company may terminate the Employee's
employment for Cause for any reason that is susceptible to cure, the Company
shall first send the Employee written notice of its intention to terminate this
Agreement for Cause, specifying in such notice the reasons for such Cause and
those conditions that, if satisfied by the Employee, would cure the reasons for
such Cause, and the Employee shall have 60 days from receipt of such written
notice to satisfy such conditions. If such conditions are satisfied within such
60-day period, the Company shall so advise the Employee in writing. If such
conditions are not satisfied within such 60-day period, the Company may
thereafter terminate this Agreement for Cause on written Notice of Termination
(as defined in Section 9(a)) delivered to the Employee describing with
specificity the grounds for termination. Immediately on termination pursuant to
this Section 7(a), the Company shall pay to the Employee in a lump sum his then
current Base Salary under Section 4(a)(1) on a prorated basis to the Date of
Termination (as defined in Section 9(b)). On termination pursuant to this
Section 7(a), the Employee shall forfeit (i) his Bonus under Section 4(a)(2) for
the year in which such termination occurs, and (ii) all unvested ISOs, other
stock options, warrants and rights relating to capital stock of the Company. For
purposes of this Agreement, Cause shall mean:
(1) a material breach of any of the terms of this
Agreement that is not immediately corrected following written notice of default
specifying such breach;
(2) repeated intoxication with alcohol or drugs while
on Company premises during its regular business hours to such a degree that, in
the reasonable judgment of the other managers of the Company, the Employee is
abusive or incapable of performing his duties and responsibilities under this
Agreement;
(3) conviction of a felony; or
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<PAGE> 5
(4) misappropriation of property belonging to the
Company and/or any of its affiliates.
(b) Termination Without Cause. The employment of the Employee
may be terminated without Cause at any time by the vote of a majority of the
Board on delivery to the Employee of a written Notice of Termination (as defined
in Section 9(a)). On the Date of Termination (as defined in Section 9(b))
pursuant to this Section 7(b), the Company shall pay to the Employee in a lump
sum an amount equal to the sum of (i) all Base Salary payable under Section
4(a)(1) through the termination date, (ii) a pro-rated portion of the maximum
Bonus available to the Employee under Section 4(a)(2) for the year in which the
termination occurs, and (iii) an amount equal to three times the Total
Compensation paid to the Employee by the Company with respect to the twelve
months preceding the termination date. For purposes of this section 7(b), the
Employee's Total Compensation shall equal the sum of the Base Salary, Bonus,
vehicle allowance and other benefits and expense reimbursements described in
Section 4(b), and director's fees paid to the Employee by the Company. If the
Employee is terminated without Cause before the first anniversary of the
effective date of this Agreement, the Total Compensation paid to the Employee
through the termination date shall be annualized before calculating the amount
in clause (iii) above. In addition, on termination of the Employee under this
Section 7(b), all of the Employee's unvested ISOs, other stock options, warrants
and rights relating to capital stock of the Company shall immediately vest and
become exercisable. The term of any such options, warrants and rights shall be
extended to the fifth anniversary of the Employee's termination. The Employee
acknowledges that extending the term of any incentive stock option pursuant to
this Section 7(b), or Section 7(c), 7(d) or 8(a), could cause such option to
lose its tax-qualified status under the Internal Revenue Code of 1986, as
amended (the "Code"), and agrees that the Company shall have no obligation to
compensate the Employee for any additional taxes he incurs as a result.
(c) Termination on Disability. If during the Term the Employee
should fail to perform his duties hereunder on account of physical or mental
illness or other incapacity which the Board shall in good faith determine
renders the Employee incapable of performing his duties hereunder, and such
illness or other incapacity shall continue for a period of more than six (6)
consecutive months ("Disability"), the Company shall have the right, on written
Notice of Termination (as defined in Section 9(a)) delivered to the Employee to
terminate the Employee's employment under this Agreement. During the period that
the Employee shall have been incapacitated due to physical or mental illness,
the Employee shall continue to receive the full Base Salary provided for in
Section 4(a)(1) hereof at the rate then in effect until the Date of Termination
(as defined in Section 9(b)) pursuant to this Section 7(c). On the Date of
Termination pursuant to this Section 7(c), the Company shall pay to the Employee
in a lump sum an amount equal to (i) the Base Salary remaining payable to the
Employee under Section 4(a)(1) for the full remaining Term, plus (ii) a
pro-rated portion of the maximum Bonus available to the Employee under Section
4(a)(2) for the year in which the termination occurs. In addition, on
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<PAGE> 6
such termination, all of the Employee's unvested ISOs, other stock options,
warrants and rights relating to capital stock of the Company shall immediately
vest and become exercisable. The term of any such options, warrants and rights
shall be extended to the fifth anniversary of the Employee's termination.
(d) Termination on Death. If the Employee shall die during the
Term, the employment of the Employee shall thereupon terminate. On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(d), the
Company shall pay to the Employee's estate the payments and other benefits
applicable to termination without Cause set forth in Section 7(b) hereof. In
addition, on termination of the Employee under this Section 7(d), all of the
Employee's unvested ISOs, other stock options, warrants and rights relating to
capital stock of the Company shall immediately vest and become exercisable. The
term of any such options, warrants and rights shall be extended to the fifth
anniversary of the Employee's termination. The provisions of this Section 7(d)
shall not affect the entitlements of the Employee's heirs, executors,
administrators, legatees, beneficiaries or assigns under any employee benefit
plan, fund or program of the Company.
8. Termination By Employee.
(a) Termination for Good Reason. The Employee may terminate
his employment hereunder for Good Reason (as defined below). On the Date of
Termination pursuant to this Section 8(a), the Employee shall be entitled to
receive, and the Company agrees to pay and deliver, the payments and other
benefits applicable to termination without Cause set forth in Section 7(b)
hereof. In addition, on termination of the Employee under this Section 8(a), all
of the Employee's unvested ISOs, other stock options, warrants and rights
relating to capital stock of the Company shall immediately vest and become
exercisable. The term of any such options, warrants and rights shall be extended
to the fifth anniversary of the Employee's termination.
For purposes of this Agreement, "Good Reason" shall mean:
(1) assignment to the Employee of duties inconsistent
with his responsibilities as they existed on the date of this Agreement; a
substantial alteration in the title(s) of the Employee (so long as the existing
corporate structure of the Company is maintained); or a substantial alteration
in the status of the Employee in the Company organization as it existed on the
date of this Agreement;
(2) the relocation of the Company's principal
executive office to a location more than fifty (50) miles from its present
location;
(3) a reduction by the Company in the Employee's Base
Salary;
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<PAGE> 7
(4) a failure by the Company to continue in effect,
without substantial change, any benefit plan or arrangement in which the
Employee was participating or the taking of any action by the Company which
would adversely affect the Employee's participation in or materially reduce his
benefits under any benefit plan (unless such changes apply equally to all other
management employees of Company);
(5) any material breach by the Company of any
provision of this Agreement without the Employee having committed any material
breach of his obligations hereunder, which breach is not cured within twenty
(20) days following written notice thereof to the Company of such breach; or
(6) the failure of the Company to obtain the
assumption of this Agreement by any successor entity.
(b) Termination Without Good Reason. The Employee may
terminate his employment hereunder without Good Reason on written Notice of
Termination delivered to the Company setting forth the effective date of
termination. If the Employee terminates his employment hereunder without Good
Reason, he shall be entitled to receive, and the Company agrees to pay on the
effective date of termination specified in the Notice of Termination, his
current Base Salary under Section 4(a)(1) hereof on a prorated basis to such
date of termination. On termination pursuant to this Section 8(b), the Employee
shall forfeit (i) his Bonus under Section 4(a)(2) for the year in which such
termination occurs, and (ii) all unvested ISOs, other stock options, warrants
and rights relating to capital stock of the Company.
9. Provisions Applicable to Termination of Employment.
(a) Notice of Termination. Any purported termination of
Employee's employment by the Company pursuant to Section 7 shall be communicated
by Notice of Termination to the Employee as provided herein, and shall state the
specific termination provisions in this Agreement relied on and set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment ("Notice of Termination"). If the
Employee terminates under Section 8, he shall give the Company a Notice of
Termination.
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<PAGE> 8
(b) Date of Termination. For all purposes, "Date of Termination"
shall mean, for Disability, thirty (30) days after Notice of Termination is
given to the Employee (provided the Employee has not returned to duty on a
full-time basis during such 30-day period), or, if the Employee's employment is
terminated by the Company for any other reason or by the Employee, the date on
which a Notice of Termination is given.
(c) Benefits on Termination. On termination of this Agreement by
the Company pursuant to Section 7 or by the Employee pursuant to Section 8, all
profit-sharing, deferred compensation and other retirement benefits payable to
the Employee under benefit plans in which the Employee then participated shall
be paid to the Employee in accordance with the provisions of the respective
plans.
10. Change In Control.
(a) Payments on Change in Control. Notwithstanding any provision
in this Agreement to the contrary, unless the Employee elects in writing to
waive this provision, a Change in Control (as defined below) of the Company
shall be deemed a termination of the Employee without Cause, and the Employee
shall be entitled to receive and the Company agrees to pay to the Employee in a
lump sum the same amount determined under Section 7(b) that is payable to the
Employee on termination without Cause. In addition, on a Change of Control, all
of the Employee's unvested ISOs, other stock options, warrants and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, and the term of any such options, warrants and rights shall be
extended to the fifth anniversary of the Employee's termination.
After a Change in Control, if any option, warrant or right (the
"Terminated Option") relating to the Company's capital stock does not remain
outstanding, the successor to the Company or its then Parent (as defined below)
shall either:
(i) Issue an option, warrant or right, as appropriate
(the "Successor Option"), to purchase common stock of such successor or Parent
in an amount such that on exercise of the Successor Option the Employee would
receive the same number of shares of the successor's/Parent's common stock as
the Employee would have received had the Employee exercised the Terminated
Option immediately prior to the transaction resulting in the Change in Control
and received shares of such successor/Parent in such transaction. The aggregate
exercise price for all of the shares covered by such Successor Option shall
equal the aggregate exercise price of the Terminated Option; or
(ii) Pay the Employee a bonus within ten (10) days
after the consummation of the Change in Control, in an amount agreed to by the
Employee and the Company. Such amount shall be at least equivalent on an
after-tax basis to the net after-tax gain that the Employee would have realized
if he had been issued a Successor Option under clause (i) above
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<PAGE> 9
and had immediately exercised such Successor Option and sold the underlying
stock, taking into account the different tax rates that apply to such bonus and
to such gain, and such amount shall also reflect other differences to the
Employee between receiving a bonus under this clause (ii) and receiving a
Successor Option under clause (i) above.
(b) Definitions. For the purposes of this Agreement, a Change
in Control shall be deemed to have occurred if (i) there shall be consummated
(aa) any reorganization, liquidation or consolidation of the Company, or any
merger or other business combination of the Company with any other corporation,
other than any such merger or other combination that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such transaction, (bb) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or if
(ii) any "person" (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), shall become the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of fifty percent (50%) or more of the Company's outstanding
voting securities (except that for purposes of this Section 10(b), "person"
shall not include any person (or any person that controls, is controlled by or
is under common control with such person) who as of the date of this Agreement
owns ten percent (10%) or more of the total voting power represented by the
outstanding voting securities of the Company, or a trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or a
corporation that is owned directly or indirectly by the stockholders of the
Company in substantially the same percentage as their ownership of the Company)
or if (iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the entire Board shall cease for any reason
to constitute at least one-half of the membership thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director was approved by a vote of at least one-half of the directors then still
in office who were directors at the beginning of the period.
The term "Parent" means a corporation, partnership, trust, limited
liability company or other entity that is the ultimate "beneficial owner" (as
defined above) of fifty percent (50%) or more of the Company's outstanding
voting securities.
11. Gross Up Payments. If all or any portion of any payment or benefit
that the Employee is entitled to receive from the Company pursuant to this
Agreement (a "Payment") constitutes an "excess parachute payment" within the
meaning of Section 280G of the Code, and as such is subject to the excise tax
imposed by Section 4999 of the Code or to any similar Federal, state or local
tax or assessment (the "Excise Tax"), the Company or its successors or assigns
shall pay to the Employee an additional amount (the "Gross-Up Payment") with
respect to such Payment. The amount of the Gross-Up Payment shall be sufficient
that, after paying (a)
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any Excise Tax on the Payment, (b) any Federal, state or local income or
employment taxes and Excise Tax on the Gross-Up Payment, and (c) any interest
and penalties imposed in respect of the Excise Tax, the Employee shall retain an
amount equal to the full amount of the Payment. For the purpose of determining
the amount of any Gross-Up Payment, the Employee shall be deemed to pay Federal
income taxes at the highest marginal rate applicable in the calendar year in
which the Gross-Up Payment is made, and state and local income taxes at the
highest marginal rate applicable in the state and locality where the Employee
resides on the date the Gross-Up Payment is made, net of the maximum reduction
in Federal income taxes that could be obtained from deducting such state and
local taxes.
The Gross-Up Payment with respect to any Payment shall be paid to
the Employee within ten (10) days after the Internal Revenue Service or any
other taxing authority issues a notice stating that an Excise Tax is due with
respect to the Payment, unless the Company undertakes to challenge the taxing
authority on the applicability of such Excise Tax and indemnifies the Employee
for (a) any amounts ultimately determined to be payable, including the Excise
Tax and any related interest and penalties, (b) all expenses (including
attorneys' and experts' fees) reasonably incurred by the Employee in connection
with such challenge, as such expenses are incurred, and (c) all amounts that the
Employee is required to pay to the taxing authorities during the pendency of
such challenge (such amounts to be repaid by the Employee to the Company if they
are ultimately refunded to the Employee by the taxing authority).
12. Indemnification. As an employee and agent of the Company, the
Employee shall be fully indemnified by the Company to the fullest extent
permitted by applicable law in connection with his employment hereunder. In
addition, the Company shall pay all legal costs and expenses reasonably incurred
by the Employee (including attorneys' and expert witness fees), as such expenses
are incurred, in defending against any claim by United Waste Systems, Inc.
("United"), or USA Waste Services, Inc., that by entering into and performing
under this Agreement the Employee has violated any provision of his previous
employment or consulting agreement with United prohibiting competition, use of
confidential information, or solicitation of employees or prospective customers;
provided that the Company shall not be liable for any other damages that the
Employee incurs in connection with such a claim, including any amount the
Employee pays to settle such a claim or to satisfy a judgment in connection with
such a claim.
13. Board Representation. The Company agrees that during the Term,
beginning on the date that the personal guarantees of Brad Bishop, Frank Butler,
Jim Butler and the Employee to Imperial Bank with respect to indebtedness of the
Company are removed, the Employee may recommend nominees for election to the
Board, such that at all times that there are five (5) or fewer members of the
Board, the Employee shall have recommended at least two (2) nominees for
election to such Board, and at all times that there are more than five (5)
members of the Board, the Employee shall have recommended at least three (3)
nominees for election to such Board.
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14. Additional Equity Investment by the Employee. On the date of this
Agreement, the Company shall sell to the Employee, for $0.01 per share in cash,
617,500 shares of the Company's Common Stock, which amount is equal to 12.35% of
the Company's total initial authorized number of shares of Common and Preferred
Stock (such number of total initial authorized shares of Common and Preferred
Stock is called the "Total Initial Shares").
In addition, the Employee agrees, concurrently with the date of
this Agreement, to purchase a number of shares of Series A Preferred Stock of
the Company equal to seven and one-eighth percent (7.125%) of the Company's
Total Initial Shares, for consideration in the amount of One Million Dollars
($1,000,000), in the form of a cashier's check payable to the Company.
The Company agrees that if on January 1, 1998, the Employee desires
to sell shares of Series A Preferred Stock of the Company and has not yet
obtained a commitment from a buyer on terms satisfactory to the Employee, the
Company will use its best efforts to obtain additional equity financing, which
shall be used to purchase from the Employee shares of the Company's Series A
Preferred Stock representing three and nine-sixteenths percent (3.5625%) of the
Company's Total Initial Shares, for cash consideration to the Employee in the
amount of Five Hundred Thousand Dollars ($500,000).
15. Management Stock Pool. The Company agrees that at the IPO Closing,
the Company shall reserve at least eight percent (8%) of the Company's Total
Initial Shares (or, if the number of shares of Common Stock issued in the IPO
exceeds the number included in the Total Initial Shares, the Company's Total
Initial Shares plus such excess) for issuance to management employees of the
Company pursuant to stock options and warrants. Such options and warrants shall
be issued to management employees from time to time as approved by a majority of
the Board, for the purposes of recruiting, retaining and motivating such
management employees.
16. Survival of Provisions. The obligations of the Company under
Section 12 of this Agreement shall survive both the termination of the
Employee's employment and this Agreement.
17. No Duty to Mitigate; No Offset. The Employee shall not be required
to mitigate damages or the amount of any payment contemplated by this Agreement,
nor shall any such payment be reduced by any earnings that the Employee may
receive from any other sources or offset against any other payments made to him
or required to be made to him pursuant to this Agreement.
18. Assignment; Binding Agreement. The Company may assign this
Agreement to any parent, subsidiary, affiliate or successor of the Company. This
Agreement is not assignable by the Employee and is binding on him and his
executors and other legal representatives. This
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Agreement shall bind the Company and its successors and assigns and inure
to the benefit of the Employee and his heirs, executors, administrators,
personal representatives, legatees or devisees. The Company shall assign this
Agreement to any entity that acquires its assets or business.
19. Notice. Any written notice under this Agreement shall be personally
delivered to the other party or sent by certified or registered mail, return
receipt requested and postage prepaid, to such party at the address set forth in
the records of the Company or to such other address as either party may from
time to time specify by written notice.
20. Entire Agreement; Amendments. This Agreement contains the entire
agreement of the parties relating to the Employee's employment and supersedes
all oral or written prior discussions, agreements and understandings of every
nature between them. This Agreement may not be changed except by an agreement in
writing signed by the Company and the Employee.
21. Waiver. The waiver of a breach of any provision of this Agreement
shall not operate or as be construed to be a waiver of any other provision or
subsequent breach of this Agreement.
22. Governing Law and Jurisdictional Agreement. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of California.
23. Severability. In case any one or more of the provisions contained
in this Agreement is, for any reason, held invalid in any respect, such
invalidity shall not affect the validity of any other provision of this
Agreement, and such provision shall be deemed modified to the extent necessary
to make it enforceable.
24. Enforcement. It is agreed that it is impossible to measure fully,
in money, the damage which will accrue to the Company in the event of a breach
or threatened breach of Sections 5 or 6 of this Agreement, and, in any action or
proceeding to enforce the provisions of Sections 5 or 6 hereof, the Employee
waives the claim or defense that the Company has an adequate remedy at law and
will not assert the claim or defense that such a remedy at law exists. The
Company is entitled to injunctive relief to enforce the provisions of such
sections as well as any and all other remedies available to it at law or in
equity without the posting of any bond.
25. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and both of which together shall constitute
one and the same instrument.
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26. Due Authorization. The execution of this Agreement has been duly
authorized by the Company by all necessary corporate action.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year set forth above.
WASTE CONNECTIONS, INC., a Delaware
corporation
By:
---------------------------------------------------
Printed Name:
------------------------------------------
Title:
-------------------------------------------------
EMPLOYEE:
-------------------------------------------------------
Ronald J. Mittelstaedt
FOUNDERS:
-------------------------------------------------------
J. Bradford Bishop
-------------------------------------------------------
Frank W. Cutler
-------------------------------------------------------
James N. Cutler, Jr.
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EXHIBIT 10.11
FIRST AMENDED EMPLOYMENT AGREEMENT
THIS FIRST AMENDED EMPLOYMENT AGREEMENT is made and entered into as
October 1, 1997, by and between Darrell Chambliss (the "Employee") and Waste
Connections, Inc., a Delaware corporation (the "Company"), and amends and
restates the Employment Agreement entered into by the parties as of October 1,
1997, with reference to the following facts.
The Company desires to engage the services and employment of the
Employee for the period provided in this Agreement, and the Employee is willing
to accept employment by the Company for such period, on the terms and conditions
set forth below.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein, the Company and the Employee agree as follows:
1. Employment. The Company agrees to employ the Employee, and the
Employee agrees to accept employment with the Company, for the Term stated in
Section 3 hereof and on the other terms and conditions herein.
2. Position and Responsibilities. During the Term, the Employee shall
serve as Vice President -- Operations of the Company, reporting directly to the
Company's President, and perform such other duties and responsibilities as the
President or the Board of Directors (the "Board") of the Company may reasonably
assign to the Employee from time to time. The Employee shall be based at the
Company's corporate headquarters in Roseville, California. The Employee shall
devote such time and attention to his duties as are necessary to the proper
discharge of his responsibilities hereunder. The Employee agrees to perform all
duties consistent with (a) policies established from time to time by the Company
and (b) all applicable legal requirements.
3. Term. The period of the Employee's employment under this Agreement
(the "Term") commenced on October 1, 1997, and shall continue through September
30, 2000, unless terminated earlier as provided herein or extended by the Board.
At the end of the initial Term, this Agreement shall be renewed automatically
for successive Terms of one year, unless either party shall have given the other
notice of termination hereof as provided herein.
4. Compensation, Benefits and Reimbursement of Expenses.
(a) Compensation. The Company shall compensate the Employee
during the Term of this Agreement as follows:
(1) Base Salary. The Employee shall be paid a base salary
("Base Salary") of not less than Eighty-Five Thousand Dollars ($85,000) per year
in installments
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consistent with the Company's usual practices. The Board shall review the
Employee's Base Salary on October 1 of each year or more frequently, at the
times prescribed in salary administration practices applied generally to
management employees of the Company; provided, however, that if an IPO Closing
(as defined below) with respect to the Company's Common Stock occurs on or
before October 1, 1998, the Employee's Base Salary shall be adjusted on October
1, 1998, to One Hundred Thousand Dollars ($100,000) per year, and if an IPO
Closing has not occurred by October 1, 1998, the Employee's Base Salary shall be
adjusted on that date to Ninety-Two Thousand Dollars ($92,000) per year. An "IPO
Closing" means (i) the date the shares of the Company's Common Stock issued in
an initial public offering registered under the Securities Act of 1933, as
amended (an "IPO"), are sold to the underwriter, if the IPO is a fully
underwritten offering, or (ii) the day following the closing of the Company's
IPO, if the IPO is a best efforts offering.
(2) Performance Bonus. The Employee shall be entitled to
an annual cash bonus (the "Bonus") based on the Company's attainment of
reasonable financial objectives to be determined annually by the Board. The
maximum annual Bonus will equal fifty percent (50%) of the applicable year's
ending Base Salary and will be payable if the Board determines, in its sole and
exclusive discretion, that that year's financial objectives have been fully met.
Notwithstanding the foregoing, the Employee will be guaranteed a minimum Bonus
of $17,000 for the 15-month period ending December 31, 1998, and the total Bonus
for such period shall not be subject to the maximum percentage limit described
above. Such minimum Bonus shall be paid on February 15, 1998, and any additional
Bonus for such period shall be paid no later than February 20, 1999. The Bonus
with respect to fiscal years beginning after December 31, 1998 shall be paid in
accordance with the Company's bonus plan, as approved by the Board; provided
that in no case shall any portion of the Bonus with respect to any such fiscal
year be paid more than seventy-five (75) days after the end of such fiscal year.
(3) Grant of Options. The Company shall grant to the
Employee, for no additional consideration, stock options (the "Options") to
purchase 150,000 shares of the Company's Common Stock under the Company's Stock
Option Plan. The Options shall have a term of 10 years from the date of such
grant. Options to purchase 100,000 of the 150,000 shares of Common Stock shall
be exercisable at a price of $2.80 per share and shall vest and become
exercisable with respect to 33,333 such shares on each of October 1, 1998, and
October 1, 1999, and with respect to 33,334 such shares on October 1, 2000.
Options to purchase 50,000 of the 150,000 shares shall be exercisable at a price
of $10.50 per share and shall vest and become exercisable with respect to 16,667
such shares on October 1, 1998, with respect to 16,667 such shares on October 1,
1999, and with respect to 16,666 such shares on October 1, 2000. The Options
shall be incentive stock options to the extent permitted under the Copmany's
Stock Option Plan, and the terms of the Options shall be described in more
detail in Stock Option Agreements to be entered into between the Employee and
the Company. If at any time while any of the Options are still outstanding the
Company amends its Stock Option Plan to provide for a less favorable vesting
schedule for stock options than that provided herein, any Options then
outstanding shall thereupon be converted to warrants entitling the Employee to
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purchase the number of shares of Common Stock for which the Employee's then
outstanding Options may be exercised, on the same terms as provided under such
Options.
If the Employee's employment by the Company is terminated by the
Company without Cause (as defined in Section 7(a)) or by the Employee for Good
Reason (as defined in Section 8(a)) before all of the Options have vested, all
of the outstanding Options shall become vested on such termination. If the
Employee's employment by the Company is terminated by the Company for Cause or
by the Employee without Good Reason before all of the Options have vested, the
Employee shall forfeit any Options that are unvested as of the termination date.
(4) Grant of Restricted Stock. On the date of this
Agreement, the Company shall sell to the Employee, for $0.01 per share in cash,
20,000 shares of the Company's Common Stock (the "Restricted Stock"). Such
Restricted Stock shall not be transferable initially by the Employee, but 6,667
shares of Restricted Stock shall become unrestricted and freely transferable
(subject to compliance with all applicable Federal and state securities laws) on
each of October 1, 1998, and October 1, 1999, and the remaining 6,666 shares of
Restricted Stock shall become unrestricted and freely transferable (subject to
compliance with all applicable Federal and state securities laws) on October 1,
2000. If a Change in Control of the Company (as defined in Section 10(b)) occurs
before all of the Employee's Restricted Stock has become unrestricted and freely
transferable under this Section 4(a)(4), all of the Employee's shares of
Restricted Stock shall immediately become unrestricted and freely transferable
on such Change of Control, and all shares of Restricted Stock granted to the
Employee hereunder shall be treated as owned by the Employee without restriction
for the purpose of determining the Employee's percentage ownership of the
Company on such Change of Control. If before all of the Employee's Restricted
Stock has become unrestricted and freely transferable under this Section
4(a)(4), the Employee's employment is terminated by the Company without Cause
(as defined in Section 7(a)) or by the Employee for Good Reason (as defined in
Section 8(a)), all of the Employee's shares of Restricted Stock shall
immediately become unrestricted and freely transferable on such termination. If
the Employee's employment is terminated by the Company for Cause or by the
Employee without Good Reason before all of the Restricted Stock has become
unrestricted and freely transferable, the Company may, within 90 days after such
termination of employment, repurchase from the Employee for $0.01 per share in
cash any shares of Restricted Stock that are subject to restrictions on transfer
under this Section 4(a)(4) as of the termination date. The Employee may in his
sole discretion file an election under Section 83(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), with respect to the Restricted Stock.
(b) Other Benefits. During the Term, the Company shall provide
the Employee with a cellular telephone and will pay or reimburse the Employee's
monthly service fee and costs of calls attributable to Company business. During
the Term, the Employee shall be entitled to receive all other benefits of
employment generally available to other management employees of the Company and
those benefits for which management employees are or shall become eligible,
including, without limitation and to the extent made available by the Company,
medical, dental, disability and prescription coverage, life insurance and
tax-qualified retirement
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benefits. The Employee shall be entitled to three (3) weeks of paid vacation
each year of his employment.
(c) Reimbursement of Other Expenses. The Company agrees to pay or
reimburse the Employee for all reasonable travel and other expenses (including
mileage for business use of employee's personal automobile at the maximum rate
permitted under Internal Revenue Service regulations) incurred by the Employee
in connection with the performance of his duties under this Agreement on
presentation of proper expense statements or vouchers. All such supporting
information shall comply with all applicable Company policies relating to
reimbursement for travel and other expenses.
(d) Withholding. All compensation payable to the Employee
hereunder is subject to all withholding requirements under applicable law.
5. Confidentiality. During the Term of his employment, and at all times
thereafter, the Employee shall not, without the prior written consent of the
Company, divulge to any third party or use for his own benefit or the benefit of
any third party or for any purpose other than the exclusive benefit of the
Company, any confidential or proprietary business or technical information
revealed, obtained or developed in the course of his employment with the Company
and which is otherwise the property of the Company or any of its affiliated
corporations, including, but not limited to, trade secrets, customer lists,
formulae and processes of manufacture; provided, however, that nothing herein
contained shall restrict the Employee's ability to make such disclosures during
the course of his employment as may be necessary or appropriate to the effective
and efficient discharge of his duties to the Company.
6. Property. Both during the Term of his employment and thereafter, the
Employee shall not remove from the Company's offices or premises any Company
documents, records, notebooks, files, correspondence, reports, memoranda and
similar materials or property of any kind unless necessary in accordance with
the duties and responsibilities of his employment. In the event that any such
material or property is removed, it shall be returned to its proper file or
place of safekeeping as promptly as possible. The Employee shall not make,
retain, remove or distribute any copies, or divulge to any third person the
nature or contents of any of the foregoing or of any other oral or written
information to which he may have access, except as disclosure shall be necessary
in the performance of his assigned duties. On the termination of his employment
with the Company, the Employee shall leave with or return to the Company all
originals and copies of the foregoing then in his possession or subject to his
control, whether prepared by the Employee or by others.
7. Termination By Company.
(a) Termination for Cause. The employment of the Employee may be
terminated for Cause at any time by the Board; provided, however, that before
the Company may terminate the Employee's employment for Cause for any reason
that is susceptible to cure,
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<PAGE> 5
the Company shall first send the Employee written notice of its intention to
terminate this Agreement for Cause, specifying in such notice the reasons for
such Cause and those conditions that, if satisfied by the Employee, would cure
the reasons for such Cause, and the Employee shall have 60 days from receipt of
such written notice to satisfy such conditions. If such conditions are satisfied
within such 60-day period, the Company shall so advise the Employee in writing.
If such conditions are not satisfied within such 60-day period, the Company may
thereafter terminate this Agreement for Cause on written Notice of Termination
(as defined in Section 9(a)) delivered to the Employee describing with
specificity the grounds for termination. Immediately on termination pursuant to
this Section 7(a), the Company shall pay to the Employee in a lump sum his then
current Base Salary under Section 4(a)(1) on a prorated basis to the Date of
Termination (as defined in Section 9(b)). On termination pursuant to this
Section 7(a), the Employee shall forfeit (i) his Bonus under Section 4(a)(2) for
the year in which such termination occurs, and (ii) all outstanding but unvested
Options and other options and rights relating to capital stock of the Company,
and all shares of Restricted Stock that as of the termination date are still
subject to the restrictions on transfer imposed by Section 4(a)(4) shall be
subject to repurchase by the Company as provided in Section 4(a)(4). For
purposes of this Agreement, Cause shall mean:
(1) a material breach of any of the terms of this
Agreement that is not immediately corrected following written notice of default
specifying such breach;
(2) a breach of any of the provisions of Section 12;
(3) repeated intoxication with alcohol or drugs while on
Company premises during its regular business hours to such a degree that, in the
reasonable judgment of the other managers of the Company, the Employee is
abusive or incapable of performing his duties and responsibilities under this
Agreement;
(4) conviction of a felony; or
(5) misappropriation of property belonging to the Company
and/or any of its affiliates.
(b) Termination Without Cause. The employment of the Employee may
be terminated without Cause at any time by the Board on delivery to the Employee
of a written Notice of Termination (as defined in Section 9(a)). On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(b), the
Company shall pay to the Employee in a lump sum an amount equal to the sum of
(i) all Base Salary payable under Section 4(a)(1) through the termination date,
(ii) a pro-rated portion of the maximum Bonus available to the Employee under
Section 4(a)(2) for the year in which the termination occurs, and (iii) an
amount equal to the aggregate Total Compensation paid to the Employee by the
Company with respect to the twelve months preceding the termination date. For
purposes of this section 7(b), the Employee's Total Compensation shall equal the
sum of the Base Salary, Bonus, and other benefits and expense reimbursements
described in Section 4(b) paid to the Employee by the Company. In addition,
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on termination of the Employee under this Section 7(b), all of the Employee's
outstanding but unvested Options and other options and rights relating to
capital stock of the Company shall immediately vest and become exercisable, and
all shares of the Employee's Restricted Stock shall immediately become
unrestricted and freely transferable. The term of any such options and rights
shall be extended to the third anniversary of the Employee's termination. The
Employee acknowledges that extending the term of any Options pursuant to this
Section 7(b), or Section 7(c), 7(d) or 8(a), could cause such Option to lose its
tax-qualified status if it is an incentive stock option under the Code and
agrees that the Company shall have no obligation to compensate the Employee for
any additional taxes he incurs as a result.
(c) Termination on Disability. If during the Term the Employee
should fail to perform his duties hereunder on account of physical or mental
illness or other incapacity which the Board shall in good faith determine
renders the Employee incapable of performing his duties hereunder, and such
illness or other incapacity shall continue for a period of more than six (6)
consecutive months ("Disability"), the Company shall have the right, on written
Notice of Termination (as defined in Section 9(a)) delivered to the Employee to
terminate the Employee's employment under this Agreement. During the period that
the Employee shall have been incapacitated due to physical or mental illness,
the Employee shall continue to receive the full Base Salary provided for in
Section 4(a)(1) hereof at the rate then in effect until the Date of Termination
(as defined in Section 9(b)) pursuant to this Section 7(c). On the Date of
Termination pursuant to this Section 7(c), the Company shall pay to the Employee
in a lump sum an amount equal to (i) the Base Salary remaining payable to the
Employee under Section 4(a)(1) for the full remaining Term, plus (ii) a
pro-rated portion of the maximum Bonus available to the Employee under Section
4(a)(2) for the year in which the termination occurs. In addition, on such
termination, all of the Employee's outstanding but unvested Options and other
options and rights relating to capital stock of the Company shall immediately
vest and become exercisable, and all shares of the Employee's Restricted Stock
shall immediately become unrestricted and freely transferable. The term of any
such options and rights shall be extended to the third anniversary of the
Employee's termination.
(d) Termination on Death. If the Employee shall die during the
Term, the employment of the Employee shall thereupon terminate. On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(d), the
Company shall pay to the Employee's estate the payments and other benefits
applicable to termination without Cause set forth in Section 7(b) hereof. In
addition, on termination of the Employee under this Section 7(d), all of the
Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, and all shares of the Employee's Restricted Stock shall immediately
become unrestricted and freely transferable. The term of any such options and
rights shall be extended to the third anniversary of the Employee's termination.
The provisions of this Section 7(d) shall not affect the entitlements of the
Employee's heirs, executors, administrators, legatees, beneficiaries or assigns
under any employee benefit plan, fund or program of the Company.
8. Termination By Employee.
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(a) Termination for Good Reason. The Employee may terminate his
employment hereunder for Good Reason (as defined below). On the Date of
Termination pursuant to this Section 8(a), the Employee shall be entitled to
receive, and the Company agrees to pay and deliver, the payments and other
benefits applicable to termination without Cause set forth in Section 7(b)
hereof. In addition, on termination of the Employee under this Section 8(a), all
of the Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, and all shares of the Employee's Restricted Stock shall immediately
become unrestricted and freely transferable. The term of any such options and
rights shall be extended to the third anniversary of the Employee's termination.
For purposes of this Agreement, "Good Reason" shall mean:
(1) assignment to the Employee of duties inconsistent with
his responsibilities as they existed on the date of this Agreement; a
substantial alteration in the title(s) of the Employee (so long as the existing
corporate structure of the Company is maintained); or a substantial alteration
in the status of the Employee in the Company organization as it existed on the
date of this Agreement;
(2) the relocation of the Company's principal executive
office to a location more than fifty (50) miles from its present location;
(3) a reduction by the Company in the Employee's Base
Salary without the Employee's prior approval;
(4) a failure by the Company to continue in effect,
without substantial change, any benefit plan or arrangement in which the
Employee was participating or the taking of any action by the Company which
would adversely affect the Employee's participation in or materially reduce his
benefits under any benefit plan (unless such changes apply equally to all other
management employees of Company);
(5) any material breach by the Company of any provision of
this Agreement without the Employee having committed any material breach of his
obligations hereunder, which breach is not cured within twenty (20) days
following written notice thereof to the Company of such breach; or
(6) the failure of the Company to obtain the assumption of
this Agreement by any successor entity.
(b) Termination Without Good Reason. The Employee may terminate
his employment hereunder without Good Reason on written Notice of Termination
delivered to the Company setting forth the effective date of termination. If the
Employee terminates his employment hereunder without Good Reason, he shall be
entitled to receive, and the Company agrees to pay on the effective date of
termination specified in the Notice of Termination, his
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current Base Salary under Section 4(a)(1) hereof on a prorated basis to such
date of termination. On termination pursuant to this Section 8(b), the Employee
shall forfeit (i) his Bonus under Section 4(a)(2) for the year in which such
termination occurs and (ii) all outstanding but unvested Options and other
options and rights relating to capital stock of the Company, and all shares of
Restricted Stock that as of the termination date are still subject to the
restrictions on transfer imposed by Section 4(a)(4) shall be subject to
repurchase by the Company as provided in Section 4(a)(4).
9. Provisions Applicable to Termination of Employment.
(a) Notice of Termination. Any purported termination of
Employee's employment by the Company pursuant to Section 7 shall be communicated
by Notice of Termination to the Employee as provided herein, and shall state the
specific termination provisions in this Agreement relied on and set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment ("Notice of Termination"). If the
Employee terminates under Section 8, he shall give the Company a Notice of
Termination.
(b) Date of Termination. For all purposes, "Date of Termination"
shall mean, for Disability, thirty (30) days after Notice of Termination is
given to the Employee (provided the Employee has not returned to duty on a
full-time basis during such 30-day period), or, if the Employee's employment is
terminated by the Company for any other reason or by the Employee, the date on
which a Notice of Termination is given.
(c) Benefits on Termination. On termination of this Agreement by
the Company pursuant to Section 7 or by the Employee pursuant to Section 8, all
profit-sharing, deferred compensation and other retirement benefits payable to
the Employee under benefit plans in which the Employee then participated shall
be paid to the Employee in accordance with the provisions of the respective
plans.
10. Change In Control.
(a) Payments on Change in Control. Notwithstanding any provision
in this Agreement to the contrary, unless the Employee elects in writing to
waive this provision, a Change in Control (as defined below) of the Company
shall be deemed a termination of the Employee without Cause, and the Employee
shall be entitled to receive and the Company agrees to pay to the Employee in a
lump sum the same amount determined under Section 7(b) that is payable to the
Employee on termination without Cause. In addition, on a Change of Control, all
of the Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, the term of any such options and rights shall be extended to the
third anniversary of the Employee's termination, and all shares of the
Employee's Restricted Stock shall immediately become unrestricted and freely
transferable.
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After a Change in Control, if any previously outstanding Option
or other option or right (the "Terminated Option") relating to the Company's
capital stock does not remain outstanding, the successor to the Company or its
then Parent (as defined below) shall either:
(i) Issue an option, warrant or right, as appropriate (the
"Successor Option"), to purchase common stock of such successor or Parent in an
amount such that on exercise of the Successor Option the Employee would receive
the same number of shares of the successor's/Parent's common stock as the
Employee would have received had the Employee exercised the Terminated Option
immediately prior to the transaction resulting in the Change in Control and
received shares of such successor/Parent in such transaction. The aggregate
exercise price for all of the shares covered by such Successor Option shall
equal the aggregate exercise price of the Terminated Option; or
(ii) Pay the Employee a bonus within ten (10) days after
the consummation of the Change in Control in an amount agreed to by the Employee
and the Company. Such amount shall be at least equivalent on an after-tax basis
to the net after-tax gain that the Employee would have realized if he had been
issued a Successor Option under clause (i) above and had immediately exercised
such Successor Option and sold the underlying stock, taking into account the
different tax rates that apply to such bonus and to such gain, and such amount
shall also reflect other differences to the Employee between receiving a bonus
under this clause (ii) and receiving a Successor Option under clause (i) above.
(b) Definitions. For the purposes of this Agreement, a Change in
Control shall be deemed to have occurred if (i) there shall be consummated (aa)
any reorganization, liquidation or consolidation of the Company, or any merger
or other business combination of the Company with any other corporation, other
than any such merger or other combination that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such transaction, (bb) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or if
(ii) any "person" (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), shall become the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of fifty percent (50%) or more of the Company's outstanding
voting securities (except that for purposes of this Section 10(b), "person"
shall not include any person (or any person that controls, is controlled by or
is under common control with such person) who as of the date of this Agreement
owns ten percent (10%) or more of the total voting power represented by the
outstanding voting securities of the Company, or a trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or a
corporation that is owned directly or indirectly by the stockholders of the
Company in substantially the same percentage as their ownership of the Company)
or if (iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the entire Board shall cease for any reason
to constitute at least one-half of the
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membership thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
one-half of the directors then still in office who were directors at the
beginning of the period.
The term "Parent" means a corporation, partnership, trust,
limited liability company or other entity that is the ultimate "beneficial
owner" (as defined above) of fifty percent (50%) or more of the Company's
outstanding voting securities.
11. Gross Up Payments. If all or any portion of any payment or benefit
that the Employee is entitled to receive from the Company pursuant to this
Agreement (a "Payment") constitutes an "excess parachute payment" within the
meaning of Section 280G of the Code, and as such is subject to the excise tax
imposed by Section 4999 of the Code or to any similar Federal, state or local
tax or assessment (the "Excise Tax"), the Company or its successors or assigns
shall pay to the Employee an additional amount (the "Gross-Up Payment") with
respect to such Payment. The amount of the Gross-Up Payment shall be sufficient
that, after paying (a) any Excise Tax on the Payment, (b) any Federal, state or
local income or employment taxes and Excise Tax on the Gross-Up Payment, and (c)
any interest and penalties imposed in respect of the Excise Tax, the Employee
shall retain an amount equal to the full amount of the Payment. For the purpose
of determining the amount of any Gross-Up Payment, the Employee shall be deemed
to pay Federal income taxes at the highest marginal rate applicable in the
calendar year in which the Gross-Up Payment is made, and state and local income
taxes at the highest marginal rate applicable in the state and locality where
the Employee resides on the date the Gross-Up Payment is made, net of the
maximum reduction in Federal income taxes that could be obtained from deducting
such state and local taxes.
The Gross-Up Payment with respect to any Payment shall be paid to
the Employee within ten (10) days after the Internal Revenue Service or any
other taxing authority issues a notice stating that an Excise Tax is due with
respect to the Payment, unless the Company undertakes to challenge the taxing
authority on the applicability of such Excise Tax and indemnifies the Employee
for (a) any amounts ultimately determined to be payable, including the Excise
Tax and any related interest and penalties, (b) all expenses (including
attorneys' and experts' fees) reasonably incurred by the Employee in connection
with such challenge, as such expenses are incurred, and (c) all amounts that the
Employee is required to pay to the taxing authorities during the pendency of
such challenge (such amounts to be repaid by the Employee to the Company if they
are ultimately refunded to the Employee by the taxing authority).
12. Non-Competition and Non-Solicitation.
(a) In consideration of the provisions hereof, for the period
commencing on the date hereof and ending on the first anniversary of the
termination of this Agreement by the Company with Cause pursuant to Section 7(a)
or by the Employee without Good Reason pursuant to Section 8(b), the Employee
will not, except as specifically provided below, anywhere in any county in any
state in which the Company is engaged in business as of such termination date,
directly or indirectly, acting individually or as the owner, shareholder,
partner or
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management employee of any entity, (i) engage in the operation of a solid waste
collection, transporting or disposal business, transfer facility, recycling
facility, materials recovery facility or solid waste landfill; (ii) enter the
employ as a manager of, or render any personal services to or for the benefit
of, or assist in or facilitate the solicitation of customers for, or receive
remuneration in the form of management salary, commissions or otherwise from,
any business engaged in such activities in such counties; or (iii) receive or
purchase a financial interest in, make a loan to, or make a gift in support of,
any such business in any capacity, including without limitation, as a sole
proprietor, partner, shareholder, officer, director, principal agent or trustee;
provided, however, that the Employee may own, directly or indirectly, solely as
an investment, securities of any business traded on any national securities
exchange or quoted on any NASDAQ market, provided the Employee is not a
controlling person of, or a member of a group which controls, such business and
further provided that the Employee does not, in the aggregate, directly or
indirectly, own two percent (2%) or more of any class of securities of such
business.
(b) After termination of this Agreement by the Company with Cause
pursuant to Section 7(a) or by the Employee without Good Reason pursuant to
Section 8(b), the Employee shall not (i) solicit any residential or commercial
customer of the Company to whom the Company provides service pursuant to a
franchise agreement with a public entity in any county in any state in which the
Company is engaged in business as of such termination date, (ii) solicit any
residential or commercial customer of the Company to enter into a solid waste
collection account relationship with a competitor of the Company in any such
county, (iii) solicit any such public entity to enter into a franchise agreement
with any such competitor, (iv) solicit any officer, employee or contractor of
the Company to enter into an employment or contractor agreement with a
competitor of the Company or otherwise interfere in any such relationship, or
(v) solicit on behalf of a competitor of the Company any prospective customer of
the Company that the Employee called on or was involved in soliciting on behalf
of the Company during the Term, in each case until the second anniversary of the
date of such termination, unless otherwise permitted to do so by Section 12(a).
(c) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 12 is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specified words or phrases
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
13. Indemnification. As an employee and agent of the Company, the
Employee shall be fully indemnified by the Company to the fullest extent
permitted by applicable law in connection with his employment hereunder.
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14. Survival of Provisions. The obligations of the Company under Section
13 of this Agreement, and of the Employee under Section 12 of this Agreement,
shall survive both the termination of the Employee's employment and this
Agreement.
15. No Duty to Mitigate; No Offset. The Employee shall not be required
to mitigate damages or the amount of any payment contemplated by this Agreement,
nor shall any such payment be reduced by any earnings that the Employee may
receive from any other sources or offset against any other payments made to him
or required to be made to him pursuant to this Agreement.
16. Assignment; Binding Agreement. The Company may assign this Agreement
to any parent, subsidiary, affiliate or successor of the Company. This Agreement
is not assignable by the Employee and is binding on him and his executors and
other legal representatives. This Agreement shall bind the Company and its
successors and assigns and inure to the benefit of the Employee and his heirs,
executors, administrators, personal representatives, legatees or devisees. The
Company shall assign this Agreement to any entity that acquires its assets or
business.
17. Notice. Any written notice under this Agreement shall be personally
delivered to the other party or sent by certified or registered mail, return
receipt requested and postage prepaid, to such party at the address set forth in
the records of the Company or to such other address as either party may from
time to time specify by written notice.
18. Entire Agreement; Amendments. This Agreement contains the entire
agreement of the parties relating to the Employee's employment and supersedes
all oral or written prior discussions, agreements and understandings of every
nature between them. This Agreement may not be changed except by an agreement in
writing signed by the Company and the Employee.
19. Waiver. The waiver of a breach of any provision of this Agreement
shall not operate or as be construed to be a waiver of any other provision or
subsequent breach of this Agreement.
20. Governing Law and Jurisdictional Agreement. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of California.
21. Severability. In case any one or more of the provisions contained in
this Agreement is, for any reason, held invalid in any respect, such invalidity
shall not affect the validity of any other provision of this Agreement, and such
provision shall be deemed modified to the extent necessary to make it
enforceable.
22. Enforcement. It is agreed that it is impossible to measure fully, in
money, the damage which will accrue to the Company in the event of a breach or
threatened breach of Sections 5, 6, or 12 of this Agreement, and, in any action
or proceeding to enforce the provisions of Sections 5, 6 or 12 hereof, the
Employee waives the claim or defense that the Company has an adequate remedy at
law and will not assert the claim or defense that such a
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remedy at law exists. The Company is entitled to injunctive relief to enforce
the provisions of such sections as well as any and all other remedies available
to it at law or in equity without the posting of any bond. The Employee agrees
that if the Employee breaches any provision of Section 12, the Company may
recover as partial damages all profits realized by the Employee at any time
prior to such recovery on the exercise of any warrant, option or right to
purchase the Company's Common Stock and the subsequent sale of such stock, and
may also cancel all outstanding such warrants, options and rights.
23. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and both of which together shall constitute
one and the same instrument.
24. Due Authorization. The execution of this Agreement has been duly
authorized by the Company by all necessary corporate action.
IN WITNESS WHEREOF, the parties have executed and delivered this First
Amended Employment Agreement as of the day and year set forth above.
WASTE CONNECTIONS, INC., a Delaware
corporation
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
EMPLOYEE:
---------------------------------------
Darrell Chambliss
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EXHIBIT 10.12
FIRST AMENDED EMPLOYMENT AGREEMENT
THIS FIRST AMENDED EMPLOYMENT AGREEMENT is made and entered into as of
October 1, 1997, by and between Michael Foos (the "Employee") and Waste
Connections, Inc., a Delaware corporation (the "Company"), and amends and
restates the Employment Agreement entered into by the parties as of October 1,
1997, with reference to the following facts.
The Company desires to engage the services and employment of the
Employee for the period provided in this Agreement, and the Employee is willing
to accept employment by the Company for such period, on the terms and conditions
set forth below.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein, the Company and the Employee agree as follows:
1. Employment. The Company agrees to employ the Employee, and the
Employee agrees to accept employment with the Company, for the Term stated in
Section 3 hereof and on the other terms and conditions herein.
2. Position and Responsibilities. During the Term, the Employee shall
serve as Vice President and Corporate Controller of the Company, reporting
directly to the Company's Chief Financial Officer, and perform such other duties
and responsibilities as the Chief Financial Officer or the Board of Directors
(the "Board") of the Company may reasonably assign to the Employee from time to
time. The Employee shall be based at the Company's corporate headquarters in
Roseville, California. The Employee shall devote such time and attention to his
duties as are necessary to the proper discharge of his responsibilities
hereunder. The Employee agrees to perform all duties consistent with (a)
policies established from time to time by the Company and (b) all applicable
legal requirements.
3. Term. The period of the Employee's employment under this Agreement
(the "Term") commenced on October 1, 1997, and shall continue through September
30, 2000, unless terminated earlier as provided herein or extended by the Board.
At the end of the initial Term, this Agreement shall be renewed automatically
for successive Terms of one year, unless either party shall have given the other
notice of termination hereof as provided herein.
4. Compensation, Benefits and Reimbursement of Expenses.
(a) Compensation. The Company shall compensate the Employee
during the Term of this Agreement as follows:
(1) Base Salary. The Employee shall be paid a base salary
("Base Salary") of not less than Eighty-Five Thousand Dollars ($85,000) per year
in installments
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consistent with the Company's usual practices. The Board shall review the
Employee's Base Salary on October 1 of each year or more frequently, at the
times prescribed in salary administration practices applied generally to
management employees of the Company; provided, however, that if an IPO Closing
(as defined below) with respect to the Company's Common Stock occurs on or
before October 1, 1998, the Employee's Base Salary shall be adjusted on October
1, 1998, to One Hundred Thousand Dollars ($100,000) per year, and if an IPO
Closing has not occurred by October 1, 1998, the Employee's Base Salary shall be
adjusted on that date to Ninety-Two Thousand Dollars ($92,000) per year. An "IPO
Closing" means (i) the date the shares of the Company's Common Stock issued in
an initial public offering registered under the Securities Act of 1933, as
amended (an "IPO"), are sold to the underwriter, if the IPO is a fully
underwritten offering, or (ii) the day following the closing of the Company's
IPO, if the IPO is a best efforts offering.
(2) Performance Bonus. The Employee shall be entitled to
an annual cash bonus (the "Bonus") based on the Company's attainment of
reasonable financial objectives to be determined annually by the Board. The
maximum annual Bonus will equal thirty-five percent (35%) of the applicable
year's ending Base Salary and will be payable if the Board determines, in its
sole and exclusive discretion, that that year's financial objectives have been
fully met. Notwithstanding the foregoing, the Employee will be guaranteed a
minimum Bonus of $32,000 for the 15-month period ending December 31, 1998, and
the total Bonus for such period shall not be subject to the maximum percentage
limit described above. Such Bonus shall be paid in installments, as follows:
$22,000 on February 15, 1998, $10,000 on October 15, 1998, and any additional
Bonus for such period shall be paid no later than February 20, 1999. The Bonus
with respect to fiscal years beginning after December 31, 1998 shall be paid in
accordance with the Company's bonus plan, as approved by the Board; provided
that in no case shall any portion of the Bonus with respect to any such fiscal
year be paid more than seventy-five (75) days after the end of such fiscal year.
(3) Grant of Options. The Company shall grant to the
Employee, for no additional consideration, stock options (the "Options") to
purchase 150,000 shares of the Company's Common Stock under the Company's Stock
Option Plan. The Options shall have a term of 10 years from the date of such
grant. Options to purchase 100,000 of the 150,000 shares of Common Stock shall
be exercisable at a price of $2.80 per share and shall vest and become
exercisable with respect to 33,333 such shares on each of October 1, 1998, and
October 1, 1999, and with respect to 33,334 such shares on October 1, 2000.
Options to purchase 50,000 of the 150,000 shares shall be exercisable at a price
of $10.50 per share and shall vest and become exercisable with respect to 16,667
such shares on October 1, 1998, with respect to 16,667 such shares on October 1,
1999, and with respect to 16,666 such shares on October 1, 2000. The Options
shall be incentive stock options to the extent permitted under the Company's
Stock Option Plan, and the terms of the Options shall be described in more
detail in Stock Option Agreements to be entered into between the Employee and
the Company. If at any time while any of the Options are still outstanding the
Company amends its Stock Option Plan to provide for a less favorable vesting
schedule for stock options than that provided herein, any Options then
outstanding shall thereupon be converted to warrants entitling the Employee to
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<PAGE> 3
purchase the number of shares of Common Stock for which the Employee's then
outstanding Options may be exercised, on the same terms as provided under such
Options.
If the Employee's employment by the Company is terminated by the
Company without Cause (as defined in Section 7(a)) or by the Employee for Good
Reason (as defined in Section 8(a)) before all of the Options have vested, all
of the outstanding Options shall become vested on such termination. If the
Employee's employment by the Company is terminated by the Company for Cause or
by the Employee without Good Reason before all of the Options have vested, the
Employee shall forfeit any Options that are unvested as of the termination date.
(4) Grant of Restricted Stock. On the date of this
Agreement, the Company shall sell to the Employee, for $0.01 per share in cash,
20,000 shares of the Company's Common Stock (the "Restricted Stock"). Such
Restricted Stock shall not be transferable initially by the Employee, but 6,667
shares of Restricted Stock shall become unrestricted and freely transferable
(subject to compliance with all applicable Federal and state securities laws) on
each of October 1, 1998, and October 1, 1999, and the remaining 6,666 shares of
Restricted Stock shall become unrestricted and freely transferable (subject to
compliance with all applicable Federal and state securities laws) on October 1,
2000. If a Change in Control of the Company (as defined in Section 10(b)) occurs
before all of the Employee's Restricted Stock has become unrestricted and freely
transferable under this Section 4(a)(4), all of the Employee's shares of
Restricted Stock shall immediately become unrestricted and freely transferable
on such Change of Control, and all shares of Restricted Stock granted to the
Employee hereunder shall be treated as owned by the Employee without restriction
for the purpose of determining the Employee's percentage ownership of the
Company on such Change of Control. If before all of the Employee's Restricted
Stock has become unrestricted and freely transferable under this Section
4(a)(4), the Employee's employment is terminated by the Company without Cause
(as defined in Section 7(a)) or by the Employee for Good Reason (as defined in
Section 8(a)), all of the Employee's shares of Restricted Stock shall
immediately become unrestricted and freely transferable on such termination. If
the Employee's employment is terminated by the Company for Cause or by the
Employee without Good Reason before all of the Restricted Stock has become
unrestricted and freely transferable, the Company may, within 90 days after such
termination of employment, repurchase from the Employee for $0.01 per share in
cash any shares of Restricted Stock that are subject to restrictions on transfer
under this Section 4(a)(4) as of the termination date. The Employee may in his
sole discretion file an election under Section 83(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), with respect to the Restricted Stock.
(b) Other Benefits. During the Term, the Company shall
provide the Employee with a cellular telephone and will pay or reimburse the
Employee's monthly service fee and costs of calls attributable to Company
business. During the Term, the Employee shall be entitled to receive all other
benefits of employment generally available to other management employees of the
Company and those benefits for which management employees are or shall become
eligible, including, without limitation and to the extent made available by the
Company, medical, dental, disability and prescription coverage, life insurance
and tax-qualified retirement
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benefits. The Employee shall be entitled to three (3) weeks of paid vacation
each year of his employment.
(c) Reimbursement of Other Expenses. The Company agrees to pay or
reimburse the Employee for all reasonable travel and other expenses (including
mileage for business use of employee's personal automobile at the maximum rate
permitted under Internal Revenue Service regulations) incurred by the Employee
in connection with the performance of his duties under this Agreement on
presentation of proper expense statements or vouchers. All such supporting
information shall comply with all applicable Company policies relating to
reimbursement for travel and other expenses.
(d) Withholding. All compensation payable to the Employee
hereunder is subject to all withholding requirements under applicable law.
5. Confidentiality. During the Term of his employment, and at all times
thereafter, the Employee shall not, without the prior written consent of the
Company, divulge to any third party or use for his own benefit or the benefit of
any third party or for any purpose other than the exclusive benefit of the
Company, any confidential or proprietary business or technical information
revealed, obtained or developed in the course of his employment with the Company
and which is otherwise the property of the Company or any of its affiliated
corporations, including, but not limited to, trade secrets, customer lists,
formulae and processes of manufacture; provided, however, that nothing herein
contained shall restrict the Employee's ability to make such disclosures during
the course of his employment as may be necessary or appropriate to the effective
and efficient discharge of his duties to the Company.
6. Property. Both during the Term of his employment and thereafter, the
Employee shall not remove from the Company's offices or premises any Company
documents, records, notebooks, files, correspondence, reports, memoranda and
similar materials or property of any kind unless necessary in accordance with
the duties and responsibilities of his employment. In the event that any such
material or property is removed, it shall be returned to its proper file or
place of safekeeping as promptly as possible. The Employee shall not make,
retain, remove or distribute any copies, or divulge to any third person the
nature or contents of any of the foregoing or of any other oral or written
information to which he may have access, except as disclosure shall be necessary
in the performance of his assigned duties. On the termination of his employment
with the Company, the Employee shall leave with or return to the Company all
originals and copies of the foregoing then in his possession or subject to his
control, whether prepared by the Employee or by others.
7. Termination By Company.
(a) Termination for Cause. The employment of the Employee may be
terminated for Cause at any time by the Board; provided, however, that before
the Company may terminate the Employee's employment for Cause for any reason
that is susceptible to cure, the Company shall first send the Employee written
notice of its intention to terminate this
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<PAGE> 5
Agreement for Cause, specifying in such notice the reasons for such Cause and
those conditions that, if satisfied by the Employee, would cure the reasons for
such Cause, and the Employee shall have 60 days from receipt of such written
notice to satisfy such conditions. If such conditions are satisfied within such
60-day period, the Company shall so advise the Employee in writing. If such
conditions are not satisfied within such 60-day period, the Company may
thereafter terminate this Agreement for Cause on written Notice of Termination
(as defined in Section 9(a)) delivered to the Employee describing with
specificity the grounds for termination. Immediately on termination pursuant to
this Section 7(a), the Company shall pay to the Employee in a lump sum his then
current Base Salary under Section 4(a)(1) on a prorated basis to the Date of
Termination (as defined in Section 9(b)). On termination pursuant to this
Section 7(a), the Employee shall forfeit (i) his Bonus under Section 4(a)(2) for
the year in which such termination occurs, and (ii) all outstanding but unvested
Options and other options and rights relating to capital stock of the Company,
and all shares of Restricted Stock that as of the termination date are still
subject to the restrictions on transfer imposed by Section 4(a)(4) shall be
subject to repurchase by the Company as provided in Section 4(a)(4). For
purposes of this Agreement, Cause shall mean:
(1) a material breach of any of the terms of this
Agreement that is not immediately corrected following written notice of default
specifying such breach;
(2) a breach of any of the provisions of Section 12;
(3) repeated intoxication with alcohol or drugs while on
Company premises during its regular business hours to such a degree that, in the
reasonable judgment of the other managers of the Company, the Employee is
abusive or incapable of performing his duties and responsibilities under this
Agreement;
(4) conviction of a felony; or
(5) misappropriation of property belonging to the Company
and/or any of its affiliates.
(b) Termination Without Cause. The employment of the Employee may
be terminated without Cause at any time by the Board on delivery to the Employee
of a written Notice of Termination (as defined in Section 9(a)). On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(b), the
Company shall pay to the Employee in a lump sum an amount equal to the sum of
(i) all Base Salary payable under Section 4(a)(1) through the termination date,
(ii) a pro-rated portion of the maximum Bonus available to the Employee under
Section 4(a)(2) for the year in which the termination occurs, and (iii) an
amount equal to the aggregate Total Compensation paid to the Employee by the
Company with respect to the twelve months preceding the termination date. For
purposes of this section 7(b), the Employee's Total Compensation shall equal the
sum of the Base Salary, Bonus, and other benefits and expense reimbursements
described in Section 4(b) paid to the Employee by the Company. In addition, on
termination of the Employee under this Section 7(b), all of the Employee's
outstanding but
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<PAGE> 6
unvested Options and other options and rights relating to capital stock of the
Company shall immediately vest and become exercisable, and all shares of the
Employee's Restricted Stock shall immediately become unrestricted and freely
transferable. The term of any such options and rights shall be extended to the
third anniversary of the Employee's termination. The Employee acknowledges that
extending the term of any Option pursuant to this Section 7(b), or Section 7(c),
7(d) or 8(a), could cause such Option to lose its tax-qualified status if it is
an incentive stock option under the Code and agrees that the Company shall have
no obligation to compensate the Employee for any additional taxes he incurs as a
result.
(c) Termination on Disability. If during the Term the Employee
should fail to perform his duties hereunder on account of physical or mental
illness or other incapacity which the Board shall in good faith determine
renders the Employee incapable of performing his duties hereunder, and such
illness or other incapacity shall continue for a period of more than six (6)
consecutive months ("Disability"), the Company shall have the right, on written
Notice of Termination (as defined in Section 9(a)) delivered to the Employee to
terminate the Employee's employment under this Agreement. During the period that
the Employee shall have been incapacitated due to physical or mental illness,
the Employee shall continue to receive the full Base Salary provided for in
Section 4(a)(1) hereof at the rate then in effect until the Date of Termination
(as defined in Section 9(b)) pursuant to this Section 7(c). On the Date of
Termination pursuant to this Section 7(c), the Company shall pay to the Employee
in a lump sum an amount equal to (i) the Base Salary remaining payable to the
Employee under Section 4(a)(1) for the full remaining Term, plus (ii) a
pro-rated portion of the maximum Bonus available to the Employee under Section
4(a)(2) for the year in which the termination occurs. In addition, on such
termination, all of the Employee's outstanding but unvested Options and other
options and rights relating to capital stock of the Company shall immediately
vest and become exercisable, and all shares of the Employee's Restricted Stock
shall immediately become unrestricted and freely transferable. The term of any
such options and rights shall be extended to the third anniversary of the
Employee's termination.
(d) Termination on Death. If the Employee shall die during the
Term, the employment of the Employee shall thereupon terminate. On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(d), the
Company shall pay to the Employee's estate the payments and other benefits
applicable to termination without Cause set forth in Section 7(b) hereof. In
addition, on termination of the Employee under this Section 7(d), all of the
Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, and all shares of the Employee's Restricted Stock shall immediately
become unrestricted and freely transferable. The term of any such options and
rights shall be extended to the third anniversary of the Employee's termination.
The provisions of this Section 7(d) shall not affect the entitlements of the
Employee's heirs, executors, administrators, legatees, beneficiaries or assigns
under any employee benefit plan, fund or program of the Company.
8. Termination By Employee.
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(a) Termination for Good Reason. The Employee may terminate his
employment hereunder for Good Reason (as defined below). On the Date of
Termination pursuant to this Section 8(a), the Employee shall be entitled to
receive, and the Company agrees to pay and deliver, the payments and other
benefits applicable to termination without Cause set forth in Section 7(b)
hereof. In addition, on termination of the Employee under this Section 8(a), all
of the Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, and all shares of the Employee's Restricted Stock shall immediately
become unrestricted and freely transferable. The term of any such options and
rights shall be extended to the third anniversary of the Employee's termination.
For purposes of this Agreement, "Good Reason" shall mean:
(1) assignment to the Employee of duties inconsistent with
his responsibilities as they existed on the date of this Agreement; a
substantial alteration in the title(s) of the Employee (so long as the existing
corporate structure of the Company is maintained); or a substantial alteration
in the status of the Employee in the Company organization as it existed on the
date of this Agreement;
(2) the relocation of the Company's principal executive
office to a location more than fifty (50) miles from its present location;
(3) a reduction by the Company in the Employee's Base
Salary without the Employee's prior approval;
(4) a failure by the Company to continue in effect,
without substantial change, any benefit plan or arrangement in which the
Employee was participating or the taking of any action by the Company which
would adversely affect the Employee's participation in or materially reduce his
benefits under any benefit plan (unless such changes apply equally to all other
management employees of Company);
(5) any material breach by the Company of any provision of
this Agreement without the Employee having committed any material breach of his
obligations hereunder, which breach is not cured within twenty (20) days
following written notice thereof to the Company of such breach; or
(6) the failure of the Company to obtain the assumption of
this Agreement by any successor entity.
(b) Termination Without Good Reason. The Employee may terminate
his employment hereunder without Good Reason on written Notice of Termination
delivered to the Company setting forth the effective date of termination. If the
Employee terminates his employment hereunder without Good Reason, he shall be
entitled to receive, and the Company agrees to pay on the effective date of
termination specified in the Notice of Termination, his
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current Base Salary under Section 4(a)(1) hereof on a prorated basis to such
date of termination. On termination pursuant to this Section 8(b), the Employee
shall forfeit (i) his Bonus under Section 4(a)(2) for the year in which such
termination occurs, and (ii) all outstanding but unvested Options and other
options and rights relating to capital stock of the Company, and all shares of
Restricted Stock that as of the termination date are still subject to the
restrictions on transfer imposed by Section 4(a)(4) shall be subject to
repurchase by the Company as provided in Section 4(a)(4).
9. Provisions Applicable to Termination of Employment.
(a) Notice of Termination. Any purported termination of
Employee's employment by the Company pursuant to Section 7 shall be communicated
by Notice of Termination to the Employee as provided herein, and shall state the
specific termination provisions in this Agreement relied on and set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Employee's employment ("Notice of Termination"). If the
Employee terminates under Section 8, he shall give the Company a Notice of
Termination.
(b) Date of Termination. For all purposes, "Date of Termination"
shall mean, for Disability, thirty (30) days after Notice of Termination is
given to the Employee (provided the Employee has not returned to duty on a
full-time basis during such 30-day period), or, if the Employee's employment is
terminated by the Company for any other reason or by the Employee, the date on
which a Notice of Termination is given.
(c) Benefits on Termination. On termination of this Agreement by
the Company pursuant to Section 7 or by the Employee pursuant to Section 8, all
profit-sharing, deferred compensation and other retirement benefits payable to
the Employee under benefit plans in which the Employee then participated shall
be paid to the Employee in accordance with the provisions of the respective
plans.
10. Change In Control.
(a) Payments on Change in Control. Notwithstanding any provision
in this Agreement to the contrary, unless the Employee elects in writing to
waive this provision, a Change in Control (as defined below) of the Company
shall be deemed a termination of the Employee without Cause, and the Employee
shall be entitled to receive and the Company agrees to pay to the Employee in a
lump sum the same amount determined under Section 7(b) that is payable to the
Employee on termination without Cause. In addition, on a Change of Control, all
of the Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, the term of any such options and rights shall be extended to the
third anniversary of the Employee's termination, and all shares of the
Employee's Restricted Stock shall immediately become unrestricted and freely
transferable.
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After a Change in Control, if any previously outstanding Option
or other option or right (the "Terminated Option") relating to the Company's
capital stock does not remain outstanding, the successor to the Company or its
then Parent (as defined below) shall either:
(i) Issue an option, warrant or right, as appropriate (the
"Successor Option"), to purchase common stock of such successor or Parent in an
amount such that on exercise of the Successor Option the Employee would receive
the same number of shares of the successor's/Parent's common stock as the
Employee would have received had the Employee exercised the Terminated Option
immediately prior to the transaction resulting in the Change in Control and
received shares of such successor/Parent in such transaction. The aggregate
exercise price for all of the shares covered by such Successor Option shall
equal the aggregate exercise price of the Terminated Option; or
(ii) Pay the Employee a bonus within ten (10) days after
the consummation of the Change in Control in an amount agreed to by the Employee
and the Company. Such amount shall be at least equivalent on an after-tax basis
to the net after-tax gain that the Employee would have realized if he had been
issued a Successor Option under clause (i) above and had immediately exercised
such Successor Option and sold the underlying stock, taking into account the
different tax rates that apply to such bonus and to such gain, and such amount
shall also reflect other differences to the Employee between receiving a bonus
under this clause (ii) and receiving a Successor Option under clause (i) above.
(b) Definitions. For the purposes of this Agreement, a Change in
Control shall be deemed to have occurred if (i) there shall be consummated (aa)
any reorganization, liquidation or consolidation of the Company, or any merger
or other business combination of the Company with any other corporation, other
than any such merger or other combination that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such transaction, (bb) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or if
(ii) any "person" (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), shall become the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of fifty percent (50%) or more of the Company's outstanding
voting securities (except that for purposes of this Section 10(b), "person"
shall not include any person (or any person that controls, is controlled by or
is under common control with such person) who as of the date of this Agreement
owns ten percent (10%) or more of the total voting power represented by the
outstanding voting securities of the Company, or a trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or a
corporation that is owned directly or indirectly by the stockholders of the
Company in substantially the same percentage as their ownership of the Company)
or if (iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the entire Board shall cease for any reason
to constitute at least one-half of the
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membership thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
one-half of the directors then still in office who were directors at the
beginning of the period.
The term "Parent" means a corporation, partnership, trust,
limited liability company or other entity that is the ultimate "beneficial
owner" (as defined above) of fifty percent (50%) or more of the Company's
outstanding voting securities.
11. Gross Up Payments. If all or any portion of any payment or benefit
that the Employee is entitled to receive from the Company pursuant to this
Agreement (a "Payment") constitutes an "excess parachute payment" within the
meaning of Section 280G of the Code, and as such is subject to the excise tax
imposed by Section 4999 of the Code or to any similar Federal, state or local
tax or assessment (the "Excise Tax"), the Company or its successors or assigns
shall pay to the Employee an additional amount (the "Gross-Up Payment") with
respect to such Payment. The amount of the Gross-Up Payment shall be sufficient
that, after paying (a) any Excise Tax on the Payment, (b) any Federal, state or
local income or employment taxes and Excise Tax on the Gross-Up Payment, and (c)
any interest and penalties imposed in respect of the Excise Tax, the Employee
shall retain an amount equal to the full amount of the Payment. For the purpose
of determining the amount of any Gross-Up Payment, the Employee shall be deemed
to pay Federal income taxes at the highest marginal rate applicable in the
calendar year in which the Gross-Up Payment is made, and state and local income
taxes at the highest marginal rate applicable in the state and locality where
the Employee resides on the date the Gross-Up Payment is made, net of the
maximum reduction in Federal income taxes that could be obtained from deducting
such state and local taxes.
The Gross-Up Payment with respect to any Payment shall be paid to
the Employee within ten (10) days after the Internal Revenue Service or any
other taxing authority issues a notice stating that an Excise Tax is due with
respect to the Payment, unless the Company undertakes to challenge the taxing
authority on the applicability of such Excise Tax and indemnifies the Employee
for (a) any amounts ultimately determined to be payable, including the Excise
Tax and any related interest and penalties, (b) all expenses (including
attorneys' and experts' fees) reasonably incurred by the Employee in connection
with such challenge, as such expenses are incurred, and (c) all amounts that the
Employee is required to pay to the taxing authorities during the pendency of
such challenge (such amounts to be repaid by the Employee to the Company if they
are ultimately refunded to the Employee by the taxing authority).
12. Non-Competition and Non-Solicitation.
(a) In consideration of the provisions hereof, for the period
commencing on the date hereof and ending on the first anniversary of the
termination of this Agreement by the Company with Cause pursuant to Section 7(a)
or by the Employee without Good Reason pursuant to Section 8(b), the Employee
will not, except as specifically provided below, anywhere in any county in any
state in which the Company is engaged in business as of such termination date,
directly or indirectly, acting individually or as the owner, shareholder,
partner or
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management employee of any entity, (i) engage in the operation of a solid waste
collection, transporting or disposal business, transfer facility, recycling
facility, materials recovery facility or solid waste landfill; (ii) enter the
employ as a manager of, or render any personal services to or for the benefit
of, or assist in or facilitate the solicitation of customers for, or receive
remuneration in the form of management salary, commissions or otherwise from,
any business engaged in such activities in such counties; or (iii) receive or
purchase a financial interest in, make a loan to, or make a gift in support of,
any such business in any capacity, including without limitation, as a sole
proprietor, partner, shareholder, officer, director, principal agent or trustee;
provided, however, that the Employee may own, directly or indirectly, solely as
an investment, securities of any business traded on any national securities
exchange or quoted on any NASDAQ market, provided the Employee is not a
controlling person of, or a member of a group which controls, such business and
further provided that the Employee does not, in the aggregate, directly or
indirectly, own two percent (2%) or more of any class of securities of such
business.
(b) After termination of this Agreement by the Company with Cause
pursuant to Section 7(a) or by the Employee without Good Reason pursuant to
Section 8(b), the Employee shall not (i) solicit any residential or commercial
customer of the Company to whom the Company provides service pursuant to a
franchise agreement with a public entity in any county in any state in which the
Company is engaged in business as of such termination date, (ii) solicit any
residential or commercial customer of the Company to enter into a solid waste
collection account relationship with a competitor of the Company in any such
county, (iii) solicit any such public entity to enter into a franchise agreement
with any such competitor, (iv) solicit any officer, employee or contractor of
the Company to enter into an employment or contractor agreement with a
competitor of the Company or otherwise interfere in any such relationship, or
(v) solicit on behalf of a competitor of the Company any prospective customer of
the Company that the Employee called on or was involved in soliciting on behalf
of the Company during the Term, in each case until the second anniversary of the
date of such termination, unless otherwise permitted to do so by Section 12(a).
(c) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 12 is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specified words or phrases
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
13. Indemnification. As an employee and agent of the Company, the
Employee shall be fully indemnified by the Company to the fullest extent
permitted by applicable law in connection with his employment hereunder.
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14. Survival of Provisions. The obligations of the Company under Section
13 of this Agreement, and of the Employee under Section 12 of this Agreement,
shall survive both the termination of the Employee's employment and this
Agreement.
15. No Duty to Mitigate; No Offset. The Employee shall not be required
to mitigate damages or the amount of any payment contemplated by this Agreement,
nor shall any such payment be reduced by any earnings that the Employee may
receive from any other sources or offset against any other payments made to him
or required to be made to him pursuant to this Agreement.
16. Assignment; Binding Agreement. The Company may assign this Agreement
to any parent, subsidiary, affiliate or successor of the Company. This Agreement
is not assignable by the Employee and is binding on him and his executors and
other legal representatives. This Agreement shall bind the Company and its
successors and assigns and inure to the benefit of the Employee and his heirs,
executors, administrators, personal representatives, legatees or devisees. The
Company shall assign this Agreement to any entity that acquires its assets or
business.
17. Notice. Any written notice under this Agreement shall be personally
delivered to the other party or sent by certified or registered mail, return
receipt requested and postage prepaid, to such party at the address set forth in
the records of the Company or to such other address as either party may from
time to time specify by written notice.
18. Entire Agreement; Amendments. This Agreement contains the entire
agreement of the parties relating to the Employee's employment and supersedes
all oral or written prior discussions, agreements and understandings of every
nature between them. This Agreement may not be changed except by an agreement in
writing signed by the Company and the Employee.
19. Waiver. The waiver of a breach of any provision of this Agreement
shall not operate or as be construed to be a waiver of any other provision or
subsequent breach of this Agreement.
20. Governing Law and Jurisdictional Agreement. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of California.
21. Severability. In case any one or more of the provisions contained in
this Agreement is, for any reason, held invalid in any respect, such invalidity
shall not affect the validity of any other provision of this Agreement, and such
provision shall be deemed modified to the extent necessary to make it
enforceable.
22. Enforcement. It is agreed that it is impossible to measure fully, in
money, the damage which will accrue to the Company in the event of a breach or
threatened breach of Sections 5, 6, or 12 of this Agreement, and, in any action
or proceeding to enforce the provisions of Sections 5, 6 or 12 hereof, the
Employee waives the claim or defense that the Company has an adequate remedy at
law and will not assert the claim or defense that such a
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remedy at law exists. The Company is entitled to injunctive relief to enforce
the provisions of such sections as well as any and all other remedies available
to it at law or in equity without the posting of any bond. The Employee agrees
that if the Employee breaches any provision of Section 12, the Company may
recover as partial damages all profits realized by the Employee at any time
prior to such recovery on the exercise of any warrant, option or right to
purchase the Company's Common Stock and the subsequent sale of such stock, and
may also cancel all outstanding such warrants, options and rights.
23. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and both of which together shall constitute
one and the same instrument.
24. Due Authorization. The execution of this Agreement has been duly
authorized by the Company by all necessary corporate action.
IN WITNESS WHEREOF, the parties have executed and delivered this First
Amended Employment Agreement as of the day and year set forth above.
WASTE CONNECTIONS, INC.,
a Delaware corporation
By:
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
EMPLOYEE:
--------------------------------------
Michael Foos
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EXHIBIT 10.13
FIRST AMENDED EMPLOYMENT AGREEMENT
THIS FIRST AMENDED EMPLOYMENT AGREEMENT is made and entered into as of
October 1, 1997, by and between Eric Moser (the "Employee") and Waste
Connections, Inc., a Delaware corporation (the "Company"), and amends and
restates the Employment Agreement entered into by the parties as of October 1,
1997, with reference to the following facts.
The Company desires to engage the services and employment of the Employee
for the period provided in this Agreement, and the Employee is willing to accept
employment by the Company for such period, on the terms and conditions set forth
below.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein, the Company and the Employee agree as follows:
1. Employment. The Company agrees to employ the Employee, and the
Employee agrees to accept employment with the Company, for the Term stated in
Section 3 hereof and on the other terms and conditions herein.
2. Position and Responsibilities. During the Term, the Employee shall
serve as the Company's Divisional Controller for Washington and Idaho, reporting
directly to the Company's Corporate Controller, and perform such other duties
and responsibilities as the Corporate Controller or the Board of Directors (the
"Board") of the Company may reasonably assign to the Employee from time to time.
The Employee shall be based in Vancouver, Washington. The Employee shall devote
such time and attention to his duties as are necessary to the proper discharge
of his responsibilities hereunder. The Employee agrees to perform all duties
consistent with (a) policies established from time to time by the Company and
(b) all applicable legal requirements.
3. Term. The period of the Employee's employment under this Agreement
(the "Term") commenced on October 1, 1997, and shall continue through September
30, 2000, unless terminated earlier as provided herein or extended by the Board.
At the end of the initial Term, this Agreement shall be renewed automatically
for successive Terms of one year, unless either party shall have given the other
notice of termination hereof as provided herein.
4. Compensation, Benefits and Reimbursement of Expenses.
(a) Compensation. The Company shall compensate the Employee during
the Term of this Agreement as follows:
(1) Base Salary. The Employee shall be paid a base salary
("Base Salary") of not less than Sixty Thousand Dollars ($60,000) per year in
installments consistent with the Company's usual practices. The Board shall
review the Employee's Base Salary on
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October 1 of each year or more frequently, at the times prescribed in salary
administration practices applied generally to management employees of the
Company; provided, however, that if an IPO Closing (as defined below) with
respect to the Company's Common Stock occurs on or before October 1, 1998, the
Employee shall be offered the position of Assistant Corporate Controller
beginning October 1, 1998, with a Base Salary of Eighty Thousand Dollars
($80,000) per year, provided that the Employee relocates to the Sacramento,
California area by November 1, 1998. If the Employee is offered such position
and rejects it, he and the Company shall renegotiate his Base Salary as of
October 1, 1998. If an IPO Closing does not occur by October 1, 1998, the
Employee's Base Salary shall be adjusted on that date to Seventy Thousand
Dollars ($70,000) per year. An "IPO Closing" means (i) the date the shares of
the Company's Common Stock issued in an initial public offering registered under
the Securities Act of 1933, as amended (an "IPO"), are sold to the underwriter,
if the IPO is a fully underwritten offering, or (ii) the day following the
closing of the Company's IPO, if the IPO is a best efforts offering.
(2) Performance Bonus. The Employee shall be entitled to an
annual cash bonus (the "Bonus") based on the Company's attainment of reasonable
financial objectives to be determined annually by the Board. The maximum annual
Bonus will equal twenty percent (20%) of the applicable year's ending Base
Salary and will be payable if the Board determines, in its sole and exclusive
discretion, that that year's financial objectives have been fully met.
Notwithstanding the foregoing, the Employee will be guaranteed a minimum Bonus
of $5,000 for the 15-month period ending December 31, 1998, and the total Bonus
for such period shall not be subject to the maximum percentage limit described
above. Such minimum Bonus shall be paid on February 15, 1998, and any additional
Bonus for such period shall be paid no later than February 20, 1999. The Bonus
with respect to fiscal years beginning after December 31, 1998 shall be paid in
accordance with the Company's bonus plan, as approved by the Board; provided
that in no case shall any portion of the Bonus with respect to any such fiscal
year be paid more than seventy-five (75) days after the end of such fiscal year.
(3) Grant of Options. On the date of this Agreement, the
Company shall grant to the Employee, for no additional consideration, stock
options (the "Options") to purchase 85,000 shares of the Company's Common Stock
under the Company's Stock Option Plan. The Options shall have a term of 10 years
from the date of such grant. Options to purchase 50,000 of the 85,000 shares of
Common Stock shall be exercisable at a price of $2.80 per share and shall vest
and become exercisable with respect to 25,000 such shares on October 1, 1998,
and with respect to 25,000 such shares on October 1, 1999. Options to purchase
35,000 of the 85,000 shares shall be exercisable at a price of $10.50 per share
and shall vest and become exercisable with respect to 11,667 such shares on
October 1, 1998, with respect to 11,667 such shares on October 1, 1999, and with
respect to 11,666 such shares on October 1, 2000. The Options shall be incentive
stock options to the extent permitted under the Company's Stock Option Plan, and
the terms of the Options shall be described in more detail in Stock Option
Agreements to be entered into between the Employee and the Company. If at any
time while any of the Options are still outstanding the Company amends its Stock
Option Plan to provide for a less favorable vesting schedule for stock options
than that provided herein, any Options then outstanding shall thereupon be
converted to warrants entitling the Employee to
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purchase the number of shares of Common Stock for which the Employee's then
outstanding Options may be exercised, on the same terms as provided under such
Options.
If the Employee's employment by the Company is terminated by the
Company without Cause (as defined in Section 7(a)) or by the Employee for Good
Reason (as defined in Section 8(a)) before all of the Options have vested, all
of the outstanding Options shall become vested on such termination. If the
Employee's employment by the Company is terminated by the Company for Cause or
by the Employee without Good Reason before all of the Options have vested, the
Employee shall forfeit any Options that are unvested as of the termination date.
(4) Grant of Restricted Stock. On the date of this
Agreement, the Company shall sell to the Employee, for $0.01 per share in cash,
10,000 shares of the Company's Common Stock (the "Restricted Stock"). Such
Restricted Stock shall not be transferable initially by the Employee, but 3,333
shares of Restricted Stock shall become unrestricted and freely transferable
(subject to compliance with all applicable Federal and state securities laws) on
each of October 1, 1998, and October 1, 1999, and the remaining 3,334 shares of
Restricted Stock shall become unrestricted and freely transferable (subject to
compliance with all applicable Federal and state securities laws) on October 1,
2000. If a Change in Control of the Company (as defined in Section 10(b)) occurs
before all of the Employee's Restricted Stock has become unrestricted and freely
transferable under this Section 4(a)(4), all of the Employee's shares of
Restricted Stock shall immediately become unrestricted and freely transferable
on such Change of Control, and all shares of Restricted Stock granted to the
Employee hereunder shall be treated as owned by the Employee without restriction
for the purpose of determining the Employee's percentage ownership of the
Company on such Change of Control. If before all of the Employee's Restricted
Stock has become unrestricted and freely transferable under this Section
4(a)(4), the Employee's employment is terminated by the Company without Cause
(as defined in Section 7(a)) or by the Employee for Good Reason (as defined in
Section 8(a)), all of the Employee's shares of Restricted Stock shall
immediately become unrestricted and freely transferable on such termination. If
the Employee's employment is terminated by the Company for Cause or by the
Employee without Good Reason before all of the Restricted Stock has become
unrestricted and freely transferable, the Company may, within 90 days after such
termination of employment, repurchase from the Employee for $0.01 per share in
cash any shares of Restricted Stock that are subject to restrictions on transfer
under this Section 4(a)(4) as of the termination date. The Employee may in his
sole discretion file an election under Section 83(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), with respect to the Restricted Stock.
(b) Other Benefits. During the Term, the Company shall provide the
Employee with a cellular telephone and will pay or reimburse the Employee's
monthly service fee and costs of calls attributable to Company business. During
the Term, the Employee shall be entitled to receive all other benefits of
employment generally available to other management employees of the Company and
those benefits for which management employees are or shall become eligible,
including, without limitation and to the extent made available by the Company,
medical, dental, disability and prescription coverage, life insurance and
tax-qualified retirement
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benefits. The Employee shall be entitled to three (3) weeks of paid vacation
each year of his employment.
(c) Reimbursement of Other Expenses. The Company agrees to pay or
reimburse the Employee for all reasonable travel and other expenses (including
mileage for business use of employee's personal automobile at the maximum rate
permitted under Internal Revenue Service regulations) incurred by the Employee
in connection with the performance of his duties under this Agreement on
presentation of proper expense statements or vouchers. All such supporting
information shall comply with all applicable Company policies relating to
reimbursement for travel and other expenses.
(d) Withholding. All compensation payable to the Employee
hereunder is subject to all withholding requirements under applicable law.
5. Confidentiality. During the Term of his employment, and at all times
thereafter, the Employee shall not, without the prior written consent of the
Company, divulge to any third party or use for his own benefit or the benefit of
any third party or for any purpose other than the exclusive benefit of the
Company, any confidential or proprietary business or technical information
revealed, obtained or developed in the course of his employment with the Company
and which is otherwise the property of the Company or any of its affiliated
corporations, including, but not limited to, trade secrets, customer lists,
formulae and processes of manufacture; provided, however, that nothing herein
contained shall restrict the Employee's ability to make such disclosures during
the course of his employment as may be necessary or appropriate to the effective
and efficient discharge of his duties to the Company.
6. Property. Both during the Term of his employment and thereafter, the
Employee shall not remove from the Company's offices or premises any Company
documents, records, notebooks, files, correspondence, reports, memoranda and
similar materials or property of any kind unless necessary in accordance with
the duties and responsibilities of his employment. In the event that any such
material or property is removed, it shall be returned to its proper file or
place of safekeeping as promptly as possible. The Employee shall not make,
retain, remove or distribute any copies, or divulge to any third person the
nature or contents of any of the foregoing or of any other oral or written
information to which he may have access, except as disclosure shall be necessary
in the performance of his assigned duties. On the termination of his employment
with the Company, the Employee shall leave with or return to the Company all
originals and copies of the foregoing then in his possession or subject to his
control, whether prepared by the Employee or by others.
7. Termination By Company.
(a) Termination for Cause. The employment of the Employee may be
terminated for Cause at any time by the Board; provided, however, that before
the Company may terminate the Employee's employment for Cause for any reason
that is susceptible to cure, the Company shall first send the Employee written
notice of its intention to terminate this
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<PAGE> 5
Agreement for Cause, specifying in such notice the reasons for such Cause and
those conditions that, if satisfied by the Employee, would cure the reasons for
such Cause, and the Employee shall have 60 days from receipt of such written
notice to satisfy such conditions. If such conditions are satisfied within such
60-day period, the Company shall so advise the Employee in writing. If such
conditions are not satisfied within such 60-day period, the Company may
thereafter terminate this Agreement for Cause on written Notice of Termination
(as defined in Section 9(a)) delivered to the Employee describing with
specificity the grounds for termination. Immediately on termination pursuant to
this Section 7(a), the Company shall pay to the Employee in a lump sum his then
current Base Salary under Section 4(a)(1) on a prorated basis to the Date of
Termination (as defined in Section 9(b)). On termination pursuant to this
Section 7(a), the Employee shall forfeit (i) his Bonus under Section 4(a)(2) for
the year in which such termination occurs, and (ii) all outstanding but unvested
Options and other options and rights relating to capital stock of the Company,
and all shares of Restricted Stock that as of the termination date are still
subject to the restrictions on transfer imposed by Section 4(a)(4) shall be
subject to repurchase by the Company as provided in Section 4(a)(4). For
purposes of this Agreement, Cause shall mean:
(1) a material breach of any of the terms of this Agreement
that is not immediately corrected following written notice of default specifying
such breach;
(2) a breach of any of the provisions of Section 12;
(3) repeated intoxication with alcohol or drugs while on
Company premises during its regular business hours to such a degree that, in the
reasonable judgment of the other managers of the Company, the Employee is
abusive or incapable of performing his duties and responsibilities under this
Agreement;
(4) conviction of a felony; or
(5) misappropriation of property belonging to the Company
and/or any of its affiliates.
(b) Termination Without Cause. The employment of the Employee may
be terminated without Cause at any time by the Board on delivery to the Employee
of a written Notice of Termination (as defined in Section 9(a)). On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(b), the
Company shall pay to the Employee in a lump sum an amount equal to the sum of
(i) all Base Salary payable under Section 4(a)(1) through the termination date,
(ii) a pro-rated portion of the maximum Bonus available to the Employee under
Section 4(a)(2) for the year in which the termination occurs, and (iii) an
amount equal to the aggregate Total Compensation paid to the Employee by the
Company with respect to the twelve months preceding the termination date. For
purposes of this section 7(b), the Employee's Total Compensation shall equal the
sum of the Base Salary, Bonus, and other benefits and expense reimbursements
described in Section 4(b) paid to the Employee by the Company. In addition, on
termination of the Employee under this Section 7(b), all of the Employee's
outstanding but
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unvested Options and other options and rights relating to capital stock of the
Company shall immediately vest and become exercisable, and all shares of the
Employee's Restricted Stock shall immediately become unrestricted and freely
transferable. The term of any such options and rights shall be extended to the
third anniversary of the Employee's termination. The Employee acknowledges that
extending the term of any Option pursuant to this Section 7(b), or Section 7(c),
7(d) or 8(a), could cause such Option to lose its tax-qualified status if such
Option is an incentive stock option under the Code and agrees that the Company
shall have no obligation to compensate the Employee for any additional taxes he
incurs as a result.
(c) Termination on Disability. If during the Term the Employee
should fail to perform his duties hereunder on account of physical or mental
illness or other incapacity which the Board shall in good faith determine
renders the Employee incapable of performing his duties hereunder, and such
illness or other incapacity shall continue for a period of more than six (6)
consecutive months ("Disability"), the Company shall have the right, on written
Notice of Termination (as defined in Section 9(a)) delivered to the Employee to
terminate the Employee's employment under this Agreement. During the period that
the Employee shall have been incapacitated due to physical or mental illness,
the Employee shall continue to receive the full Base Salary provided for in
Section 4(a)(1) hereof at the rate then in effect until the Date of Termination
(as defined in Section 9(b)) pursuant to this Section 7(c). On the Date of
Termination pursuant to this Section 7(c), the Company shall pay to the Employee
in a lump sum an amount equal to (i) the Base Salary remaining payable to the
Employee under Section 4(a)(1) for the full remaining Term, plus (ii) a
pro-rated portion of the maximum Bonus available to the Employee under Section
4(a)(2) for the year in which the termination occurs. In addition, on such
termination, all of the Employee's outstanding but unvested Options and other
options and rights relating to capital stock of the Company shall immediately
vest and become exercisable, and all shares of the Employee's Restricted Stock
shall immediately become unrestricted and freely transferable. The term of any
such options and rights shall be extended to the third anniversary of the
Employee's termination.
(d) Termination on Death. If the Employee shall die during the
Term, the employment of the Employee shall thereupon terminate. On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(d), the
Company shall pay to the Employee's estate the payments and other benefits
applicable to termination without Cause set forth in Section 7(b) hereof. In
addition, on termination of the Employee under this Section 7(d), all of the
Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, and all shares of the Employee's Restricted Stock shall immediately
become unrestricted and freely transferable. The term of any such options and
rights shall be extended to the third anniversary of the Employee's termination.
The provisions of this Section 7(d) shall not affect the entitlements of the
Employee's heirs, executors, administrators, legatees, beneficiaries or assigns
under any employee benefit plan, fund or program of the Company.
8. Termination By Employee.
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(a) Termination for Good Reason. The Employee may terminate his
employment hereunder for Good Reason (as defined below). On the Date of
Termination pursuant to this Section 8(a), the Employee shall be entitled to
receive, and the Company agrees to pay and deliver, the payments and other
benefits applicable to termination without Cause set forth in Section 7(b)
hereof. In addition, on termination of the Employee under this Section 8(a), all
of the Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, and all shares of the Employee's Restricted Stock shall immediately
become unrestricted and freely transferable. The term of any such options and
rights shall be extended to the third anniversary of the Employee's termination.
For purposes of this Agreement, "Good Reason" shall mean:
(1) assignment to the Employee of duties inconsistent with
his responsibilities as they existed on the date of this Agreement; a
substantial alteration in the title(s) of the Employee (so long as the existing
corporate structure of the Company is maintained); or a substantial alteration
in the status of the Employee in the Company organization as it existed on the
date of this Agreement;
(2) the relocation of the Employee to a location more than
fifty (50) miles from Vancouver;
(3) a reduction by the Company in the Employee's Base Salary
without the Employee's prior approval;
(4) a failure by the Company to continue in effect, without
substantial change, any benefit plan or arrangement in which the Employee was
participating or the taking of any action by the Company which would adversely
affect the Employee's participation in or materially reduce his benefits under
any benefit plan (unless such changes apply equally to all other management
employees of Company);
(5) any material breach by the Company of any provision of
this Agreement without the Employee having committed any material breach of his
obligations hereunder, which breach is not cured within twenty (20) days
following written notice thereof to the Company of such breach; or
(6) the failure of the Company to obtain the assumption of
this Agreement by any successor entity.
(b) Termination Without Good Reason. The Employee may terminate
his employment hereunder without Good Reason on written Notice of Termination
delivered to the Company setting forth the effective date of termination. If the
Employee terminates his employment hereunder without Good Reason, he shall be
entitled to receive, and the Company agrees to pay on the effective date of
termination specified in the Notice of Termination, his
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<PAGE> 8
current Base Salary under Section 4(a)(1) hereof on a prorated basis to such
date of termination. On termination pursuant to this Section 8(b), the Employee
shall forfeit (i) his Bonus under Section 4(a)(2) for the year in which such
termination occurs, and (ii) all outstanding but unvested Options and other
options and rights relating to capital stock of the Company, and all shares of
Restricted Stock that as of the termination date are still subject to the
restrictions on transfer imposed by Section 4(a)(4) shall be subject to
repurchase by the Company as provided in Section 4(a)(4).
9. Provisions Applicable to Termination of Employment.
(a) Notice of Termination. Any purported termination of Employee's
employment by the Company pursuant to Section 7 shall be communicated by Notice
of Termination to the Employee as provided herein, and shall state the specific
termination provisions in this Agreement relied on and set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Employee's employment ("Notice of Termination"). If the Employee terminates
under Section 8, he shall give the Company a Notice of Termination.
(b) Date of Termination. For all purposes, "Date of Termination"
shall mean, for Disability, thirty (30) days after Notice of Termination is
given to the Employee (provided the Employee has not returned to duty on a
full-time basis during such 30-day period), or, if the Employee's employment is
terminated by the Company for any other reason or by the Employee, the date on
which a Notice of Termination is given.
(c) Benefits on Termination. On termination of this Agreement by
the Company pursuant to Section 7 or by the Employee pursuant to Section 8, all
profit-sharing, deferred compensation and other retirement benefits payable to
the Employee under benefit plans in which the Employee then participated shall
be paid to the Employee in accordance with the provisions of the respective
plans.
10. Change In Control.
(a) Payments on Change in Control. Notwithstanding any provision
in this Agreement to the contrary, unless the Employee elects in writing to
waive this provision, a Change in Control (as defined below) of the Company
shall be deemed a termination of the Employee without Cause, and the Employee
shall be entitled to receive and the Company agrees to pay to the Employee in a
lump sum the same amount determined under Section 7(b) that is payable to the
Employee on termination without Cause. In addition, on a Change of Control, all
of the Employee's outstanding but unvested Options and other options and rights
relating to capital stock of the Company shall immediately vest and become
exercisable, the term of any such options and rights shall be extended to the
third anniversary of the Employee's termination, and all shares of the
Employee's Restricted Stock shall immediately become unrestricted and freely
transferable.
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<PAGE> 9
After a Change in Control, if any previously outstanding Option or
other option or right (the "Terminated Option") relating to the Company's
capital stock does not remain outstanding, the successor to the Company or its
then Parent (as defined below) shall either:
(i) Issue an option, warrant or right, as appropriate (the
"Successor Option"), to purchase common stock of such successor or Parent in an
amount such that on exercise of the Successor Option the Employee would receive
the same number of shares of the successor's/Parent's common stock as the
Employee would have received had the Employee exercised the Terminated Option
immediately prior to the transaction resulting in the Change in Control and
received shares of such successor/Parent in such transaction. The aggregate
exercise price for all of the shares covered by such Successor Option shall
equal the aggregate exercise price of the Terminated Option; or
(ii) Pay the Employee a bonus within ten (10) days after the
consummation of the Change in Control in an amount agreed to by the Employee and
the Company. Such amount shall be at least equivalent on an after-tax basis to
the net after-tax gain that the Employee would have realized if he had been
issued a Successor Option under clause (i) above and had immediately exercised
such Successor Option and sold the underlying stock, taking into account the
different tax rates that apply to such bonus and to such gain, and such amount
shall also reflect other differences to the Employee between receiving a bonus
under this clause (ii) and receiving a Successor Option under clause (i) above.
(b) Definitions. For the purposes of this Agreement, a Change in
Control shall be deemed to have occurred if (i) there shall be consummated (aa)
any reorganization, liquidation or consolidation of the Company, or any merger
or other business combination of the Company with any other corporation, other
than any such merger or other combination that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such transaction, (bb) any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or if
(ii) any "person" (as defined in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), shall become the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of fifty percent (50%) or more of the Company's outstanding
voting securities (except that for purposes of this Section 10(b), "person"
shall not include any person or any person that controls, is controlled by or is
under common control with such person, who as of the date of this Agreement owns
ten percent (10%) or more of the total voting power represented by the
outstanding voting securities of the Company, or a trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or a
corporation that is owned directly or indirectly by the stockholders of the
Company in substantially the same percentage as their ownership of the Company)
or if (iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the entire Board shall cease for any reason
to constitute at least one-half of the
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membership thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
one-half of the directors then still in office who were directors at the
beginning of the period.
The term "Parent" means a corporation, partnership, trust, limited
liability company or other entity that is the ultimate "beneficial owner" (as
defined above) of fifty percent (50%) or more of the Company's outstanding
voting securities.
11. Gross Up Payments. If all or any portion of any payment or benefit
that the Employee is entitled to receive from the Company pursuant to this
Agreement (a "Payment") constitutes an "excess parachute payment" within the
meaning of Section 280G of the Code, and as such is subject to the excise tax
imposed by Section 4999 of the Code or to any similar Federal, state or local
tax or assessment (the "Excise Tax"), the Company or its successors or assigns
shall pay to the Employee an additional amount (the "Gross-Up Payment") with
respect to such Payment. The amount of the Gross-Up Payment shall be sufficient
that, after paying (a) any Excise Tax on the Payment, (b) any Federal, state or
local income or employment taxes and Excise Tax on the Gross-Up Payment, and (c)
any interest and penalties imposed in respect of the Excise Tax, the Employee
shall retain an amount equal to the full amount of the Payment. For the purpose
of determining the amount of any Gross-Up Payment, the Employee shall be deemed
to pay Federal income taxes at the highest marginal rate applicable in the
calendar year in which the Gross-Up Payment is made, and state and local income
taxes at the highest marginal rate applicable in the state and locality where
the Employee resides on the date the Gross-Up Payment is made, net of the
maximum reduction in Federal income taxes that could be obtained from deducting
such state and local taxes.
The Gross-Up Payment with respect to any Payment shall be paid to
the Employee within ten (10) days after the Internal Revenue Service or any
other taxing authority issues a notice stating that an Excise Tax is due with
respect to the Payment, unless the Company undertakes to challenge the taxing
authority on the applicability of such Excise Tax and indemnifies the Employee
for (a) any amounts ultimately determined to be payable, including the Excise
Tax and any related interest and penalties, (b) all expenses (including
attorneys' and experts' fees) reasonably incurred by the Employee in connection
with such challenge, as such expenses are incurred, and (c) all amounts that the
Employee is required to pay to the taxing authorities during the pendency of
such challenge (such amounts to be repaid by the Employee to the Company if they
are ultimately refunded to the Employee by the taxing authority).
12. Non-Competition and Non-Solicitation.
(a) In consideration of the provisions hereof, for the period
commencing on the date hereof and ending on the first anniversary of the
termination of this Agreement by the Company with Cause pursuant to Section 7(a)
or by the Employee without Good Reason pursuant to Section 8(b), the Employee
will not, except as specifically provided below, anywhere in any county in any
state in which the Company is engaged in business as of such termination date,
directly or indirectly, acting individually or as the owner, shareholder,
partner or
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management employee of any entity, (i) engage in the operation of a solid waste
collection, transporting or disposal business, transfer facility, recycling
facility, materials recovery facility or solid waste landfill; (ii) enter the
employ as a manager of, or render any personal services to or for the benefit
of, or assist in or facilitate the solicitation of customers for, or receive
remuneration in the form of management salary, commissions or otherwise from,
any business engaged in such activities in such counties; or (iii) receive or
purchase a financial interest in, make a loan to, or make a gift in support of,
any such business in any capacity, including without limitation, as a sole
proprietor, partner, shareholder, officer, director, principal agent or trustee;
provided, however, that the Employee may own, directly or indirectly, solely as
an investment, securities of any business traded on any national securities
exchange or quoted on any NASDAQ market, provided the Employee is not a
controlling person of, or a member of a group which controls, such business and
further provided that the Employee does not, in the aggregate, directly or
indirectly, own two percent (2%) or more of any class of securities of such
business.
(b) After termination of this Agreement by the Company with Cause
pursuant to Section 7(a) or by the Employee without Good Reason pursuant to
Section 8(b), the Employee shall not (i) solicit any residential or commercial
customer of the Company to whom the Company provides service pursuant to a
franchise agreement with a public entity in any county in any state in which the
Company is engaged in business as of such termination date, (ii) solicit any
residential or commercial customer of the Company to enter into a solid waste
collection account relationship with a competitor of the Company in any such
county, (iii) solicit any such public entity to enter into a franchise agreement
with any such competitor, (iv) solicit any officer, employee or contractor of
the Company to enter into an employment or contractor agreement with a
competitor of the Company or otherwise interfere in any such relationship, or
(v) solicit on behalf of a competitor of the Company any prospective customer of
the Company that the Employee called on or was involved in soliciting on behalf
of the Company during the Term, in each case until the second anniversary of the
date of such termination, unless otherwise permitted to do so by Section 12(a).
(c) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 12 is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specified words or phrases
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
13. Indemnification. As an employee and agent of the Company, the
Employee shall be fully indemnified by the Company to the fullest extent
permitted by applicable law in connection with his employment hereunder.
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14. Survival of Provisions. The obligations of the Company under Section
13 of this Agreement, and of the Employee under Section 12 of this Agreement,
shall survive both the termination of the Employee's employment and this
Agreement.
15. No Duty to Mitigate; No Offset. The Employee shall not be required
to mitigate damages or the amount of any payment contemplated by this Agreement,
nor shall any such payment be reduced by any earnings that the Employee may
receive from any other sources or offset against any other payments made to him
or required to be made to him pursuant to this Agreement.
16. Assignment; Binding Agreement. The Company may assign this Agreement
to any parent, subsidiary, affiliate or successor of the Company. This Agreement
is not assignable by the Employee and is binding on him and his executors and
other legal representatives. This Agreement shall bind the Company and its
successors and assigns and inure to the benefit of the Employee and his heirs,
executors, administrators, personal representatives, legatees or devisees. The
Company shall assign this Agreement to any entity that acquires its assets or
business.
17. Notice. Any written notice under this Agreement shall be personally
delivered to the other party or sent by certified or registered mail, return
receipt requested and postage prepaid, to such party at the address set forth in
the records of the Company or to such other address as either party may from
time to time specify by written notice.
18. Entire Agreement; Amendments. This Agreement contains the entire
agreement of the parties relating to the Employee's employment and supersedes
all oral or written prior discussions, agreements and understandings of every
nature between them. This Agreement may not be changed except by an agreement in
writing signed by the Company and the Employee.
19. Waiver. The waiver of a breach of any provision of this Agreement
shall not operate or as be construed to be a waiver of any other provision or
subsequent breach of this Agreement.
20. Governing Law and Jurisdictional Agreement. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of California.
21. Severability. In case any one or more of the provisions contained in
this Agreement is, for any reason, held invalid in any respect, such invalidity
shall not affect the validity of any other provision of this Agreement, and such
provision shall be deemed modified to the extent necessary to make it
enforceable.
22. Enforcement. It is agreed that it is impossible to measure fully, in
money, the damage which will accrue to the Company in the event of a breach or
threatened breach of Sections 5, 6, or 12 of this Agreement, and, in any action
or proceeding to enforce the provisions of Sections 5, 6 or 12 hereof, the
Employee waives the claim or defense that the Company has an adequate remedy at
law and will not assert the claim or defense that such a
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remedy at law exists. The Company is entitled to injunctive relief to enforce
the provisions of such sections as well as any and all other remedies available
to it at law or in equity without the posting of any bond. The Employee agrees
that if the Employee breaches any provision of Section 12, the Company may
recover as partial damages all profits realized by the Employee at any time
prior to such recovery on the exercise of any warrant, option or right to
purchase the Company's Common Stock and the subsequent sale of such stock, and
may also cancel all outstanding such warrants, options and rights.
23. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and both of which together shall constitute
one and the same instrument.
24. Due Authorization. The execution of this Agreement has been duly
authorized by the Company by all necessary corporate action.
IN WITNESS WHEREOF, the parties have executed and delivered this First
Amended Employment Agreement as of the day and year set forth above.
WASTE CONNECTIONS, INC., a Delaware
corporation
By: _____________________________________
Printed Name: ___________________________
Title: __________________________________
EMPLOYEE:
_________________________________________
Eric Moser
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<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of January 13, 1998,
by and between Steven F. Bouck (the "Employee") and Waste Connections, Inc., a
Delaware corporation (the "Company"), with reference to the following facts.
The Company desires to engage the services and employment of the Employee
for the period provided in this Agreement, and the Employee is willing to accept
employment by the Company for such period, on the terms and conditions set forth
below.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and conditions herein, the Company and the Employee agree as follows:
1. Employment. The Company agrees to employ the Employee, and the
Employee agrees to accept employment with the Company, for the Term stated in
Section 3 hereof and on the other terms and conditions herein.
2. Position and Responsibilities. During the Term, the Employee shall
serve as Executive Vice President and Chief Financial Officer of the Company,
reporting directly to the Company's President, and perform such other duties and
responsibilities as the President or the Board of Directors (the "Board") of the
Company may reasonably assign to the Employee from time to time. The Employee
shall be based at the Company's corporate headquarters in Roseville, California.
The Employee shall devote such time and attention to his duties as are necessary
to the proper discharge of his responsibilities hereunder. The Employee agrees
to perform all duties consistent with (a) policies established from time to time
by the Company and (b) all applicable legal requirements. At the discretion of
the President and the Board, the Employee shall attend Board meetings, except
during executive sessions of the Board as determined by the Board, and shall
make presentations to the Board from time to time.
The Company recognizes and accepts that the Employee may, for a
period of time not to exceed 90 days (the "Transition Period"), engage in such
activities as are reasonably necessary to assist his previous employer in
transferring the Employee's responsibilities to his successor. The Employee
agrees to make every effort to minimize the effect of these transition
activities on the Company and to perform fully his obligations hereunder during
the Transition Period. The Employee agrees that either he or his previous
employer shall be responsible for all costs incurred by the Employee or his
previous employer in connection with the Employee's providing such transition
assistance, including, but not limited to, travel costs.
3. Term. The period of the Employee's employment under this Agreement
(the "Term") shall commence on March 1, 1998, or earlier by agreement between
the Employee and the Company, and shall continue through February 28, 2001,
unless terminated earlier as provided herein. At the end of the initial Term,
this Agreement shall be renewed automatically
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for successive Terms of one year, unless either party shall have given the
other notice of termination hereof as provided herein.
4. Compensation, Benefits and Reimbursement of Expenses.
(a) Compensation. The Company shall compensate the Employee during
the Term of this Agreement as follows:
(1) Base Salary. The Employee shall be paid a base salary
("Base Salary") of not less than One Hundred Fifteen Thousand Dollars ($115,000)
per year in installments consistent with the Company's usual practices. On the
first anniversary of the Employee's employment by the Company, the Employee's
Base Salary shall be increased to One Hundred Thirty-Five Thousand Dollars
($135,000) per year. Thereafter, the Board shall review the Employee's Base
Salary on March 1 of each year or more frequently, at the times prescribed in
salary administration practices applied generally to management employees of the
Company.
(2) Performance Bonus. The Employee shall be entitled to an
annual cash bonus (the "Bonus") based on the Company's attainment of financial
objectives to be determined annually by the Board. The maximum annual Bonus will
equal thirty-five percent (35%) of the applicable year's ending Base Salary and
will be payable if the Board determines, in its sole and exclusive discretion,
that that year's financial objectives have been fully met. Notwithstanding the
foregoing, for calendar 1998, the Employee will be guaranteed a minimum Bonus of
twenty percent (20%) of the Base Salary paid to the Employee during that year,
and will be paid on a schedule agreed to by the Company and the Employee. The
Bonus with respect to 1999 and each year thereafter shall be paid in February of
the following year.
(3) Signing Bonus. The Employee shall be entitled to a cash
signing bonus in the amount of $69,166, payable no later than March 1, 1998.
(4) Grant of Options. On the first day of the initial Term,
the Company shall grant to the Employee, for no additional consideration, stock
options (the "Options") to purchase 200,000 shares of the Company's Common Stock
under the Company's Stock Option Plan. The Options shall have a term of 10 years
from the date of such grant. Options to purchase 100,000 of the 200,000 shares
of Common Stock shall be exercisable at a price of $2.80 per share and shall
vest and become exercisable with respect to 33,333 such shares on each of
October 1, 1998, and October 1, 1999, and with respect to 33,334 such shares on
October 1, 2000. Options to purchase 50,000 of the 200,000 shares shall be
exercisable at a price of $9.50 per share and shall vest and become exercisable
with respect to 16,667 such shares on October 1, 1998, with respect to 16,667
such shares on October 1, 1999, and with respect to 16,666 such shares on
October 1, 2000. Options to purchase 50,000 of the 200,000 shares shall be
exercisable at a price of $12.50 per share and shall vest and become exercisable
with respect to 16,667 such shares on October 1, 1998, with respect to 16,667
such shares on October 1, 1999, and with respect to 16,666 such shares on
October 1, 2000. The Options shall
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<PAGE> 3
be incentive stock options to the extent permitted under the Company's Stock
Option Plan, and the terms of the Options shall be described in more detail in
Stock Option Agreements to be entered into between the Employee and the Company.
If at any time while any of the Options are still outstanding the Company amends
its Stock Option Plan to provide for a less favorable vesting schedule for stock
options than that provided herein, any Options then outstanding shall thereupon
be converted to warrants entitling the Employee to purchase the number of shares
of Common Stock for which the Employee's then outstanding Options may be
exercised, on the same terms as provided under such Options.
(5) Contingent Option Grant. If (i) the Employee's previous
employer announces an acquisition before February 15, 1998, (ii) such
acquisition closes within 60 days after the commencement of the initial Term,
and (iii) the acquisition is one with respect to which, under the Employee's
employment agreement with his previous employer, the Employee would normally
have received additional compensation, but the Employee's previous employer does
not in this case compensate the Employee, the Company shall grant to the
Employee, for no additional consideration, within 30 days after it has been
conclusively determined that the Employee's previous employer will not pay such
additional compensation, stock options (the "Contingent Options") to purchase
30,000 shares of the Company's Common Stock under the Company's Stock Option
Plan. The Contingent Options shall have a term of 10 years from the date of such
grant, shall be exercisable at a price of $2.80 per share, and shall vest and
become exercisable with respect to 10,000 such shares on each of October 1,
1998, October 1, 1999, and October 1, 2000. The Contingent Options shall be
incentive stock options to the extent permitted under the Company's Stock Option
Plan, and the terms of the Contingent Options shall be described in more detail
in Stock Option Agreements to be entered into between the Employee and the
Company. If at any time while any of the Contingent Options are still
outstanding the Company amends its Stock Option Plan to provide for a less
favorable vesting schedule for stock options than that provided herein, any
Contingent Options then outstanding shall thereupon be converted to warrants
entitling the Employee to purchase the number of shares of Common Stock for
which the Employee's then outstanding Contingent Options may be exercised, on
the same terms as provided under such Contingent Options.
If the Employee's employment by the Company is terminated by the
Company without Cause (as defined in Section 7(a)) before all of the Options or
Contingent Options have vested, all of the outstanding Options and Contingent
Options shall become vested on such termination. If the Employee's employment by
the Company is terminated by the Company for Cause or by the Employee before all
of the Options or Contingent Options have vested, the Employee shall forfeit any
Options (but not any Contingent Options) that are unvested as of the termination
date.
(b) Other Benefits. During the Term, the Company shall provide the
Employee with a cellular telephone and will pay or reimburse the Employee's
monthly service fees and costs of calls attributable to Company business. During
the Term, the Employee shall be entitled to receive all other benefits of
employment generally available to other management
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employees of the Company and those benefits for which management employees are
or shall become eligible, including, without limitation and to the extent made
available by the Company, medical, dental, disability and prescription coverage,
life insurance and tax-qualified retirement benefits. The Employee shall be
entitled to two (2) weeks of paid vacation in his first twelve months of
employment by the Company, three (3) weeks during each of the second through the
fifth twelve-month periods of employment, and four (4) weeks per twelve-month
period beginning with the sixth twelve-month period of employment.
(c) Reimbursement of Other Expenses. The Company agrees to pay or
reimburse the Employee for all reasonable travel and other expenses (including
mileage for business use of employee's personal automobile at the maximum rate
permitted under Internal Revenue Service regulations) incurred by the Employee
in connection with the performance of his duties under this Agreement on
presentation of proper expense statements or vouchers. All such supporting
information shall comply with all applicable Company policies relating to
reimbursement for travel and other expenses.
(d) Withholding. All compensation payable to the Employee
hereunder is subject to all withholding requirements under applicable law.
5. Confidentiality. During the Term, and at all times thereafter, the
Employee shall not, without the prior written consent of the Company, divulge to
any third party or use for his own benefit or the benefit of any third party or
for any purpose other than the exclusive benefit of the Company, any
confidential or proprietary business or technical information revealed, obtained
or developed in the course of his employment with the Company and which is
otherwise the property of the Company or any of its affiliated corporations,
including, but not limited to, trade secrets, customer lists, formulae and
processes of manufacture; provided, however, that nothing herein contained shall
restrict the Employee's ability to make such disclosures during the course of
his employment as may be necessary or appropriate to the effective and efficient
discharge of his duties to the Company.
6. Property. Both during the Term and thereafter, the Employee shall
not remove from the Company's offices or premises any Company documents,
records, notebooks, files, correspondence, reports, memoranda and similar
materials or property of any kind unless necessary in accordance with the duties
and responsibilities of his employment. In the event that any such material or
property is removed, it shall be returned to its proper file or place of
safekeeping as promptly as possible. The Employee shall not make, retain, remove
or distribute any copies, or divulge to any third person the nature or contents
of any of the foregoing or of any other oral or written information to which he
may have access, except as disclosure shall be necessary in the performance of
his assigned duties. On the termination of his employment with the Company, the
Employee shall leave with or return to the Company all originals and copies of
the foregoing then in his possession or subject to his control, whether prepared
by the Employee or by others.
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7. Termination By Company.
(a) Termination for Cause. The employment of the Employee may be
terminated for Cause at any time by the Board; provided, however, that before
the Company may terminate the Employee's employment for Cause for any reason
that is susceptible to cure, the Company shall first send the Employee written
notice of its intention to terminate this Agreement for Cause, specifying in
such notice the reasons for such Cause and those conditions that, if satisfied
by the Employee, would cure the reasons for such Cause, and the Employee shall
have 60 days from receipt of such written notice to satisfy such conditions. If
such conditions are satisfied within such 60-day period, the Company shall so
advise the Employee in writing. If such conditions are not satisfied within such
60-day period, the Company may thereafter terminate this Agreement for Cause on
written Notice of Termination (as defined in Section 9(a)) delivered to the
Employee describing with specificity the grounds for termination. Immediately on
termination pursuant to this Section 7(a), the Company shall pay to the Employee
in a lump sum his then current Base Salary under Section 4(a)(1) on a prorated
basis to the Date of Termination (as defined in Section 9(b)). On termination
pursuant to this Section 7(a), the Employee shall forfeit (i) his Bonus under
Section 4(a)(2) for the year in which such termination occurs, and (ii) all
outstanding but unvested Options (but not Contingent Options) and other options
and rights relating to capital stock of the Company. For purposes of this
Agreement, Cause shall mean:
(1) a material breach of any of the terms of this Agreement
that is not immediately corrected following written notice of default specifying
such breach;
(2) a breach of any of the provisions of Section 12;
(3) repeated intoxication with alcohol or drugs while on
Company premises during its regular business hours to such a degree that, in the
reasonable judgment of the other managers of the Company, the Employee is
abusive or incapable of performing his duties and responsibilities under this
Agreement;
(4) conviction of a felony; or
(5) misappropriation of property belonging to the Company
and/or any of its affiliates.
(b) Termination Without Cause. The employment of the Employee may
be terminated without Cause at any time by the Board on delivery to the Employee
of a written Notice of Termination (as defined in Section 9(a)). On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(b), the
Company shall pay to the Employee in a lump sum an amount equal to the sum of
(i) all Base Salary payable under Section 4(a)(1) through the termination date,
(ii) a pro-rated portion of the maximum Bonus available to the Employee under
Section 4(a)(2) for the year in which the termination occurs, and (iii) an
amount equal to the
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greater of (aa) the aggregate Total Compensation paid to the Employee by the
Company with respect to the twelve months preceding the termination date, or
(bb) the aggregate Remaining Compensation payable to the Employee by the Company
for the balance of the Term remaining under this Agreement. For purposes of this
section 7(b), the Employee's Total Compensation shall equal the sum of the Base
Salary, Bonus, and other benefits and expense reimbursements described in
Section 4(b) paid to the Employee by the Company. For purposes of this section
7(b), the Remaining Compensation for the balance of the Term shall equal the sum
of the Base Salary and Bonus payable to the Employee under the remaining Term of
this Agreement, assuming that the Employee would receive for the remaining Term
the same Base Salary and Bonus earned by the Employee with respect to the
previous year, unless otherwise specified in this Agreement. In addition, on
termination of the Employee under this Section 7(b), all of the Employee's
outstanding but unvested Options, Contingent Options and other options and
rights relating to capital stock of the Company shall immediately vest and
become exercisable. The term of any such options and rights shall be extended to
the third anniversary of the Employee's termination. The Employee acknowledges
that extending the term of any Options or Contingent Options pursuant to this
Section 7(b) or Section 7(c) or Section 7(d) could cause such Options or
Contingent Options to lose their tax-qualified status if they are incentive
stock options under the Code and agrees that the Company shall have no
obligation to compensate the Employee for any additional taxes he incurs as a
result.
(c) Termination on Disability. If during the Term the Employee
should fail to perform his duties hereunder on account of physical or mental
illness or other incapacity which the Board shall in good faith determine
renders the Employee incapable of performing his duties hereunder, and such
illness or other incapacity shall continue for a period of more than six (6)
consecutive months ("Disability"), the Company shall have the right, on written
Notice of Termination (as defined in Section 9(a)) delivered to the Employee to
terminate the Employee's employment under this Agreement. During the period that
the Employee shall have been incapacitated due to physical or mental illness,
the Employee shall continue to receive the full Base Salary provided for in
Section 4(a)(1) hereof at the rate then in effect until the Date of Termination
(as defined in Section 9(b)) pursuant to this Section 7(c). On the Date of
Termination pursuant to this Section 7(c), the Company shall pay to the Employee
in a lump sum an amount equal to (i) the Base Salary remaining payable to the
Employee under Section 4(a)(1) for the full remaining Term, plus (ii) a
pro-rated portion of the maximum Bonus available to the Employee under Section
4(a)(2) for the year in which the termination occurs. In addition, on such
termination, all of the Employee's outstanding but unvested Options, Contingent
Options and other options and rights relating to capital stock of the Company
shall immediately vest and become exercisable. The term of any such options and
rights shall be extended to the third anniversary of the Employee's termination.
(d) Termination on Death. If the Employee shall die during the
Term, the employment of the Employee shall thereupon terminate. On the Date of
Termination (as defined in Section 9(b)) pursuant to this Section 7(d), the
Company shall pay to the Employee's estate the payments and other benefits
applicable to termination without Cause set forth in Section 7(b)
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hereof. In addition, on termination of the Employee under this Section 7(d), all
of the Employee's outstanding but unvested Options, Contingent Options and other
options and rights relating to capital stock of the Company shall immediately
vest and become exercisable. The term of any such options and rights shall be
extended to the third anniversary of the Employee's termination. The provisions
of this Section 7(d) shall not affect the entitlements of the Employee's heirs,
executors, administrators, legatees, beneficiaries or assigns under any employee
benefit plan, fund or program of the Company.
8. Termination By Employee. The Employee may terminate his employment
hereunder on written Notice of Termination delivered to the Company setting
forth the effective date of termination. If the Employee terminates his
employment hereunder, he shall be entitled to receive, and the Company agrees to
pay on the effective date of termination specified in the Notice of Termination,
his current Base Salary under Section 4(a)(1) hereof on a prorated basis to such
date of termination. On termination by the Employee, the Employee shall forfeit
(i) his Bonus under Section 4(a)(2) for the year in which such termination
occurs and (ii) all outstanding but unvested Options (but not any Contingent
Options) and other options and rights relating to capital stock of the Company.
9. Provisions Applicable to Termination of Employment.
(a) Notice of Termination. Any purported termination of Employee's
employment by the Company pursuant to Section 7 shall be communicated by Notice
of Termination to the Employee as provided herein, and shall state the specific
termination provisions in this Agreement relied on and set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Employee's employment ("Notice of Termination"). If the Employee terminates
under Section 8, he shall give the Company a Notice of Termination.
(b) Date of Termination. For all purposes, "Date of Termination"
shall mean, for Disability, thirty (30) days after Notice of Termination is
given to the Employee (provided the Employee has not returned to duty on a
full-time basis during such 30-day period), or, if the Employee's employment is
terminated by the Company for any other reason or by the Employee, the date on
which a Notice of Termination is given.
(c) Benefits on Termination. On termination of this Agreement by
the Company pursuant to Section 7 or by the Employee pursuant to Section 8, all
profit-sharing, deferred compensation and other retirement benefits payable to
the Employee under benefit plans in which the Employee then participated shall
be paid to the Employee in accordance with the provisions of the respective
plans.
10. Change In Control.
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(a) Payments on Change in Control. Notwithstanding any provision
in this Agreement to the contrary, unless the Employee elects in writing to
waive this provision, a Change in Control (as defined below) of the Company
shall be deemed a termination of the Employee without Cause, and the Employee
shall be entitled to receive and the Company agrees to pay to the Employee in a
lump sum the same amount determined under Section 7(b) that is payable to the
Employee on termination without Cause. In addition, on a Change of Control, all
of the Employee's outstanding but unvested Options, Contingent Options and other
options and rights relating to capital stock of the Company shall immediately
vest and become exercisable, the term of any such options and rights shall be
extended to the third anniversary of the Employee's termination.
After a Change in Control, if any previously outstanding Option,
Contingent Option or other option or right (the "Terminated Option") relating to
the Company's capital stock does not remain outstanding, the successor to the
Company or its then Parent (as defined below) shall either:
(i) Issue an option, warrant or right, as appropriate (the
"Successor Option"), to purchase common stock of such successor or Parent in an
amount such that on exercise of the Successor Option the Employee would receive
the same number of shares of the successor's/Parent's common stock as the
Employee would have received had the Employee exercised the Terminated Option
immediately prior to the transaction resulting in the Change in Control and
received shares of such successor/Parent in such transaction. The aggregate
exercise price for all of the shares covered by such Successor Option shall
equal the aggregate exercise price of the Terminated Option; or
(ii) Pay the Employee a bonus within ten (10) days after the
consummation of the Change in Control in an amount agreed to by the Employee and
the Company. Such amount shall be at least equivalent on an after-tax basis to
the net after-tax gain that the Employee would have realized if he had been
issued a Successor Option under clause (i) above and had immediately exercised
such Successor Option and sold the underlying stock, taking into account the
different tax rates that apply to such bonus and to such gain, and such amount
shall also reflect other differences to the Employee between receiving a bonus
under this clause (ii) and receiving a Successor Option under clause (i) above.
(b) Definitions. For the purposes of this Agreement, a Change in
Control shall be deemed to have occurred if (i) there shall be consummated (aa)
any reorganization, liquidation or consolidation of the Company, or any merger
or other business combination of the Company with any other corporation, other
than any such merger or other combination that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such transaction, (bb) any sale,
lease, exchange or other transfer (in one
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transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or if (ii) any "person" (as defined in Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), shall become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of fifty percent (50%) or more
of the Company's outstanding voting securities (except that for purposes of this
Section 10(b), "person" shall not include any person (or any person that
controls, is controlled by or is under common control with such person) who as
of the date of this Agreement owns ten percent (10%) or more of the total voting
power represented by the outstanding voting securities of the Company, or a
trustee or other fiduciary holding securities under any employee benefit plan of
the Company, or a corporation that is owned directly or indirectly by the
stockholders of the Company in substantially the same percentage as their
ownership of the Company) or if (iii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the entire
Board shall cease for any reason to constitute at least one-half of the
membership thereof unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of at least
one-half of the directors then still in office who were directors at the
beginning of the period.
The term "Parent" means a corporation, partnership, trust, limited
liability company or other entity that is the ultimate "beneficial owner" (as
defined above) of fifty percent (50%) or more of the Company's outstanding
voting securities.
11. Gross Up Payments. If all or any portion of any payment or benefit
that the Employee is entitled to receive from the Company pursuant to this
Agreement (a "Payment") constitutes an "excess parachute payment" within the
meaning of Section 280G of the Code, and as such is subject to the excise tax
imposed by Section 4999 of the Code or to any similar Federal, state or local
tax or assessment (the "Excise Tax"), the Company or its successors or assigns
shall pay to the Employee an additional amount (the "Gross-Up Payment") with
respect to such Payment. The amount of the Gross-Up Payment shall be sufficient
that, after paying (a) any Excise Tax on the Payment, (b) any Federal, state or
local income or employment taxes and Excise Tax on the Gross-Up Payment, and (c)
any interest and penalties imposed in respect of the Excise Tax, the Employee
shall retain an amount equal to the full amount of the Payment. For the purpose
of determining the amount of any Gross-Up Payment, the Employee shall be deemed
to pay Federal income taxes at the highest marginal rate applicable in the
calendar year in which the Gross-Up Payment is made, and state and local income
taxes at the highest marginal rate applicable in the state and locality where
the Employee resides on the date the Gross-Up Payment is made, net of the
maximum reduction in Federal income taxes that could be obtained from deducting
such state and local taxes.
The Gross-Up Payment with respect to any Payment shall be paid to
the Employee within ten (10) days after the Internal Revenue Service or any
other taxing authority issues a notice stating that an Excise Tax is due with
respect to the Payment, unless the Company undertakes to challenge the taxing
authority on the applicability of such Excise Tax and indemnifies the Employee
for (a) any amounts ultimately determined to be payable, including the
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Excise Tax and any related interest and penalties, (b) all expenses (including
attorneys' and experts' fees) reasonably incurred by the Employee in connection
with such challenge, as such expenses are incurred, and (c) all amounts that the
Employee is required to pay to the taxing authorities during the pendency of
such challenge (such amounts to be repaid by the Employee to the Company if they
are ultimately refunded to the Employee by the taxing authority).
12. Non-Competition and Non-Solicitation.
(a) In consideration of the provisions hereof, for the period
commencing on the date hereof and ending on the first anniversary of the
termination of this Agreement by the Company with Cause pursuant to Section 7(a)
or by the Employee pursuant to Section 8, the Employee will not, except as
specifically provided below, anywhere in any county in any state in which the
Company is engaged in business as of such termination date, directly or
indirectly, acting individually or as the owner, shareholder, partner or
management employee of any entity, (i) engage in the operation of a solid waste
collection, transporting or disposal business, transfer facility, recycling
facility, materials recovery facility or solid waste landfill; (ii) enter the
employ as a manager of, or render any personal services to or for the benefit
of, or assist in or facilitate the solicitation of customers for, or receive
remuneration in the form of management salary, commissions or otherwise from,
any business engaged in such activities in such counties; or (iii) receive or
purchase a financial interest in, make a loan to, or make a gift in support of,
any such business in any capacity, including without limitation, as a sole
proprietor, partner, shareholder, officer, director, principal agent or trustee;
provided, however, that the Employee may own, directly or indirectly, solely as
an investment, securities of any business traded on any national securities
exchange or quoted on any NASDAQ market, provided the Employee is not a
controlling person of, or a member of a group which controls, such business and
further provided that the Employee does not, in the aggregate, directly or
indirectly, own two percent (2%) or more of any class of securities of such
business.
(b) After termination of this Agreement by the Company with Cause
pursuant to Section 7(a) or by the Employee pursuant to Section 8, the Employee
shall not (i) solicit any residential or commercial customer of the Company to
whom the Company provides service pursuant to a franchise agreement with a
public entity in any county in any state in which the Company is engaged in
business as of such termination date, (ii) solicit any residential or commercial
customer of the Company to enter into a solid waste collection account
relationship with a competitor of the Company in any such county, (iii) solicit
any such public entity to enter into a franchise agreement with any such
competitor, (iv) solicit any officer, employee or contractor of the Company to
enter into an employment or contractor agreement with a competitor of the
Company or otherwise interfere in any such relationship, or (v) solicit on
behalf of a competitor of the Company any prospective customer of the Company
that the Employee called on or was involved in soliciting on behalf of the
Company during the Term, in each case until the second anniversary of the date
of such termination, unless otherwise permitted to do so by Section 12(a).
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(c) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 12 is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specified words or phrases
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
13. Indemnification. As an employee and agent of the Company, the
Employee shall be fully indemnified by the Company to the fullest extent
permitted by applicable law in connection with his employment hereunder.
14. Survival of Provisions. The obligations of the Company under Section
13 of this Agreement, and of the Employee under Section 12 of this Agreement,
shall survive both the termination of the Employee's employment and this
Agreement.
15. Equity Investment by the Employee. On the first day of the initial
Term, the Company shall sell to the Employee, for $2.80 per share in cash, up to
50,000 shares of the Company's Common Stock, at the Employee's election, but
subject to any approvals of the Company's existing stockholders required under
the Company's existing agreements with such stockholders.
16. No Duty to Mitigate; No Offset. The Employee shall not be required
to mitigate damages or the amount of any payment contemplated by this Agreement,
nor shall any such payment be reduced by any earnings that the Employee may
receive from any other sources or offset against any other payments made to him
or required to be made to him pursuant to this Agreement.
17. Assignment; Binding Agreement. The Company may assign this Agreement
to any parent, subsidiary, affiliate or successor of the Company. This Agreement
is not assignable by the Employee and is binding on him and his executors and
other legal representatives. This Agreement shall bind the Company and its
successors and assigns and inure to the benefit of the Employee and his heirs,
executors, administrators, personal representatives, legatees or devisees. The
Company shall assign this Agreement to any entity that acquires its assets or
business.
18. Notice. Any written notice under this Agreement shall be personally
delivered to the other party or sent by certified or registered mail, return
receipt requested and postage prepaid, to such party at the address set forth in
the records of the Company or to such other address as either party may from
time to time specify by written notice.
19. Entire Agreement; Amendments. This Agreement contains the entire
agreement of the parties relating to the Employee's employment and supersedes
all oral or written prior
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discussions, agreements and understandings of every nature between them. This
Agreement may not be changed except by an agreement in writing signed by the
Company and the Employee.
20. Waiver. The waiver of a breach of any provision of this Agreement
shall not operate or as be construed to be a waiver of any other provision or
subsequent breach of this Agreement.
21. Governing Law and Jurisdictional Agreement. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of California.
22. Severability. In case any one or more of the provisions contained in
this Agreement is, for any reason, held invalid in any respect, such invalidity
shall not affect the validity of any other provision of this Agreement, and such
provision shall be deemed modified to the extent necessary to make it
enforceable.
23. Enforcement. It is agreed that it is impossible to measure fully, in
money, the damage which will accrue to the Company in the event of a breach or
threatened breach of Sections 5, 6, or 12 of this Agreement, and, in any action
or proceeding to enforce the provisions of Sections 5, 6 or 12 hereof, the
Employee waives the claim or defense that the Company has an adequate remedy at
law and will not assert the claim or defense that such a remedy at law exists.
The Company is entitled to injunctive relief to enforce the provisions of such
sections as well as any and all other remedies available to it at law or in
equity without the posting of any bond. The Employee agrees that if the Employee
breaches any provision of Section 12, the Company may recover as partial damages
all profits realized by the Employee at any time prior to such recovery on the
exercise of any warrant, option or right to purchase the Company's Common Stock
and the subsequent sale of such stock, and may also cancel all outstanding such
warrants, options and rights.
24. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and both of which together shall constitute
one and the same instrument.
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25. Due Authorization. The execution of this Agreement has been duly
authorized by the Company by all necessary corporate action.
IN WITNESS WHEREOF, the parties have executed and delivered this
Employment Agreement as of the day and year set forth above.
WASTE CONNECTIONS, INC., a Delaware
corporation
By: ____________________________________
Printed Name: __________________________
Title: _________________________________
EMPLOYEE:
________________________________________
Steven F. Bouck
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EXHIBIT 10.15
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of February ___, 1998, by and
between Waste Connections, Inc., a Delaware corporation (the "Company"), and
Eugene Dupreau (the "Employee"), with reference to the following facts:
The Company desires to employ the Employee and the Employee desires
to be employed by the Company as one of the Vice Presidents of the Company's
Madera, California division.
In consideration of the foregoing recitals and the mutual covenants
herein, the parties agree as follows:
1. Employment; Acceptance. The Company hereby employs the Employee and the
Employee hereby accepts employment by the Company on the terms and conditions
hereinafter set forth.
2. Duties and Powers. The Employee is hereby employed as a Vice President
of the Company's Madera, California division and shall devote his full
attention, energies and abilities in that capacity to the proper oversight and
operation of the Company's business, to the exclusion of any other occupation.
3. Term. The employment of the Employee by the Company pursuant to this
Agreement shall commence on the date hereof and shall continue until the third
anniversary hereof or until terminated prior to such anniversary when and as
provided in Section 5. This Agreement shall be renewable for successive one-year
terms at the sole discretion of the Company.
4. Compensation.
4.1 Base Salary. The Company hereby agrees to pay to the Employee an
annual base salary of $45,000 ("Base Salary"). Such Base Salary shall be payable
in accordance with the Company's normal payroll practices, and such Base Salary
is subject to withholding and social security, unemployment and other taxes.
Increases in Base Salary shall be considered by the Compensation Committee of
the Company's Board of Directors on an annual basis.
4.2 Bonus Compensation. Employee shall be eligible for an annual
bonus ("Bonus Compensation") of up to thirty-five percent (35%) of Employee's
Base Salary payable pursuant to Section 4.1. The actual amount of any such bonus
will be determined by the board in its sole and absolute discretion, and shall
be paid at such time or times as shall be determined by the Board. Bonus
Compensation shall generally be paid on or before March 1, of the fiscal year
following the fiscal year in which such Bonus Compensation was earned.
5. Termination.
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5.1 For Cause. The Company may terminate this Agreement and the
Employee's employment for cause, effective immediately on the day it sends
notice of such termination to the Employee. "Cause" for this purpose shall be
defined as insobriety; conviction of a misdemeanor involving moral turpitude or
a felony; illegal business practices in connection with the Company's business;
misappropriation of the Company's assets; excessive absence of the Employee from
his employment during usual working hours for reasons other than vacation,
disability or sickness; or any material breach by the Employee of any term or
provision of this Agreement. On such termination for cause, the Employee shall
be entitled only to his Base Salary hereunder to the date of such termination,
and shall not be entitled to any other compensation, including, without
limitation, any severance compensation or Bonus Compensation. Any stock options
granted to the Employee by the Company that have not vested shall terminate on
the day that the Company sends the notice of termination of employment to the
Employee.
5.2 Without Cause. The Company may terminate this Agreement and the
Employee's employment without cause, for any reason or no reason at all,
effective immediately on the day it sends notice of such termination to the
Employee. On such termination, Employee shall be entitled only to the greater of
his compensation hereunder for the remainder of the term of this Agreement or
one year's Base Salary. Any stock options granted to the Employee by the Company
shall vest on the day that the Company sends the notice of termination of
employment to the Employee. The Employee shall not be entitled to any other
compensation, including, without limitation, any severance compensation or Bonus
Compensation.
5.3 By the Employee. The Employee may terminate this Agreement and
his employment, effective not earlier than the fifteenth day after the Company
receives his notice of such termination. On such termination by the Employee,
Employee shall be entitled only to his Base Salary hereunder to the date of such
termination, and shall not be entitled to any other compensation, including,
without limitation, any severance compensation or Bonus Compensation. Any stock
options granted to the Employee by the Company shall terminate upon the
Company's receipt of notice of the Employee's intent to terminate this
Agreement.
5.4 Disability. If, in the reasonable judgment of the Company, the
Employee becomes unable to perform competently and efficiently his duties
hereunder because of any physical, mental or legal disability (including
sickness or an injunction or similar order or decree of a court of competent
jurisdiction preventing or severely impairing the performance of his duties
hereunder) that lasts for six (6) consecutive months (the "Disability Period"),
he shall be entitled to the greater of his compensation hereunder for the
remainder of the term of this Agreement or one year's Base Salary. Any stock
options granted to the Employee by the Company shall vest on the last day of the
Disability Period. The Employee shall not be entitled
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to any other compensation, including, without limitation, any severance
compensation or Bonus Compensation.
5.5 Death. In the event of the death of the Employee, the Employee's
heirs, legatees, devisees, executors or legal representatives shall be entitled
to the greater of the Employee's compensation hereunder for the remainder of the
term of this Agreement or one year's Base Salary. Any stock options granted to
the Employee by the Company shall vest on the day of the Employee's death. The
Employee's heirs, legatees, devisees, executors, administrators and legal
representatives shall not be entitled to any other compensation, including,
without limitation, any severance compensation or Bonus Compensation.
5.6 Merger; Sale of Assets. This Agreement shall not be terminated
by any voluntary or involuntary dissolution, reorganization, merger,
consolidation or transfer of assets of the Company, or by any other act or event
of or suffered by the Company, if a surviving or resulting corporation or other
entity or person continues (or resumes after a period of not more than sixty
days) the business of the Company. In any such event, if the business of the
Company is so continued or so resumed, this Agreement shall be binding on and
shall inure to the benefit of the corporation or other entity or person
surviving or resulting or to which such assets shall have been transferred and
the Employee shall be an employee of that part or division of such corporation
or other entity or person that shall have been the Company immediately prior to
such transaction. If, in any such event, the business of the Company is not so
continued or so resumed, such event shall be deemed to constitute termination
without cause by the Company as provided in Section 5.2.
6. Trade Secrets, Patents, Competition, Etc.
6.1 Trade Secrets. The Employee acknowledges that as an employee of
the Company he has had and will have access to and has and will become
acquainted with various trade secrets and other proprietary and confidential
information of the Company (the "Trade Secrets"), which may consist of, among
other things, designs, equipment, devices, patterns, electronically recordable
data or concepts, computer programs and software, software enhancements,
modifications and improvements, secret inventions, processes, compilations of
information, books, papers, records and specifications, names, buying habits and
practices of customers or potential customers of the Company, marketing methods,
operating practices and related data, names of vendors and suppliers names,
names of acquisition targets, costs of materials, prices the Company obtains or
has obtained or at which it sells or has sold its services, sales costs, lists
or other written records used in the Company's business, compensation paid to
Company employees and consultants and other terms of employment, all of which
are owned by the Company and are regularly used or contemplated to be used in
the business of the Company.
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The Employee represents, warrants and agrees that he will not
at any time, whether during or subsequent to the term of his employment by the
Company, without the specific written consent of the Company in the particular
case, directly or indirectly use, disclose or communicate to any person or
entity any Trade Secrets, for any purpose, except such as have been publicly
disclosed through no act or omission of the Employee. The Employee further
acknowledges and agrees that this Section 6 prohibits and precludes any use of
Trade Secrets by him or by any person obtaining any Trade Secrets directly or
indirectly from him in competition with the Company.
The Employee further agrees that all written materials,
including without limitation files, records, documents, drawings and
specifications, and all equipment and devices and all other items relating to
the business of the Company, whether prepared by or with the assistance of the
Employee or otherwise coming into his possession, control or knowledge, are and
shall remain the exclusive property of the Company and shall not be removed from
the premises of the Company under any circumstances. On termination of his
employment with the Company for any reason, the Employee agrees to deliver
promptly to the Company all of the foregoing which are or have been in his
possession or under his control.
6.2 Inventions, Designs and Patents. The Employee further
represents, warrants and agrees that he will fully inform and disclose to the
Company all inventions, designs, improvements and discoveries ("Inventions") of
which he obtains knowledge or information during his employment by the Company
and which relate to the existing or contemplated business of the Company or to
any experimental or developmental work carried on or contemplated by the
Company, whether or not conceived by the Employee alone or with others and
whether or not conceived during regular working hours. All Inventions are and
shall remain the exclusive property of the Company. The Employee agrees to
assist the Company to obtain any and all patents, trademarks, service marks and
copyrights relating to Inventions and to execute all documents and do all things
necessary to obtain letters patent and trademark, service mark and copyright
registrations, to vest the Company with full and exclusive title to each
Invention, and to protect the Inventions against infringement by others, all as
and to the extent the Company may request.
Notwithstanding the foregoing provisions of this Section 6.2,
this Section 6.2 shall not apply to an Invention developed entirely on the
Employee's own time without using the Company's equipment, supplies, facilities,
or trade secret information except for those Inventions that either (a) relate
at the time of conception or reduction to practice of the Invention to the
Company's business or demonstrably anticipated research or development of the
Company, or (b) result from any work performed by the Employee for the Company.
The Employee acknowledges that this paragraph constitutes the notification
contemplated by California Labor Code section 2872.
4
<PAGE> 5
6.3 Competition and Solicitation. The Employee acknowledges and
agrees that he will not at any time during his employment by the Company
directly or indirectly own an interest in, join, operate, control or participate
in, or be connected as an officer, employee, agent, independent contractor,
consultant, partner, shareholder or principal with, any corporation,
partnership, proprietorship, association, or other entity or person engaged in
developing, producing, designing, providing, soliciting orders for, selling,
distributing or marketing products or services that directly or indirectly
compete with the Company's products, services or business.
The Employee further agrees that he will not at any time
during his employment by the Company and if the Employee's employment is
terminated for cause pursuant to Section 5.1, or if Employee voluntarily
terminates employment pursuant to Section 5.3, for a period of five years
following such termination of his employment, directly or indirectly, and
whether or not for compensation, interfere with the business of the Company in
any manner, including, without limitation, (a) by diverting or attempting to
divert from the Company any business in which the Company is engaged or
contemplates engaging, (b) assisting in bidding or negotiating any franchise or
agreement with governmental entities to provide solid waste, collection,
landfill or recycling services in California, or (c) by inducing any employee of
the Company to leave the Company's employ or any consultant or other independent
contractor for the Company to change or terminate any relationship between that
person and the Company. This paragraph shall not apply if this Agreement is not
renewed at the end of its term or if Employee's employment is terminated without
cause pursuant to Section 5.2. Nothing in this paragraph shall be deemed to
modify the Stock Purchase Agreement dated as of February 4, 1998 among the
Company, Madera Disposal Systems, Inc. ("Madera") and the shareholders of Madera
(including Employee), including without limitation Section 11 of that Agreement.
6.4 No Derogation. The Employee will not in any way or to any person
or entity or governmental or regulatory body or agency, denigrate or derogate
the Company or any of its affiliates or any of its subsidiaries, or any officer,
director or employee, or any product or service or procedure of any such company
whether or not such denigrating or derogatory statements shall be true and are
based on acts or omissions which are learned by the Employee from and after the
date hereof or on acts or omissions which occur from and after the date hereof,
or otherwise. A statement shall be deemed denigrating or derogatory to any
person or entity if it may reasonably adversely affect the regard or esteem in
which such person or entity is held by investors, lenders, or licensing, rating,
or regulatory entities. Without limiting the generality of the foregoing, the
Employee will not directly or indirectly in any way in respect of any such
company or any such directors or officers, communicate with, or take any action
which is adverse to the position of any such company with any person, entity or
governmental or regulatory body or agency who or which has dealings or
prospective dealings with any such company or jurisdiction or prospective
jurisdiction over any such company. This section does
5
<PAGE> 6
not apply to the extent that testimony is required by legal process, provided
that the Company has received not less than five days' prior written notice of
such proposed testimony.
6.5 Injunctive Relief. The Employee acknowledges and agrees that his
failure to perform any of his covenants in this Section 6 would cause
irreparable injury to the Company and cause damages to the Company which would
be difficult or impossible to ascertain or quantify. Accordingly, without
limiting any remedies that may be available with respect to any breach of this
Agreement, the Employee consents to the entry of an injunction to restrain any
breach of this Section 6.
6.6 Infringement. The Employee represents and warrants that he does
not possess and will not use, in connection with his employment by the Company,
any trade secrets or other confidential or proprietary information or
intellectual property in which any other person has any right, title or interest
and that his employment by the Company as contemplated hereby will not infringe
or violate the rights of any other corporation, partnership, firm,
proprietorship, association or other person.
6.7 Survival. The representations, warranties and agreements in this
Section 6 shall survive any cancellation, termination, rescission or expiration
of this Agreement and any termination of the Employee's employment with the
Company.
7. Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision hereof. The Employee agrees that the provisions of this Agreement are
reasonable and valid in geographic and temporal scope and in all other respects.
If any court determines that any provision of this Agreement, or any part
thereof, is invalid or unenforceable, the remainder of this Agreement shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions. If any court determines that any provision of this Agreement,
or any part thereof, is unenforceable because of duration or geographic scope,
such court shall reduce the duration or scope of such provision to the extent
necessary to render it enforceable and, in its reduced form, such provision
shall then be enforced.
8. Notices. Except as otherwise specifically provided herein, any notice,
consent, demand or other communication to be given under or in connection with
this Agreement shall be in writing and shall be deemed duly given when delivered
personally, when transmitted by facsimile transmission, one day after being
deposited with Federal Express or other nationally recognized overnight delivery
service or three days after being mailed by first class mail, charges or postage
prepaid, properly addressed, if to the Company, at its principal office, and, if
to the Employee, at his address set forth following his signature below. Either
party may change such address from time to time by notice to the other.
6
<PAGE> 7
9. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of California.
10. Assignment. Except as otherwise specifically provided herein, neither
party shall assign this Agreement or any rights hereunder without the consent of
the other party, and any attempted or purported assignment without such consent
shall be void; provided that the Employee's consent shall not be required hereby
for any of the transactions to which Section 5.6 hereof refers. This Agreement
shall otherwise bind and inure to the benefit of the parties hereto and their
respective successors, assigns, heirs, legatees, devisees, executors,
administrators and legal representatives.
11. Specific Enforcement. The Employee is obligated under this Agreement
to render services of a special, unique, unusual, extraordinary and intellectual
character, thereby giving this Agreement peculiar value so that the loss thereof
cannot be reasonably or adequately compensated in damages in an action at law.
Accordingly, in addition to other remedies provided by law, the Company shall
have the right during the term of this Agreement to compel specific performance
by the Employee.
12. Entire Agreement. This Agreement contains the entire agreement of the
parties and supersedes all prior or contemporaneous negotiations,
correspondence, understandings and agreements between the parties, regarding the
subject matter of this Agreement. This Agreement may not be amended or modified
except in writing signed by both parties and supported by new consideration.
7
<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been duly executed by or on
behalf of the parties hereto as of the date first above written.
WASTE CONNECTIONS, INC.
By:
- -------------------------------- ----------------------------------------
Eugene Dupreau Ronald J. Mittelstaedt
President and Chief Executive Officer
Address:
- -----------------------------
- -----------------------------
8
<PAGE> 1
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made as of February ___, 1998, by and
between Waste Connections, Inc., a Delaware corporation (the "Company"), and
Charles B. Youngclaus (the "Employee"), with reference to the following facts:
The Company desires to employ the Employee and the Employee desires
to be employed by the Company as one of the Vice Presidents of the Company's
Madera, California division.
In consideration of the foregoing recitals and the mutual covenants
herein, the parties agree as follows:
1. Employment; Acceptance. The Company hereby employs the Employee and
the Employee hereby accepts employment by the Company on the terms and
conditions hereinafter set forth.
2. Duties and Powers. The Employee is hereby employed as a Vice
President of the Company's Madera, California division and shall devote his full
attention, energies and abilities in that capacity to the proper oversight and
operation of the Company's business, to the exclusion of any other occupation.
The Employee shall also serve as an adviser to Madera Disposal
Systems, Inc. Board of Directors (an "Advisory Director"). As an Advisory
Director, the Employee shall be able to attend the Board's meetings, but shall
have no other rights, preferences or powers of a Board member. The Employee's
position as an Advisory Director shall be renewed at the sole discretion of the
Board on a yearly basis, and such position can last for up to the term of this
Employment Agreement.
3. Term. The employment of the Employee by the Company pursuant to this
Agreement shall commence on the date hereof and shall continue until the third
anniversary hereof or until terminated prior to such anniversary when and as
provided in Section 5. This Agreement shall be renewable for successive one-year
terms at the sole discretion of the Company.
4. Compensation.
4.1 Base Salary. The Company hereby agrees to pay to the Employee
an annual base salary of $45,000 ("Base Salary"). Such Base Salary shall be
payable in accordance with the Company's normal payroll practices, and such Base
Salary is subject to withholding and social security, unemployment and other
taxes. Increases in Base Salary shall be considered by the Compensation
Committee of the Company's Board of Directors on an annual basis.
4.2 Bonus Compensation. Employee shall be eligible for an annual
bonus
<PAGE> 2
("Bonus Compensation") of up to thirty-five percent (35%) of Employee's Base
Salary payable pursuant to Section 4.1. The actual amount of any such bonus will
be determined by the board in its sole and absolute discretion, and shall be
paid at such time or times as shall be determined by the Board. Bonus
Compensation shall generally be paid on or before March 1, of the fiscal year
following the fiscal year in which such Bonus Compensation was earned.
4.3 Other Benefits. During the term of this Agreement, the
Employee shall be entitled to receive all other benefits of employment generally
available to other management employees of Madera Disposal Systems, Inc., and
those benefits for which management employees are or shall become eligible,
including, without limitation and to the extent made available by Madera
Disposal Systems, Inc., medical, dental, disability and prescription coverage,
life insurance and tax-qualified retirement benefits. Neither the Company nor
Madera Disposal Systems, Inc. shall be obligated to provide or continue any such
benefit. The Employee shall be entitled to four (4) weeks of paid vacation each
year of his employment.
4.4 Reimbursement of Other Expenses. The Company agrees to pay or
reimburse the Employee for all reasonable travel and other expenses incurred by
the Employee in connection with the performance of his duties under this
Agreement on presentation of proper expense statements and receipts. All such
supporting information shall comply with all applicable Company policies
relating to reimbursement for travel and other expenses. It is understood that
the Employee will continue to serve on the Board of Directors of the California
Refuse Removal Council, Northern District, and the State Executive Board as
Treasurer, at his own expense.
5. Termination.
5.1 For Cause. The Company may terminate this Agreement and the
Employee's employment for cause, effective immediately on the day it sends
notice of such termination to the Employee. "Cause" for this purpose shall be
defined as insobriety; conviction of a misdemeanor involving moral turpitude or
a felony; illegal business practices in connection with the Company's business;
misappropriation of the Company's assets; excessive absence of the Employee from
his employment during usual working hours for reasons other than vacation,
disability or sickness; or any material breach by the Employee of any term or
provision of this Agreement. On such termination for cause, the Employee shall
be entitled only to his Base Salary hereunder to the date of such termination,
and shall not be entitled to any other compensation, including, without
limitation, any severance compensation or Bonus Compensation. Any stock options
granted to the Employee by the Company that have not vested shall terminate on
the day that the Company sends the notice of termination of employment to the
Employee.
2
<PAGE> 3
5.2 Without Cause. The Company may terminate this Agreement and
the Employee's employment without cause, for any reason or no reason at all,
effective immediately on the day it sends notice of such termination to the
Employee. On such termination, Employee shall be entitled only to the greater of
his compensation hereunder for the remainder of the term of this Agreement or
one year's Base Salary. Any stock options granted to the Employee by the Company
shall vest on the day that the Company sends the notice of termination of
employment to the Employee. The Employee shall not be entitled to any other
compensation, including, without limitation, any severance compensation or Bonus
Compensation.
5.3 By the Employee. The Employee may terminate this Agreement and
his employment, effective not earlier than the fifteenth day after the Company
receives his notice of such termination.
(a) Termination for Good Reason. The Employee may terminate
his employment hereunder for Good Reason (as defined below). On the date that
the Company receives the Employee's notice of termination pursuant to this
Section 5.3(a), the Employee shall be entitled to receive, and the Company
agrees to pay and deliver, the payments and other benefits applicable to
termination Without Cause set forth in Section 5.2 hereof. In addition, on
termination of the Employee under this Section 5.3(a), all of the Employee's
unvested incentive stock options, other stock options, warrants and rights
relating to capital stock of the Company shall immediately vest and become
exercisable. For the purposes of this Section 5.3(a), "Good Reason" shall mean:
(i) relocation of Madera Disposal Systems, Inc.'s, principal executive office to
a location more than fifty miles from its present location; or (ii) the failure
of the Company to obtain the assumption of this Agreement by any successor
entity to which it is assigned.
(b) Termination Without Good Reason. If the Employee
terminates his employment hereunder without Good Reason, the Employee shall be
entitled only to his Base Salary hereunder to the date of such termination, and
shall not be entitled to any other compensation, including, without limitation,
any severance compensation or Bonus Compensation. Any stock options granted to
the Employee by the Company shall terminate upon the Company's receipt of notice
of the Employee's intent to terminate this Agreement.
5.4 Disability. If, in the reasonable judgment of the Company, the
Employee becomes unable to perform competently and efficiently his duties
hereunder because of any physical, mental or legal disability (including
sickness or an injunction or similar order or decree of a court of competent
jurisdiction preventing or severely impairing the performance of his duties
hereunder) that lasts for six (6) consecutive months (the "Disability Period"),
he shall be entitled to the greater of his compensation hereunder for the
remainder of the term of this Agreement or one year's Base Salary. Any stock
options granted to the Employee by the Company shall vest on the last day of the
Disability Period. The Employee shall not be entitled
3
<PAGE> 4
to any other compensation, including, without limitation, any severance
compensation or Bonus Compensation.
5.5 Death. In the event of the death of the Employee, the
Employee's heirs, legatees, devisees, executors or legal representatives shall
be entitled to the greater of the Employee's compensation hereunder for the
remainder of the term of this Agreement or one year's Base Salary. Any stock
options granted to the Employee by the Company shall vest on the day of the
Employee's death. The Employee's heirs, legatees, devisees, executors,
administrators and legal representatives shall not be entitled to any other
compensation, including, without limitation, any severance compensation or Bonus
Compensation.
5.6 Merger; Sale of Assets. This Agreement shall not be terminated
by any voluntary or involuntary dissolution, reorganization, merger,
consolidation or transfer of assets of the Company, or by any other act or event
of or suffered by the Company, if a surviving or resulting corporation or other
entity or person continues (or resumes after a period of not more than sixty
days) the business of the Company. In any such event, if the business of the
Company is so continued or so resumed, this Agreement shall be binding on and
shall inure to the benefit of the corporation or other entity or person
surviving or resulting or to which such assets shall have been transferred and
the Employee shall be an employee of that part or division of such corporation
or other entity or person that shall have been the Company immediately prior to
such transaction. If, in any such event, the business of the Company is not so
continued or so resumed, such event shall be deemed to constitute termination
without cause by the Company as provided in Section 5.2.
6. Trade Secrets, Patents, Competition, Etc.
6.1 Trade Secrets. The Employee acknowledges that as an employee
of the Company he has had and will have access to and has and will become
acquainted with various trade secrets and other proprietary and confidential
information of the Company (the "Trade Secrets"), which may consist of, among
other things, designs, equipment, devices, patterns, electronically recordable
data or concepts, computer programs and software, software enhancements,
modifications and improvements, secret inventions, processes, compilations of
information, books, papers, records and specifications, names, buying habits and
practices of customers or potential customers of the Company, marketing methods,
operating practices and related data, names of vendors and suppliers names,
names of acquisition targets, costs of materials, prices the Company obtains or
has obtained or at which it sells or has sold its services, sales costs, lists
or other written records used in the Company's business, compensation paid to
Company employees and consultants and other terms of employment, all of which
are owned by the Company and are regularly used or contemplated to be used in
the business of the Company.
4
<PAGE> 5
The Employee represents, warrants and agrees that he will not
at any time, whether during or subsequent to the term of his employment by the
Company, without the specific written consent of the Company in the particular
case, directly or indirectly use, disclose or communicate to any person or
entity any Trade Secrets, for any purpose, except such as have been publicly
disclosed through no act or omission of the Employee. The Employee further
acknowledges and agrees that this Section 6 prohibits and precludes any use of
Trade Secrets by him or by any person obtaining any Trade Secrets directly or
indirectly from him in competition with the Company.
The Employee further agrees that all written materials,
including without limitation files, records, documents, drawings and
specifications, and all equipment and devices and all other items relating to
the business of the Company, whether prepared by or with the assistance of the
Employee or otherwise coming into his possession, control or knowledge, are and
shall remain the exclusive property of the Company and shall not be removed from
the premises of the Company under any circumstances. On termination of his
employment with the Company for any reason, the Employee agrees to deliver
promptly to the Company all of the foregoing which are or have been in his
possession or under his control.
6.2 Inventions, Designs and Patents. The Employee further
represents, warrants and agrees that he will fully inform and disclose to the
Company all inventions, designs, improvements and discoveries ("Inventions") of
which he obtains knowledge or information during his employment by the Company
and which relate to the existing or contemplated business of the Company or to
any experimental or developmental work carried on or contemplated by the
Company, whether or not conceived by the Employee alone or with others and
whether or not conceived during regular working hours. All Inventions are and
shall remain the exclusive property of the Company. The Employee agrees to
assist the Company to obtain any and all patents, trademarks, service marks and
copyrights relating to Inventions and to execute all documents and do all things
necessary to obtain letters patent and trademark, service mark and copyright
registrations, to vest the Company with full and exclusive title to each
Invention, and to protect the Inventions against infringement by others, all as
and to the extent the Company may request.
Notwithstanding the foregoing provisions of this Section 6.2,
this Section 6.2 shall not apply to an Invention developed entirely on the
Employee's own time without using the Company's equipment, supplies, facilities,
or trade secret information except for those Inventions that either (a) relate
at the time of conception or reduction to practice of the Invention to the
Company's business or demonstrably anticipated research or development of the
Company, or (b) result from any work performed by the Employee for the Company.
The Employee acknowledges that this paragraph constitutes the notification
contemplated by California Labor Code section 2872.
5
<PAGE> 6
6.3 Competition and Solicitation. The Employee acknowledges and
agrees that he will not at any time during his employment by the Company
directly or indirectly own an interest in, join, operate, control or participate
in, or be connected as an officer, employee, agent, independent contractor,
consultant, partner, shareholder or principal with, any corporation,
partnership, proprietorship, association, or other entity or person engaged in
developing, producing, designing, providing, soliciting orders for, selling,
distributing or marketing products or services that directly or indirectly
compete with the Company's products, services or business.
The Employee further agrees that he will not at any time
during his employment by the Company and for a period of five years following
termination (voluntary or involuntary, whether or not for cause, or otherwise)
of this Agreement or his employment with the Company, directly or indirectly,
and whether or not for compensation, interfere with the business of the Company
in any manner, including, without limitation, (a) by diverting or attempting to
divert from the Company any business in which the Company is engaged or
contemplates engaging, (b) assisting in bidding or negotiating any franchise or
agreement with governmental entities to provide solid waste, collection,
landfill or recycling services in California, or (c) by inducing any employee of
the Company to leave the Company's employ or any consultant or other independent
contractor for the Company to change or terminate any relationship between that
person and the Company. Despite the provisions of this Section 6.3, the Company
agrees that the Employee may continue to operate Youngclaus Enterprises as it is
operated on the date hereof, but the Employee cannot expand the operation of
Youngclaus Enterprises.
6.4 No Derogation. The Employee will not in any way or to any
person or entity or governmental or regulatory body or agency, denigrate or
derogate the Company or any of its affiliates or any of its subsidiaries, or any
officer, director or employee, or any product or service or procedure of any
such company whether or not such denigrating or derogatory statements shall be
true and are based on acts or omissions which are learned by the Employee from
and after the date hereof or on acts or omissions which occur from and after the
date hereof, or otherwise. A statement shall be deemed denigrating or derogatory
to any person or entity if it may reasonably adversely affect the regard or
esteem in which such person or entity is held by investors, lenders, or
licensing, rating, or regulatory entities. Without limiting the generality of
the foregoing, the Employee will not directly or indirectly in any way in
respect of any such company or any such directors or officers, communicate with,
or take any action which is adverse to the position of any such company with any
person, entity or governmental or regulatory body or agency who or which has
dealings or prospective dealings with any such company or jurisdiction or
prospective jurisdiction over any such company. This section does not apply to
the extent that testimony is required by legal process, provided that the
Company has received not less than five days' prior written notice of such
proposed testimony.
7
<PAGE> 7
6.5 Injunctive Relief. The Employee acknowledges and agrees that
his failure to perform any of his covenants in this Section 6 would cause
irreparable injury to the Company and cause damages to the Company which would
be difficult or impossible to ascertain or quantify. Accordingly, without
limiting any remedies that may be available with respect to any breach of this
Agreement, the Employee consents to the entry of an injunction to restrain any
breach of this Section 6.
6.6 Infringement. The Employee represents and warrants that he
does not possess and will not use, in connection with his employment by the
Company, any trade secrets or other confidential or proprietary information or
intellectual property in which any other person has any right, title or interest
and that his employment by the Company as contemplated hereby will not infringe
or violate the rights of any other corporation, partnership, firm,
proprietorship, association or other person.
6.7 Survival. The representations, warranties and agreements in
this Section 6 shall survive any cancellation, termination, rescission or
expiration of this Agreement and any termination of the Employee's employment
with the Company.
7. Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision hereof. The Employee agrees that the provisions of this Agreement are
reasonable and valid in geographic and temporal scope and in all other respects.
If any court determines that any provision of this Agreement, or any part
thereof, is invalid or unenforceable, the remainder of this Agreement shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions. If any court determines that any provision of this Agreement,
or any part thereof, is unenforceable because of duration or geographic scope,
such court shall reduce the duration or scope of such provision to the extent
necessary to render it enforceable and, in its reduced form, such provision
shall then be enforced.
8. Notices. Except as otherwise specifically provided herein, any
notice, consent, demand or other communication to be given under or in
connection with this Agreement shall be in writing and shall be deemed duly
given when delivered personally, when transmitted by facsimile transmission, one
day after being deposited with Federal Express or other nationally recognized
overnight delivery service or three days after being mailed by first class mail,
charges or postage prepaid, properly addressed, if to the Company, at its
principal office, and, if to the Employee, at his address set forth following
his signature below. Either party may change such address from time to time by
notice to the other.
9. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of California.
8
<PAGE> 8
10. Assignment; Binding Agreement. The Company may assign this Agreement
to any parent, subsidiary, affiliate or successor of the Company. This Agreement
is not assignable by the Employee and is binding on him and his executors and
other legal representatives. This Agreement shall bind the Company and its
successors and assigns and inure to the benefit of the Employee and his heirs,
executors, administrators, personal representatives, legatees or devisees. The
Company shall assign this Agreement to any entity that acquires its assets or
business.
11. Specific Enforcement. The Employee is obligated under this Agreement
to render services of a special, unique, unusual, extraordinary and intellectual
character, thereby giving this Agreement peculiar value so that the loss thereof
cannot be reasonably or adequately compensated in damages in an action at law.
Accordingly, in addition to other remedies provided by law, the Company shall
have the right during the term of this Agreement to compel specific performance
by the Employee.
12. Entire Agreement. This Agreement contains the entire agreement of
the parties and supersedes all prior or contemporaneous negotiations,
correspondence, understandings and agreements between the parties, regarding the
subject matter of this Agreement. This Agreement may not be amended or modified
except in writing signed by both parties and supported by new consideration.
IN WITNESS WHEREOF, this Agreement has been duly executed by or on
behalf of the parties hereto as of the date first above written.
WASTE CONNECTIONS, INC.
By: _____________________________________
Ronald J. Mittelstaedt
President and Chief Executive Officer
___________________________________
Charles B Youngclaus
Address:
___________________________________
___________________________________
8
<PAGE> 1
EXHIBIT 10.17
PURCHASE AND SALE AGREEMENT
BETWEEN
BROWNING-FERRIS INDUSTRIES, INC.,
BROWNING-FERRIS, INC., AND
BROWNING-FERRIS INDUSTRIES OF IDAHO, INC.,
AS SELLERS,
AND
WASTE CONNECTIONS, INC.
WASTE CONNECTIONS OF IDAHO, INC. AND
CONTINENTAL PAPER RECYCLING, L.L.C.,
AS BUYERS
SEPTEMBER 29,1997
<PAGE> 2
PURCHASE AND SALE AGREEMENT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
ARTICLE 1. TRANSFER OF STOCK AND ASSETS AND PURCHASE PRICE.......... 2
1.1 Sale of Shares and Assets................................ 2
1.2 Consideration............................................ 3
1.3 Assignment............................................... 6
1.4 Further Cooperation...................................... 6
1.5 Excluded Assets.......................................... 6
1.6 Post-Closing Adjustment of the Purchase Price............ 7
1.7 Payment of Accounts Payable.............................. 8
1.8 Allocation of Purchase Price............................. 8
1.9 Definitions.............................................. 9
ARTICLE 2. CLOSING.................................................. 9
ARTICLE 3. BFI'S REPRESENTATIONS AND WARRANTIES..................... 9
3.1 Existence and Qualification.............................. 9
3.2 Authority................................................ 9
3.3 No Conflicts............................................. 9
3.4 Capitalization; Ownership of Shares...................... 10
3.5 Litigation............................................... 10
3.6 Equipment Schedules; Title to Equipment.................. 10
3.7 Real Property............................................ 11
3.8 Taxes.................................................... 11
3.9 Outstanding Obligations.................................. 11
3.10 Disposal Sites Used...................................... 11
3.11 Accounts Receivable...................................... 12
3.12 Material Contracts....................................... 12
3.13 Material Leases.......................................... 13
3.14 Permits.................................................. 13
3.15 Financial Information.................................... 13
3.16 Laws and Regulations..................................... 14
3.17 Compliance with Environmental Laws....................... 14
3.18 Underground Storage Tanks................................ 15
3.19 Employment and Labor Matters, Etc........................ 15
3.20 Status of Fibres Purchase Agreement...................... 15
3.21 Disclosure Schedules..................................... 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 4. BUYERS' REPRESENTATIONS AND WARRANTIES................... 16
4.1 Existence................................................ 16
4.2 Authority................................................ 16
4.3 No Conflicts............................................. 16
ARTICLE 5. COVENANTS PRIOR TO CLOSING............................... 16
5.1 Access................................................... 16
5.2 Operations............................................... 16
5.3 Maintenance of Condition................................. 17
5.4 Disposal of Certain Assets............................... 17
5.5 Change of Name........................................... 18
ARTICLE 6. INDEMNIFICATION.......................................... 18
6.1 Indemnity By BFI......................................... 18
6.2 Indemnity By Buyers...................................... 19
6.3 Limitations on Indemnities............................... 20
6.4 Sole Remedy.............................................. 22
6.5 Notice of Indemnity Claim................................ 22
ARTICLE 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER............. 23
7.1 Accuracy of Representations; Performance of Covenants.... 23
7.2 Governmental Consents; No Litigation..................... 23
7.3 No Material Adverse Change............................... 23
7.4 Updated Material Contracts............................... 23
7.5 Conveyancing Documents................................... 23
7.6 Lease of Maltby and Issaquah Properties.................. 23
7.7 Vancouver Sublease....................................... 23
7.8 Noncompete Agreement..................................... 24
7.9 Termination of Plans..................................... 24
7.10 Corporate Resignations, Terminations, Etc................ 24
7.11 Section 338(h)(10) Election.............................. 24
7.12 Financing................................................ 24
ARTICLE 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BFI............... 24
8.1 Accuracy of Representations; Performance of Covenants.... 24
8.2 Governmental Consents.................................... 25
8.3 Receipt of Purchase Price, Etc........................... 25
8.4 Carryover Lease of Brokerage Operations.................. 25
ARTICLE 9. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................ 25
9.1 Customer Names........................................... 25
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
9.2 Confidentiality.......................................... 25
ARTICLE 10. SURVIVAL OF REPRESENTATIONS.............................. 26
ARTICLE 11. TERMINATION, AMENDMENT AND WAIVER........................ 26
11.1 Termination.............................................. 26
11.2 Effect of Termination.................................... 27
ARTICLE 12. POST CLOSING COVENANTS................................. 27
12.1 Access to Records........................................ 27
12.2 Severance Pay............................................ 27
12.3 Employee Benefits........................................ 28
12.4 BFI Name and Logos....................................... 28
12.5 Termination of Insurance Policies........................ 28
12.6 Public Announcements..................................... 28
ARTICLE 13. GENERAL................................................ 28
13.1 Assignment............................................... 28
13.2 Arbitration.............................................. 29
13.3 Definition of Affiliate.................................. 29
13.4 Counterparts............................................. 29
13.5 Brokers.................................................. 29
13.6 Fees and Expenses........................................ 29
13.7 Notices.................................................. 29
13.8 Applicable Law........................................... 30
13.9 Captions................................................. 30
13.10 Entire Agreement......................................... 30
</TABLE>
ANNEXES
A $3 Million Note
B First Lien Deed of Trust
C Guaranty
D $2.5 Million Note
E Second Lien Deed of Trust
F $1.45 Million Note
G Idaho Security Agreement
H Waste Working Capital Note
I Security Agreement (Waste Working Capital Note)
J Continental Working Capital Note
K Security Agreement (Fibres Working Capital Note)
iii
<PAGE> 5
L Waste Bridge Note
M Waste Inventory Note
N Continental Inventory Note
O Noncompete Agreement
SCHEDULES
1.2(b) Property subject to Deeds of Trust
1.2(e) Assumed Obligations
1.8 Purchase Price Allocation
1.9 Definitions
3.5 Litigation
3.6 Equipment
3.7 Real Property
3.9 Outstanding Obligations
3.10 Disposal Sites
3.12 Material Contracts
3.13 Material Leases
3.14 Permits
3.15 Financial Information
3.16 Violations of Laws
3.17 Environmental Law Violations
3.18 Underground Storage Tanks
3.19 Labor Issues
5.4(b) Fibres Real Property To Be Conveyed
5.4(d) Vancouver Assets
5.4(f) Fibres Recycling Assets
7.11 338(h) Election Allocation
iv
<PAGE> 6
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, dated as of the 29th day of September 1997, between
BROWNING-FERRIS INDUSTRIES, INC., a Delaware corporation ("BFI"),
BROWNING-FERRIS, INC., a Delaware corporation ("BFI OKC"), and BROWNING-FERRIS
INDUSTRIES OF IDAHO, INC., an Idaho corporation ("BFI Idaho") (the foregoing
being sometimes referred to herein individually as a "Seller" and collectively
as "Sellers") and WASTE CONNECTIONS, INC., a Delaware corporation ("Waste"),
WASTE CONNECTIONS OF IDAHO, INC., a Delaware corporation ("Waste of Idaho"), and
CONTINENTAL PAPER RECYCLING, L.L.C., an Oregon limited liability company
("Continental") (Waste, Waste of Idaho and Continental are sometimes referred to
herein collectively as "Buyers" and individually as a "Buyer").
W I T N E S S E T H:
WHEREAS, BFI desires to sell and Waste desires to purchase the outstanding
shares ("Company Shares" or "Shares") of Common Stock ("Stock") of
Browning-Ferris Industries of Washington, Inc., a Washington corporation (the
"Company"), pursuant to the terms and conditions set forth herein.
WHEREAS, the Company owns all of the outstanding shares of common stock ("Fibres
Shares") of Fibres International, Inc., a Washington corporation ("Fibres"), and
is also engaged in the solid waste collection and recycling business in and
around Vancouver, Washington (the "Vancouver Business");
WHEREAS, Fibres is engaged in the recycling business in and around Seattle,
Washington ("Fibres Recycling Business") and owns various assets related thereto
("Fibres Recycling Assets"), including the Real Property defined herein;
WHEREAS, Fibres intends to convey to Continental Property Holdings, Inc., a
Washington corporation ("CPH"), to be formed and owned by BFI, all of the Fibres
Recycling Assets and obligations related thereto;
WHEREAS, BFI desires to sell and Continental desires to purchase the outstanding
shares ("CPH Shares") of Common Stock of CPH pursuant to the terms and
conditions set forth herein;
WHEREAS, BFI OKC owns certain customer routes and recycling processing and
related equipment and assets dedicated to the recycling business in and around
Oklahoma City, Oklahoma (the "Oklahoma City Business"), and Continental desires
to purchase and BFI OKC desires to sell such assets and business;
WHEREAS, BFI Idaho is engaged in the recycling collection and processing
business in and around Idaho Falls and Pocatello, Idaho and owns certain
customer routes, equipment and assets
<PAGE> 7
related thereto (the "Idaho Recycling Business"), and Continental desires to
purchase and BFI Idaho desires to sell such assets and business;
WHEREAS, BFI Idaho is also engaged in the solid waste collection and
transportation business in and around Idaho Falls and Pocatello, Idaho and owns
certain customer routes, equipment and assets related thereto ("Idaho Solid
Waste Business"), and Waste of Idaho desires to purchase and BFI Idaho desires
to sell such business and assets;
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1.
TRANSFER OF STOCK AND ASSETS AND PURCHASE PRICE
1.1 Sale of Shares and Assets. Subject to the terms and conditions of this
Agreement and in consideration of the obligations of Buyers herein at the
Closing (as defined in Article 2):
(a) BFI agrees to sell, convey, assign, transfer and deliver (i) all
right, title and interest of BFI in and to the Company Shares to
Waste and (ii) all right, title and interest of BFI in and to the
CPH Shares to Continental;
(b) BFI OKC agrees to sell, convey, assign, transfer and deliver to
Continental all of its right, title and interest in and to the
following assets ("Oklahoma City Assets"):
(i) the Equipment owned by BFI OKC set forth on SCHEDULE 3.6, (ii)
the "OKC Contracts" consisting of the Material Contracts of
BFI OKC, if any, set forth on SCHEDULE 3.12 ("Material OKC
Contracts") and all other processing and service agreements
not required to be set forth on SCHEDULE 3.12 related to the
Oklahoma City Business, (iii) the "OKC Leases" consisting of
the Material Leases of BFI OKC, if any, set forth on SCHEDULE
3.13 ("Material OKC Leases") and all other leases of BFI OKC
not required to be set forth on SCHEDULE 3.13 related to the
Oklahoma City Business, (iv) the permits, licenses, consents
and authorizations of BFI OKC set forth on SCHEDULE 3.14, (v)
all accounts receivable of BFI OKC existing on the Closing
Date arising from the Oklahoma City Business ("OKC
Receivables") and (vi) the spare parts and any other inventory
of BFI OKC existing on the Closing Date related to the
Oklahoma City Business ("OKC Inventory");
2
<PAGE> 8
(c) BFI Idaho agrees to sell, convey, assign, transfer and deliver to
Continental all of its right, title and interest in and to the
following assets ("Idaho Recycling Assets"):
(i) the Equipment owned by BFI Idaho set forth on SCHEDULE 3.6
related to the Idaho Recycling Business, (ii) the "Idaho
Recycling Contracts" consisting of the Material Contracts of
BFI Idaho, if any, set forth on SCHEDULE 3.12 ("Material Idaho
Recycling Contracts") related to the Idaho Recycling Business
and all other processing and service agreements not required
to be set forth on SCHEDULE 3.12 related to the Idaho
Recycling Business, (iii) the "Idaho Recycling Leases,"
consisting of the Material Leases of BFI Idaho, if any, set
forth on SCHEDULE 3.13 ("Material Idaho Recycling Leases")
related to the Idaho Recycling Business and all other leases
of BFI Idaho not required to be set forth on SCHEDULE 3.13
related to the Idaho Recycling Business, (iv) the permits,
licenses, consents and authorizations of BFI Idaho set forth
on SCHEDULE 3.14 related to the Idaho Recycling Business, (v)
all accounts receivable of BFI Idaho existing on the Closing
Date arising from the Idaho Recycling Business ("Idaho
Recycling Receivables") and (vi) the spare parts and any other
inventory of BFI Idaho existing on the Closing Date related to
the Idaho Recycling Business ("Idaho Recycling Inventory");
(d) BFI Idaho agrees to sell, convey, assign, transfer and deliver to
Waste of Idaho all of its right, title and interest in and to the
following assets ("Idaho Solid Waste Assets"):
(i) the Equipment owned by BFI Idaho set forth on SCHEDULE 3.6
related to the Idaho Solid Waste Business, (ii) the "Idaho
Solid Waste Contracts" consisting of the Material Contracts of
BFI Idaho set forth on Schedule 3.12 ("Material Idaho Solid
Waste Contracts") related to the Idaho Solid Waste Business,
and all other service agreements not required to be set forth
on SCHEDULE 3.12 related to the Idaho Solid Waste Business,
(iii) the "Idaho Solid Waste Leases" consisting of the
Material Leases of BFI Idaho set forth on SCHEDULE 3.13
("Material Idaho Solid Waste Leases") related to the Idaho
Solid Waste Business and all other leases related to the Idaho
Solid Waste Business not required to be set forth on SCHEDULE
3.13 related to the Idaho Solid Waste Business, (iv) the
permits, licenses, consents and authorizations of BFI Idaho
set forth on SCHEDULE 3.14 related to the Idaho Solid Waste
Business, (v) the accounts receivable of BFI Idaho existing on
the Closing Date arising from the Idaho Solid Waste Business
("Idaho
3
<PAGE> 9
Solid Waste Receivables") and (vi) the spare parts and any
other inventory of BFI Idaho existing on the Closing Date
related to the Idaho Solid Waste Business ("Idaho Solid Waste
Inventory").
(e) The sale of the Idaho Assets constitutes a sale of substantially all
of the operating assets of a separate division, branch or
identifiable segment of BFI Idaho.
1.2 Consideration. In consideration of the transfers described in Section 1.1
and subject to Section 1.8, at the Closing:
(a) Buyers shall pay BFI or its designees in immediately available funds
an amount equal to Eleven Million Four Hundred Seventy-One Thousand
Nine Hundred Fifty and No/100 Dollars ($11,471,950.00);
(b) Continental shall deliver to BFI a promissory note in substantially
the form of ANNEX A hereto ("$3 Million Note") in the principal
amount of Three Million Dollars ($3,000,000), payable on or before 6
months from the date thereof, bearing interest payable quarterly at
the rate of ten percent (10%) per annum, secured by a first lien
Deed of Trust on the real property of CPH described on SCHEDULE
1.2(b) pursuant to a Deed of Trust in substantially the form of
ANNEX B ("First Lien Deed of Trust"), and guaranteed by J. Bradford
Bishop and James Cutler (individually a "Guarantor" and collectively
the "Guarantors") pursuant to a Guarantee in substantially the form
of ANNEX C hereto (the "Guarantee");
(c) Continental shall deliver to BFI a promissory note in substantially
the form of ANNEX D hereto ("$2.5 Million Note") in the principal
amount of Two Million Five Hundred Thousand Dollars ($2,500,000),
payable on or before twenty-four (24) months from the date thereof,
bearing interest payable quarterly at the rate of ten percent (10%)
per annum, secured by a deed of trust on the real property of Fibres
described on SCHEDULE 1.2(b) hereto, pursuant to a deed of trust in
substantially the form of ANNEX E hereto ("Second Lien Deed of
Trust") with such lien being subordinated to the First Lien Deed of
Trust and any liens replacing the foregoing and securing
indebtedness not exceeding $3 million principal amount and the lien
of Imperial Bank securing indebtedness in the principal amount of
$2,700,000 to Continental; and
(d) Waste of Idaho shall deliver to BFI a promissory note in
substantially the form of ANNEX F hereto ("$1.45 Million Note") in
the principal amount of One Million Four Hundred Fifty Thousand
Dollars ($1,450,000) payable on or before 120
4
<PAGE> 10
days from the date thereof, bearing interest payable quarterly at
the rate of ten percent (10%) per annum, secured by a security
interest in the equipment, inventory, accounts and general
intangibles of Waste of Idaho arising from the Idaho Solid Waste
Business granted pursuant to a security agreement in substantially
the form of ANNEX G hereto ("Idaho Security Agreement"), and
guaranteed by the Guarantors pursuant to the Guarantee;
(e) Waste shall deliver to BFI a promissory note in substantially the
form of ANNEX H hereto ("Waste Working Capital Note") in the
principal amount of Two Million Five Hundred Ninety-Three Thousand
Seven Hundred Sixty-Seven and No/100 Dollars ($2,593,767.00) payable
as to principal, plus interest at the rate of six percent (6%) per
annum, as set forth therein, secured by a security interest of BFI
in all accounts receivable of the Company and Fibres as of the
Closing Date granted pursuant pursuant to a security agreement in
substantially the form of ANNEX I hereto and guaranteed by the
Guarantors pursuant to the Guaranty;
(f) Continental shall deliver to BFI a promissory note in substantially
the form of ANNEX J hereto, ("Continental Working Capital Note") in
the principal amount of One Million Two Hundred Seventy Thousand
Five Hundred Fifty-Six and No/100 Dollars ($1,270,556.00) payable as
to principal, plus interest at the rate of six per cent (6%) per
annum, as set forth therein secured by a security interest of BFI in
all accounts receivable of CPH as of the Closing Date granted
pursuant to a security agreement in substantially the form of ANNEX
K hereto, and guaranteed by the Guarantors pursuant to the Guaranty;
(g) Waste shall deliver to BFI a promissory note in substantially the
form of ANNEX L hereto ("Waste Bridge Note") in the principal amount
of Five hundred Thousand and No/100 Dollars ("$500,000 Note")
payable on or before six months from the date thereof bearing
interest at the rate of ten percent (10%) per annum, guaranteed by
the Guarantors pursuant to the Guarantee, and secured by the Idaho
Security Agreement;
(h) Waste shall deliver to BFI a promissory note in substantially the
form of ANNEX M hereto ("Waste Inventory Note") in the principal
amount of Three Hundred Fifty-Nine Thousand Five Hundred Fourteen
and No/100 Dollars ($359,514.00) payable 30 days from the date
thereof together with interest at the rate of six per cent (6%) per
annum and guaranteed by the Guarantors pursuant to the Guaranty;
5
<PAGE> 11
(i) Continental shall deliver to BFI a promissory in substantially the
form of ANNEX N hereto ("Continental Inventory Note") in the
principal amount of Two Hundred Ninety-Four Thousand Seven Hundred
Fifteen and No/100 Dollars ($294,715.00) payable 30 days from the
date thereof with interest at the rate of six per cent (6%) per
annum and guaranteed by the Guarantors pursuant to the Guaranty;
(j) Waste of Idaho shall assume, perform, and discharge from and after
the Closing Date the (i) obligations to be performed after the
Closing Date under all Idaho Solid Waste Contracts and Idaho Solid
Waste Leases and (ii) obligations to be performed after the Closing
Date under all Material Idaho Solid Waste Contracts and Material
Idaho Solid Waste Leases entered into prior to the Closing Date and
after the date hereof in compliance with Section 5.3(a);
(k) Continental shall assume, perform and discharge from and after the
Closing Date the (i) obligations to be performed after the Closing
Date under all Idaho Recycling Contracts and Idaho Recycling Leases
and OKC Contracts and (ii) obligations to be performed after the
Closing Date under any Material Idaho
Recycling Contracts and Material Idaho Recycling Leases and Material
OKC Contracts entered into prior to the Closing Date and after the
date hereof in compliance with Section 5.3(a);
(l) Buyers shall not assume any of the following liabilities or
obligations of any Seller with respect to the Oklahoma City
Business, the Idaho Solid Waste Business or the Idaho Recycling
Business: (i) federal, state or local tax liabilities, or (ii)
liabilities or obligations arising out of any breach by any Seller
prior to the Closing Date of any OKC Contract, Idaho Recycling
Contract or Idaho Solid Waste Contract, OKC Lease or Idaho Recycling
Lease or Idaho Solid Waste Lease. Except as set forth above Buyers
shall assume no obligations or liabilities of any Seller in
connection with the purchase of the Oklahoma City Assets, Oklahoma
City Business, Idaho Recycling Assets, Idaho Recycling Business,
Idaho Solid Waste Business or Idaho Solid Waste Assets.
The "Purchase Price" shall mean (i) the cash paid at Closing pursuant to
Section 1.2(a), and (ii) the aggregate principal amount of the $3 Million
Note, the $2.5 Million Note, the $1.45 Million Note, the Waste Working
Capital Note, the Continental Working Capital Note, the Waste Bridge Note,
the Waste Inventory Note and the Continental Inventory Note.
1.3 Assignment. At the Closing, BFI shall deliver or cause to be delivered to
the appropriate Buyer (i) a stock certificate or certificates representing
the Company Shares and the CPH
6
<PAGE> 12
Shares accompanied by stock powers duly endorsed and in good delivery form
and (ii) such assignments, bills of sale, deeds and other good and
sufficient instruments of conveyance and transfer as shall be effective to
vest in Continental all title of BFI OKC to the Oklahoma City Assets and
all title of BFI Idaho to the Idaho Recycling Assets and to vest in Waste
of Idaho all title of BFI Idaho to the Idaho Solid Waste Assets.
Simultaneously with such delivery, BFI will take all such other steps
reasonably requested by Buyers to put Continental in actual possession and
operating control of the Oklahoma City Assets and Idaho Recycling Assets
and to put Waste of Idaho in actual possession and operating control of
the Idaho Solid Waste Assets. At the Closing, Buyers shall deliver such
instruments as BFI may reasonably require confirming the appropriate
Buyer's assumption of such liabilities and obligations of BFI Idaho and
BFI OKC as such Buyer is to assume pursuant to Sections 1.2(j) and 1.2(k)
of this Agreement.
1.4 Further Cooperation. From time to time after the Closing Date without
further consideration, BFI OKC or BFI Idaho will execute and deliver such
other instruments of conveyance and transfer and take such other action,
as Buyers reasonably may request, to more effectively convey, transfer to
and vest in the appropriate Buyer and to put such Buyer in possession of
the Oklahoma City Assets, the Idaho Recycling Assets or Idaho Solid Waste
Assets, and in the case of contracts and rights, if any, for which the
consents of third parties required for assignment hereunder cannot be
obtained, to use its reasonable business efforts to provide Buyer with the
benefits thereof in some other manner.
1.5 Excluded Assets. The Oklahoma City Assets, Idaho Recycling Assets and
Idaho Solid Waste Assets to be conveyed to Continental or Waste of Idaho
hereunder shall not include (i) any deposits or prepaid items, except to
the extent such items are reflected in the Working Capital Calculation
defined in Section 1.6, (ii) any corporate record books or similar records
related to the corporate existence of BFI OKC or BFI Idaho, (iii) cash,
(iv) financial or tax records of BFI OKC or BFI Idaho, or (v) the use of
the name "Browning-Ferris" or any name similar or related thereto, except
as provided in Section 12.4.
1.6 Post-Closing Adjustment of the Purchase Price. The Purchase Price shall be
adjusted in accordance with the following provisions:
(a) On the Closing Date BFI shall deliver to Buyers (1) an estimate
("Estimated Working Capital") as of the Closing Date of the sum of
(i) 90.5% of all accounts receivable of the Company ("Company
Receivables") and Fibres (including the receivables to be
transferred to CPH) ("Fibres Receivables"), the OKC Receivables,
Idaho Solid Waste Receivables and the Idaho Recycling Receivables,
7
<PAGE> 13
("Receivables Calculation"), (ii) the value of the inventory of the
Company ("Company Inventory") and Fibres (including the inventory to
be transferred to CPH) ("Fibres Inventory") and the OKC Inventory,
Idaho Recycling Inventory and Idaho Solid Waste Inventory,
("Inventory Calculation"), and (iii) any deposits or prepaid items
of the Company, Fibres (including deposits or prepaid items to be
transferred to CPH), BFI OKC with respect to the Oklahoma City
Business and BFI Idaho with respect to the Idaho Solid Waste
Business and Idaho Recycling Business, in each case which will not
be refunded to the Company, Fibres, BFI OKC or BFI Idaho, and which
will benefit Buyers, less (iv) the amount of any deferred revenues
of the Company, Fibres (including any deferred revenues to be
transferred to CPH), BFI OKC respecting the Oklahoma City Business
and BFI Idaho respecting the Idaho Solid Waste Business and Idaho
Recycling Business, and (2) a schedule of the items included in the
Estimated Working Capital; the Estimated Working Capital as of the
Closing Date is based on July 31, 1997, information. On or before
October 10, 1997, BFI shall deliver to Buyers a revision of the
Estimated Working Capital as of September 30, 1997 (the "Revised
Estimated Working Capital"). If the Receivables Calculation based on
the Revised Estimated Working Capital declines, the Waste Working
Capital Note and/or the Continental Working Capital Note, as the
case may be, shall be immediately amended to reduce the principal
amount thereof to such new estimated number and to reduce the two
installments due on such note by one-half of the amount of the
reduction.
(b) Within sixty (60) days after the Closing Date the appropriate Buyer
shall deliver to BFI a final schedule and calculation ("Final
Working Capital") of the Receivables Calculation, Company Inventory,
Fibres Inventory, OKC Inventory, Idaho Recycling Inventory and Idaho
Solid Waste Inventory, prepaid items and deposits less all deferred
revenue of the Company and Fibres and all deferred revenues of BFI
OKC respecting the Oklahoma City Business and BFI Idaho respecting
the Idaho Solid Waste Business and Idaho Recycling Business as of
the Closing Date;
(c) Within ten (10) days thereafter, BFI shall deliver to Waste and/or
Continental, or Waste and/or Continental shall deliver to BFI
immediately available funds in the amount by which the Final Working
Capital attributable to the Company Receivables and Fibres
Receivables is less than or greater than the original principal
amount of the Waste Working Capital Note and the Fibres Working
Capital Note, respectively; provided, that if BFI disagrees with the
Final Working Capital calculation it shall give written notice to
Buyers within such ten (10) day period and, if Buyers and BFI are
unable to resolve such disagreement within
8
<PAGE> 14
thirty (30) days of the date of delivery of such notice of
disagreement, they shall arbitrate such disagreement in accordance
with the provisions of Section 13.2; and
(d) Buyers shall make available to BFI all supporting information with
respect to the calculation of the Final Working Capital.
1.7 Payment of Accounts Payable. BFI shall pay all trade accounts payable of
the Company and of Fibres in existence on the Closing Date in accordance
with the customary payment practices of BFI. Buyers shall have the right
to pay any trade account payable prior to its payment by BFI if Buyers
reasonably believe that the failure to pay such account at such time would
have an adverse effect on the future business relationship between Buyers
and the vendor, and any amount so paid shall be deducted from the amounts
due to BFI by Buyer pursuant to Section 1.6(c) or shall be paid by BFI to
Buyers instead of the holder of such trade account at the time BFI pays
such trade account, subject to BFI's reasonable satisfaction that the
account has been paid by Buyers.
1.8 Allocation of Purchase Price. The Purchase Price shall be allocated among
the Company Shares, the CPH Shares, the Oklahoma City Assets, the Idaho
Recycling Assets and the Idaho Solid Waste Assets as set forth on SCHEDULE
1.8, and, with respect to the portion of the Purchase Price allocated to
the Oklahoma City Assets and the Idaho Assets, Buyer and BFI shall prior
to the Closing Date agree upon the allocation of such portion among such
Assets. BFI agrees that notwithstanding any other provisions of this
Agreement, (i) the obligations of Buyers with respect to payment of the
Purchase Price shall be several and not joint, (ii) Waste shall be
obligated to pay the portion of the Purchase Price allocated to the
Company Shares, (iii) Waste of Idaho shall be obligated to pay the portion
of the Purchase Price allocated to the Idaho Solid Waste Business, and
(iv) Continental shall be obligated to pay the portion of the Purchase
Price allocated to the CPH Shares, the Idaho Recycling Business and Idaho
Recycling Assets, and the Oklahoma City Business and Oklahoma City Assets.
1.9 Definitions. The terms defined herein are listed in SCHEDULE 1.9.
ARTICLE 2.
CLOSING
The transfer of the Shares and Assets payment of the consideration referred to
in Article 1 hereof (the "Closing") shall take place at 10:00 a.m. at the
offices of Shartsis, Friese & Ginsburg LLP, One Maritime Plaza, San Francisco,
California, on September 30, 1997, or at such other time and date as BFI and the
Buyers may in writing designate or such exchange actually occurs (the "Closing
Date").
9
<PAGE> 15
ARTICLE 3.
BFI'S REPRESENTATIONS AND WARRANTIES
BFI represents and warrants to Buyers as of the date hereof:
3.1 Existence and Qualification. Each of the Company and Fibres is, and CPH
will be, a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Washington, and BFI OKC and BFI
Idaho are each duly incorporated, validly existing and in good standing
under the laws of their respective states of incorporation. Each of the
Company and Fibres has, and CPH at the Closing will have, all requisite
power and authority, corporate and otherwise, to carry on its business as
presently conducted, and it is duly qualified to conduct such business as
a foreign corporation in all jurisdictions where the failure to be so
qualified would have a material adverse effect on the business of each.
BFI OKC and BFI Idaho have all requisite power and authority, corporate
and otherwise, to carry on the Oklahoma City Business and the Idaho
Business, respectively. BFI has provided to Buyers true and complete
copies of the articles of incorporation and bylaws of the Company and
Fibres as in effect on the date hereof. CPH will be organized solely for
purposes of the transactions contemplated by this Agreement and will have
no assets or operations prior to receipt of the Fibres Recycling Assets
and obligations related thereto.
3.2 Authority. Each Seller has all requisite power and authority, corporate
and otherwise, to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement have
been duly and validly authorized by all necessary corporate action on the
part of each Seller, and this Agreement constitutes a valid and binding
obligation of each Seller.
3.3 No Conflicts. Neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions provided for herein,
will conflict with or result in a breach of the charter or bylaws of any
Seller, Fibres or the Company or of any of the terms, conditions or
provisions of any agreement or instrument to which any Seller, Fibres or
the Company is a party or by which any of them is bound or will result in
a violation of any applicable law, ordinance, regulation, permit,
authorization or decree or order of any court or other governmental agency
applicable to any Seller, Fibres or the Company; provided, that BFI makes
no representation with respect to whether the consent of any governmental
entity or third party is required in connection with the consummation of
the transactions contemplated by this Agreement.
3.4 Capitalization; Ownership of Shares. The authorized capitalization of
Fibres consists of 2,500 shares of Common Stock, par value $10 per share,
all of which shares are validly issued and outstanding, fully paid and
nonassessable and free of preemptive rights. The
10
<PAGE> 16
authorized capitalization of the Company consists of 1,000 shares of
common stock, par value $10, all of which shares are validly issued and
outstanding, fully paid and nonassessable and free of preemptive rights.
The authorized capitalization of CPH will consist of 1,000 shares of
Common Stock, par value $1 per share, all of which shares will be validly
issued, fully paid and nonassessable and free of preemptive rights. There
are no outstanding subscriptions, warrants, options, or other agreements
or commitments obligating the Company or Fibres to issue any additional
shares of stock. BFI owns or will own on the Closing Date all interest in
the Shares and CPH Shares, and the Company owns all interest in the Fibres
Shares, free and clear of any liens, claims, security interests, or rights
of any other person or entity.
3.5 Litigation. Except as listed on SCHEDULE 3.5, (i) there is not pending
and, to the best knowledge of BFI, there is not threatened any litigation,
suit, action or proceeding in or before any court or governmental or
regulatory agency or body to which any Seller, the Company, CPH or Fibres
is or will be a party, and (ii) there is no judgment, order, decree, or
injunction by any court or governmental or regulatory agency or body in
effect against any Seller, the Company, CPH or Fibres which would have a
material adverse effect on the future operations or business of the
Company, Fibres, CPH, the Oklahoma City Business, the Idaho Recycling
Business or the Idaho Solid Waste Business.
3.6 Equipment Schedules; Title to Equipment. SCHEDULE 3.6 lists all motor
vehicles, containers, compactors, and other tangible equipment
("Equipment") owned by (i) the Company or Fibres (including the Fibres
Recycling Assets) and used in connection with the respective business of
either as presently conducted, excluding the equipment to be disposed of
by Fibres prior to Closing as set forth in Section 5.4(a) hereof, (ii) BFI
Idaho and used in connection with the Idaho Solid Waste Business or Idaho
Recycling Business, or (iii) BFI OKC and used in connection with the
Oklahoma City Business. The Company, Fibres, BFI OKC or BFI Idaho owns,
and CPH at the Closing will own, such Equipment free and clear of any
liens, claims, security interests or encumbrances of any type. EXCEPT AS
SET FORTH IN THE PRECEDING SENTENCE, NO SELLER, THE COMPANY OR FIBRES
MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE CONDITION OR
FITNESS FOR ANY PURPOSE OF ANY EQUIPMENT, ALL OF WHICH IS BEING PURCHASED
BY BUYER "AS IS, WHERE IS."
3.7 Real Property. SCHEDULE 3.7 sets forth all real property ("Real Property")
owned by Fibres (including the Real Property to be conveyed to CPH) and
used in connection with its business as presently conducted, excluding the
real property to be disposed of by Fibres prior to Closing as set forth in
Section 5.4(b) hereof. Fibres has good and marketable title to the Real
Property, subject to no liens, claims, or encumbrances except for (i)
"Permitted Encumbrances" and (ii) encumbrances listed on SCHEDULE 3.7. The
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term "Permitted Encumbrances" means any minor defects in title which do
not, in the aggregate, materially interfere with the ability of Fibres to
conduct its business and will not interfere with the ability of CPH to
conduct its business. All activities and operations at the Real Property
are being and, since December 18, 1995, have been conducted in compliance
in all material respects with the requirements and conditions set forth in
all applicable federal, state and local statutes, orders, approvals,
permits, zoning or land use permits or requirements and all restrictions,
variances, licenses, rules and regulations.
3.8 Taxes. The Company and Fibres are members of the affiliated group of BFI
and are included in the consolidated income tax returns filed by BFI. (i)
Each of the Company and Fibres has filed all federal, state, and local tax
returns and reports required to be filed by it as of the date hereof, and
all taxes, fees, assessments and governmental charges of any nature shown
by such returns to be due and payable have been paid, except for those
amounts being contested in good faith; (ii) there is no tax deficiency
which has been, or to the knowledge of BFI might be, asserted against the
Company or Fibres which would have a material adverse effect on its
business; (iii) the Company or Fibres has not been, nor is it now being,
audited by any federal, state, or local tax authorities; (iv) the Company
and Fibres have made all required deposits for taxes applicable to the
current and immediately preceding tax year; and (v) all tax returns and
reports of the Company or Fibres were prepared in accordance with the
relevant rules and regulations of each taxing authority having
jurisdiction over the Company or Fibres and are true and correct in all
material respects.
3.9 Outstanding Obligations. Except as set forth on SCHEDULE 3.9 and except
for accounts payable of the Company and Fibres in existence on the Closing
Date, neither Fibres nor the Company has and CPH will not have on the
Closing Date any liability for (i) any indebtedness for borrowed money,
whether as principal, guarantor, surety or otherwise, or (ii) any other
obligation which would be material to the business of Fibres or the
Company as presently conducted and which, in accordance with generally
accepted accounting principles, would be reflected in financial statements
(or the notes thereto) of Fibres or the Company as of the date hereof. The
Assets are owned by the Sellers free and clear of any lien, claim,
security interest or encumbrance of any type.
3.10 Disposal Sites Used. SCHEDULE 3.10 lists the name and address of all solid
waste landfills or transfer stations or recycling processing facilities to
which (i) Fibres since December 18, 1995 or the Company, BFI OKC with
respect to the Oklahoma City Business, or BFI Idaho with respect to the
Idaho Recycling Business or Idaho Solid Waste Business has transported
material amounts of municipal solid waste or recyclable material in
connection with the operation of its business, or (ii) Fibres, prior to
December 18, 1995, transported material amounts of municipal solid waste
or recyclable material as represented in the Stock Purchase Agreement
dated as of December 18, 1995 ("Fibres
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Purchase Agreement") among MacMillan Bloedel of America, Inc. and John
Matheson ("Fibres Stockholders") and the Company. SCHEDULE 3.10 also
states whether any listed facility is, to the best of BFI's knowledge,
currently being remediated or currently scheduled to undergo remediation
under the Comprehensive Environmental Response, Compensation and Liability
Act or comparable state law.
3.11 Accounts Receivable. All of the Accounts Receivable will have arisen out
of services performed in the ordinary course of business by Fibres, the
Company, BFI OKC or BFI Idaho, no municipal account debtor will have any
right of set-off against any Account Receivable and, to the best of BFI's
knowledge, no other account debtor will have any right of set-off against
any such Account Receivable; provided that BFI makes no representation
with respect to the collectibility of any such Account Receivable.
3.12 Material Contracts. SCHEDULE 3.12 lists all customer service contracts,
processing agreements, office supply contracts, maintenance contracts,
consulting agreements, and any other service contracts or other agreements
for the purchase or sale of goods or services relating to the Idaho
Recycling Business, Idaho Solid Waste Business or Oklahoma City Business
or the business of Fibres or the Company ("Material Contracts") (excluding
Leases) which (i) are not cancelable without penalty on not more than 90
days notice by BFI Idaho, BFI OKC, Fibres or the Company, (ii) provide for
the payment by BFI Idaho, BFI OKC, Fibres or the Company of more than
$25,000 annually, (iii) provide for the receipt by BFI Idaho, BFI OKC,
Fibres or the Company of more than $50,000 annually, (iv) provide for
services by BFI Idaho, BFI OKC, Fibres or the Company to a governmental
agency or unit of any kind and have a termination date which is less than
1 year from the date hereof, or (v) are with any Affiliate of BFI. BFI
Idaho, BFI OKC, Fibres or the Company is not in default in any material
respect under any such Material Contact, and BFI Idaho, BFI OKC, Fibres or
the Company is not in default under any other contracts or agreements to
which it is a party or by which it is bound (referred to collectively with
the Material Contracts as the "Contracts") the result of which defaults
would in the aggregate have a material adverse effect on the Idaho
Recycling Business, Idaho Solid Waste Business or Oklahoma City Business
or the business of the Company or Fibres. No municipality is in default in
any material respect under any Material Contract, and to the best of BFI's
knowledge, no other party to any Material Contract is in default in any
material respect thereunder, nor are there defaults by the other parties
to any of the other Contracts which would in the aggregate have a material
adverse effect on the Idaho Recycling Business, Idaho Solid Waste Business
or the Oklahoma City Business or the business of the Company or Fibres.
BFI makes no representation with respect to whether the consent of any
other party to any Contract is required in connection with consummation of
the transactions contemplated by this Agreement, including the transfer of
the Fibres Recycling Assets to CPH.
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3.13 Material Leases. SCHEDULE 3.13 lists all leases of personal property and
real property relating to the Idaho Recycling Business, Idaho Solid Waste
Business or the Oklahoma City Business or the business of Fibres or the
Company ("Material Leases") which (i) are not cancelable by BFI Idaho, BFI
OKC, Fibres or the Company without penalty on not more than 90 days
notice, (ii) provide for annual lease payments by BFI Idaho, BFI OKC,
Fibres or the Company of at least $25,000, or (iii) are with any Affiliate
of BFI. BFI Idaho, BFI OKC, Fibres or the Company is not in default in any
respect under any Material Lease and BFI Idaho, BFI OKC, Fibres or the
Company is not in default under any other leases to which it is a party
(referred to collectively with the Material Leases as the "Leases") the
result of which defaults in the aggregate would have a material adverse
effect on the Idaho Recycling Business, Idaho Solid Waste Business or the
Oklahoma City Business or the business of the Company or Fibres. To the
best of BFI's knowledge, no other party to any Material Lease is in
default in any material respect thereunder nor are there defaults by the
other parties to the other Leases which would in the aggregate have a
material adverse effect on the Idaho Recycling Business, Idaho Solid Waste
Business or the Oklahoma City Business or the business of the Company or
Fibres. BFI makes no representation with respect to whether the consent of
any other party to any Lease is required in connection with the
consummation of the transactions contemplated by this Agreement.
3.14 Permits. SCHEDULE 3.14 sets forth all material permits, licenses, consents
and authorizations ("Permits") required to conduct the Idaho Recycling
Business, Idaho Solid Waste Business or the Oklahoma City Business or the
business of the Company or Fibres as presently conducted. BFI Idaho, BFI
OKC, Fibres or the Company is not in default in any material respect under
any Permit, and each Permit is in full force and effect. BFI makes no
representation with respect to whether the consent of any governmental
agency or authority issuing any such Permit is required in connection with
the consummation of the transactions contemplated by this Agreement,
including the transfer of the Fibres Recycling Assets to CPH.
3.15 Financial Information. SCHEDULE 3.15 lists certain financial information
("Financial Data") respecting the Idaho Recycling Business, Idaho Solid
Waste Business and Oklahoma Business and the business of the Company and
Fibres provided by BFI to Buyer. Such Financial Data has been compiled
from the internal accounting records of BFI, the Company or Fibres without
audit and does not constitute any representation with respect to future
results of operations of the Idaho Recycling Business, Idaho Solid Waste
Business, the Oklahoma City Business, the Company's business or the
business of Fibres. The financial information described in SCHEDULE 3.15
is accurate in all material respects. The internal accounting records of
BFI, the Company or Fibres from which such financial information has been
compiled have been maintained on a consistent basis in all material
respects by BFI, the Company or Fibres.
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3.16 Laws and Regulations. Except as set forth on SCHEDULE 3.16, the Company,
Fibres, BFI OKC with respect to the Oklahoma City Business or BFI Idaho
with respect to the Idaho Recycling Business or Idaho Solid Waste Business
is not in violation of or default under any material law or regulation, or
any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company, Fibres, BFI OKC or BFI Idaho, excluding any
federal, state, or local law, statute, rule or regulation relating to
protection of the environment ("Environmental Laws").
3.17 Compliance with Environmental Laws. Except as set forth in SCHEDULE 3.17,
the Company, Fibres, BFI Idaho, with respect to the Idaho Business, or BFI
OKC, with respect to the Oklahoma City Business, is not in violation of or
default under any material Environmental Laws or any order of any court or
federal, state, municipal, or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction pursuant to
any Environmental Laws over the Company, Fibres, BFI Idaho or BFI OKC.
Specifically and without limiting the generality of the foregoing, except
as disclosed on SCHEDULE 3.17:
(a) Except as permitted under applicable laws and regulations,
including, without limitation, the federal Resource Conservation
Recovery Act, 42 USC Section 6901 et seq. ("RCRA"), the Company,
Fibres (since December 18, 1995), BFI Idaho, with respect to the
Idaho Business, and BFI OKC, with respect to the Oklahoma City
Business, have not accepted, processed, handled, transferred,
generated, treated, stored or disposed of any Hazardous Material (as
defined below) nor accepted, processed, handled, transferred,
generated, treated, stored or disposed of asbestos, medical waste,
radioactive waste or municipal waste, except in compliance with
Environmental Laws;
(b) No Hazardous Material, other than that allowed under Environmental
Laws, has been disposed of or otherwise released (i) on any real
property included in the Oklahoma City Assets during the period such
property was owned or leased by BFI OKC, (ii) on any interest in
real property included in the Idaho Assets during the period such
property was owned or leased by BFI Idaho, (iii) on any real
property owned or leased by the Company, or (iv) since December 18,
1995, on any real property owned or leased by Fibres;
(c) With respect to the Company's, Fibres', BFI Idaho's, with respect to
the Idaho Business, and BFI OKC's, with respect to the Oklahoma City
Business, ownership or leasing of the real property owned or leased
by it, no such property has been subject to or received any notice
of any private, administrative or
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judicial action, or notice of any intended private, administrative
or judicial action relating to the presence or alleged presence of
Hazardous Material in, under, upon or emanating from any such
property since December 18, 1995 in the case of Fibres, or since the
Company, BFI Idaho or BFI OKC has owned or leased any such property.
There are no pending and, to the Sellers' knowledge, no threatened,
actions or proceedings from any governmental agency or any other
entity involving remediation of any condition of any such property,
including, without limitation, petroleum contamination, pursuant to
Environmental Laws;
(d) Except as allowed under Environmental Laws, neither the Company,
Fibres (since December 18, 1995), BFI Idaho, with respect to the
Idaho Business, nor BFI OKC, with respect to the Oklahoma City
Business, has knowingly sent, transported or arranged for the
transportation or disposal of any Hazardous Material, to any site,
location or facility; and
(e) As used in this Agreement, "Hazardous Material" shall mean the
substances (i) defined as "Hazardous Waste" in 40 CFR 261, and
substances defined in any comparable statute or regulation of
Washington, Idaho or Oklahoma; (ii) any substance the presence of
which requires remediation pursuant to any Environmental Laws; and
(iii) any substance disposed of in a manner not in compliance with
Environmental Laws.
3.18 Underground Storage Tanks. Except as set forth on the SCHEDULE 3.18, no
underground storage tanks containing petroleum products or wastes or other
hazardous substances regulated by 40 CFR 280 or Environmental Laws are
currently or have been located on the Real Property or on any other real
property owned or leased by the Company or Fibres or included in the Idaho
Assets or the Oklahoma City Assets while the Company, Fibres, the Idaho
Assets and the Oklahoma City Assets were owned by the Sellers.
3.19 Employment and Labor Matters, Etc. Except as set forth in SCHEDULE 3.19,
the Company, Fibres, BFI Idaho with respect to the Idaho Business and BFI
OKC with respect to the Oklahoma City Business is not a party to (i) any
collective bargaining agreement, (ii) any agreement respecting the
employment of any officer or any other employee of the Company or Fibres,
or (iii) any agreement for the provision of consulting or other
professional services which is not cancelable without penalty on not more
than ninety (90) days notice.
3.20 Status of Fibres Purchase Agreement. The Company has not made any claim
for indemnification or for Remediation Losses (as hereinafter defined)
under the Fibres Purchase Agreement, and BFI is not aware of any event
which has occurred which would
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entitle the Company to make any such claim for indemnification or for any
Remediation Losses.
3.21 Disclosure Schedules. The term "Disclosure Schedule" or "Disclosure
Schedules" means any or all schedules referred to in any section of this
Article 3.
ARTICLE 4.
BUYERS' REPRESENTATIONS AND WARRANTIES
Buyers represent and warrant to BFI as follows:
4.1 Existence. Each of Waste and Waste of Idaho is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. Continental is a limited liability company validly
existing and in good standing under the laws of the State of Oregon.
4.2 Authority. Each Buyer has all requisite power and authority to enter into
this Agreement and perform its obligations hereunder, and this Agreement
constitutes a valid and binding obligation of each Buyer. The execution,
delivery and performance of this Agreement by each Buyer have been duly
and validly authorized by all necessary corporate action on the part of
such Buyer, and this Agreement constitutes a valid and binding obligation
of each Buyer.
4.3 No Conflicts. Neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions provided for herein,
will conflict with or result in a breach of any of the terms, conditions
or provisions of any agreement or instrument to which any Buyer is a party
or by which it is bound or will result in a violation of any applicable
law, ordinance, regulation, permit, authorization or decree or order of
any court or other governmental agency applicable to any Buyer.
ARTICLE 5.
COVENANTS PRIOR TO CLOSING
Between the date of this Agreement and the Closing Date:
5.1 Access. BFI will afford to the officers and authorized representatives of
Buyers such access to the records of the Company, Fibres, BFI OKC with
respect to the Oklahoma City Assets and BFI Idaho with respect to the
Idaho Assets as Buyer may from time to time reasonably request. BFI will
cooperate with Buyer, their representatives and counsel, in the
preparation of any documents or other materials which may be required
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by any governmental agency in connection with any approvals for
consummation of the transaction contemplated by this Agreement.
5.2 Operations. Subject to Section 5.4, BFI will cause each of BFI OKC with
respect to the Oklahoma City Business, BFI Idaho with respect to the Idaho
Business, the Company and Fibres to:
(a) carry on the Oklahoma City Business, the Idaho Business, and the
business of the Company and Fibres in substantially the same manner
as currently existing and in compliance with all applicable laws,
rules, and regulations;
(b) maintain the Equipment in its present condition, ordinary wear and
tear excepted;
(c) perform all its material obligations under any agreements to which
it is a party;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use its reasonable commercial efforts to maintain and preserve its
business organization intact, retain its present employees and
maintain its relationship with suppliers, customers and others
having business relations with it; and
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(f) not enter into any Material Contract or Material Lease without the
consent of Buyers.
5.3 Maintenance of Condition. Subject to Section 5.4, the Company, Fibres, BFI
OKC with respect to the Oklahoma City Business and BFI Idaho with respect
to the Idaho Business will not, without the prior written consent of the
applicable Buyer, which shall not be unreasonably withheld:
(a) enter into any contract or lease which would be required to be
included in Schedules 3.12 or 3.13 hereof or enter into any contact
or commitment or incur or agree to incur any liability or make any
capital expenditures except in the ordinary course of business;
(b) except in the ordinary course of business, increase the compensation
payable or to become payable to any officer, employee or agent, or
make any bonus payment to such person;
(c) sell, assign, lease or otherwise transfer or dispose of any property
or equipment except in the ordinary course of business;
(d) issue or commit to issue any securities of the Company or Fibres;
(e) take any action which could cause any representation or warranty in
Article 3 not to be true in any material respect as of the Closing
Date; or
(f) amend the articles of incorporation or bylaws of the Company or
Fibres.
5.4 Disposal of Certain Assets. Notwithstanding the other provisions of
Article 5 hereof, it is understood and agreed that prior to the Closing
Date, Fibres or the Company will:
(a) dispose of all assets and business of Fibres in the Salt Lake City,
Utah area;
(b) dispose of the real property described in SCHEDULE 5.4(b) hereto;
(c) dispose of all brokerage operations, including all customer accounts
and assets related thereto, outside of a radius of 100 miles from
Seattle, Washington;
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(d) dispose of its interest in and obligations under the leases and
agreements described in SCHEDULE 5.4(d) relating to the business of
the Company in Vancouver, Washington, including the Lease Agreement
dated as of May 30, 1996 ("Vancouver Lease") between the Company and
Leichner Brothers Land Reclamation, Inc. and the Consultant
Agreement dated as of May 30, 1996 between the Company and M.C.T.C.
Consulting L.L.C.; and
(e) transfer to CPH the Fibres Recycling Assets, including the Fibres
Recycling Assets described in SCHEDULE 5.4(e).
5.5 Change of Name. On or prior to the Closing, BFI will cause the name of the
Company to be changed to Waste Connections of Washington, Inc.
ARTICLE 6.
INDEMNIFICATION
6.1 Indemnity By BFI. BFI covenants and agrees that it will, subject to the
provisions set forth in this Article 6, indemnify and hold harmless the
Buyers, from and after the Closing Date, against any and all losses,
damages, liabilities, claims, deficiencies, costs, expenses, expenditures,
including, without limitation, reasonable attorney's fees and court costs,
(collectively, "Indemnity Losses") arising with respect to each of the
following ("Indemnity Event"):
(a) any federal, state or local tax liability of any Seller, CPH, the
Company or Fibres arising out of any events occurring during any
period ended on or before the Closing Date;
(b) any federal income tax liability arising from the Section 338
Election (as hereinafter defined);
(c) any misrepresentation, breach of warranty, or nonfulfillment of any
agreement or covenant to be performed by any Seller, Fibres or the
Company under this Agreement;
(d) any act or failure to act on or prior to the Closing Date relating
to (i) any "employee benefit plan," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), of Fibres, the Company or any Affiliate of the Company,
(ii) any "prohibited transaction" as defined in ERISA and the
Internal Revenue Code, as amended, ("Code") relating to such
employee benefit plan, (iii) any failure of an "employee pension
benefit plan," as defined in Section 3(2) of ERISA, of Fibres, the
Company or any Affiliate of the
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Company which is intended to be a tax-qualified plan under Code
Section 401(a) to be so tax-qualified, (iv) any failure of any
employee pension benefit plan of Fibres, the Company or any
Affiliate of the Company, to timely comply with the funding
requirements of ERISA or the Code, (v) any failure of any employee
welfare benefit plan, as defined in Section 3(2) of ERISA, of
Fibres, the Company or any Affiliate of the Company to comply with
the Consolidated Omnibus Reconciliation Act of 1985, as amended, or
(v) any other violation of ERISA relating to an employee benefit
plan of Fibres, the Company or any Affiliate of the Company;
(e) any liability arising from the termination by any Seller, the
Company or Fibres of any employee on or prior to the Closing Date,
including without limitation any liability for accrued but unpaid
wages, vacation, expense reimbursements and any severance liability;
(f) any proceeding listed in SCHEDULE 3.5;
(g) any losses arising from the failure of BFI Idaho, Continental or
Waste to receive the consent to assignment of any municipal
contracts included in the Idaho Recycling Assets or Idaho Solid
Waste Assets;
(h) the obligations of the Company pursuant to Sections 3.19, 4.5, 7,
8.1 and 8.7 of the Asset Purchase Agreement dated as of October 18,
1995, as amended, by and between the Disposal Group, Inc., Buchman
Sanitary Service, Inc., Diamond Fabrication & Welding, Inc. and the
Company; and
(i) all actions, suits, proceedings, demands, assessments,
investigations, costs, expenses and claims incident to any of the
foregoing, including, without limitation, any interim or final
judicial or administrative decree, clean-up order or other remedial
action.
6.2 Indemnity By Buyers. Each Buyer covenants and agrees, severally and not
jointly, that it will indemnify and hold harmless BFI and its affiliates,
from and after the Closing Date, against any and all Indemnity Losses
arising with respect to each of the following Indemnity Events:
(a) any sales or use tax liability arising out the transactions
contemplated by this Agreement;
(b) any misrepresentation, breach of warranty, or nonfulfillment of any
agreement or covenant to be performed by the applicable Buyer under
this Agreement;
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(c) any liability or obligation of BFI OKC or BFI Idaho expressly
assumed by Waste or Continental pursuant to this Agreement.
6.3 Limitations on Indemnities. The obligations of indemnity provided above in
Sections 6.1 and 6.2 are subject to the following terms, conditions and
limitations:
(a) The aggregate obligation of indemnity of BFI pursuant to Section 6.1
("Aggregate Indemnity Limit") shall not exceed the portion of the
Purchase Price allocated to (i) the Company Shares with respect to
any Indemnity Losses relating to the Company, (ii) the Fibres Shares
with respect to any Indemnity Losses relating to Fibres, (iii) the
Oklahoma City Assets with respect to any Indemnity Losses relating
to the Oklahoma City Business and the Oklahoma City Assets, (iv) the
Idaho Recycling Assets with respect to any Indemnity Losses relating
to the Idaho Recycling Business and the Idaho Recycling Assets, and
(v) the Idaho Solid Waste Assets with respect to any Indemnity
Losses relating to the Idaho Solid Waste Business and Idaho Solid
Waste Assets.
(b) BFI shall have no obligation for Indemnity Events described in
Section 6.1(c) (other than for failure to transfer all of the
Equipment, Company Shares, and CPH Shares or a misrepresentation
under Section 3.4, 3.5, 3.8 or 3.9) until the aggregate amount of
Indemnity Losses with respect to (i) the Company exceeds one percent
(1%) of the portion of the Purchase Price allocated to the Company
Shares, (ii) the Oklahoma City Assets exceeds one percent (1%) of
the portion of the Purchase Price allocated to the Oklahoma City
Assets, (iii) the Idaho Recycling Assets exceeds one percent (1%) of
the portion of the Purchase Price allocated to the Idaho Recycling
Assets, (iv) the Idaho Solid Waste Assets exceeds one percent (1%)
of the portion of the Purchase Price allocated to the Idaho Solid
Waste Assets and (v) Fibres exceeds one percent (1%) of the portion
of the Purchase Price allocated to the Fibres Shares; provided, that
BFI shall be liable for Indemnity Losses relating to the Company or
Fibres, the Oklahoma City Assets and the Idaho Assets without regard
to such 1% limitation if the Indemnity Losses with respect to the
foregoing exceed 1% of the Purchase Price allocated to the Shares,
the Oklahoma City Assets, the Idaho Recycling Assets or the Idaho
Solid Waste Assets, respectively.
(c) The obligations of indemnity described in Sections 6.1(a), 6.1(b)
and 6.2(a) shall survive the Closing Date for the applicable statute
of limitations, the obligations of indemnity described in Sections
6.1(d), 6.1(e) and 6.2(c) and the obligation of indemnity for a
misrepresentation under Section 3.10 or under Section 3.17 shall
survive indefinitely, and the obligations of indemnity described in
Sections 6.1(c)
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(except for a misrepresentation under Section 3.10 or under Section
3.17) and 6.2(b) shall survive the Closing Date for three (3) years.
Any representations and warranties for which Buyers have made timely
notice of a claim for Indemnity Losses ("Indemnity Claim") pursuant
to Section 6.5 shall survive, with respect to such Indemnity Claim
only, until the resolution of such Indemnity Claim.
(d) The obligation of indemnity for any Indemnity Event in Sections 6.1
and 6.2 shall be reduced by the amount of any actual recovery by the
Indemnified Party for such Indemnity Event under policies of
insurance maintained by it or its affiliates with third parties less
all reasonable out-of-pockets costs or expenses incurred by the
Indemnified Party (excluding overhead costs) in recovering such
amount under any such insurance policy.
(e) BFI agrees with Buyers as follows with respect to (x) any claim
("Fibres Environmental Indemnity Claim") by the Company for
indemnification from the Fibres Stockholders for a breach of any
representation or warranty in Sections 3.19, 3.21 or 3.23 of the
Fibres Purchase Agreement or (y) any claim ("Fibres Remediation Loss
Claim") for "Remediation Losses"(as defined in Section 1.9 of the
Fibres Purchase Agreement) at any Special Remediation Site (as
defined in Section 1.9 of the Fibres Purchase Agreement):
(i) Except as set forth in this Section 6.3(e), no Seller shall
have any obligation of indemnity for any Fibres Environmental
Indemnity Claim or Fibres Remediation Loss Claim;
(ii) BFI will indemnify Buyers to the extent that the Company would
be entitled to indemnification from the Fibres Stockholders
for a Fibres Environmental Indemnity Claim (1) except for the
fact that the claim for indemnification was not made on a
timely basis date under the Fibres Agreement, provided, that
the Fibres Environmental Indemnity Claim is made in accordance
with the procedures set forth in Section 6.5 within four years
of the Closing Date under this Agreement or (2) if the
representations and warranties in Sections 3.19, 3.21 and 3.23
of the Fibres Purchase Agreement were not made "to the best of
Stockholders' knowledge," i.e., were made without any
limitation respecting the knowledge of the Fibres
Stockholders, provided that Buyers use reasonable efforts to
pursue any such Fibres Environmental Indemnity Claim against
the Fibres Stockholders;
(iii) BFI will indemnify Buyers to the extent that any Fibres
Environmental Indemnity Claim or Fibres Remediation Loss Claim
which is otherwise
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payable by the Fibres Stockholders is not paid solely as a
result of the bankruptcy, insolvency, or similar financial
incapacity of the Fibres Stockholders;
(iv) BFI will increase the aggregate liability of the Fibres
Stockholders under the Fibres Purchase Agreement by and pay
$1,000,000 so that the aggregate liability is $7,000,000, and
such additional $1,000,000 may be applied either to Fibres
Environmental Indemnity Claims or Fibres Remediation Loss
Claims;
(v) BFI will pay any Fibres Remediation Loss Claim which the
Fibres Stockholders would be required to pay except for the
fact that the "trigger event" described in Section 1.9
occurred after the date set forth therein; provided that such
trigger event occurs prior to September 30, 2001 (or September
30, 2003, in the case of the Monroe Landfill).
6.4 Sole Remedy. The sole remedy of Buyer and BFI for breach of the
representations, warranties, covenants and agreements set forth herein
shall be pursuant to the sections in this Article 6; provided, that
nothing in this Section 6.4 or elsewhere in this Agreement shall be deemed
to limit any right or remedy of Buyers against Sellers for breach of the
representations and warranties set forth in Sections 3.1, 3.2, 3.3 or 3.4,
for breach of the Non Competition Agreement (as hereinafter defined) or
for fraud, nor shall anything in this Section 6.4 or elsewhere in this
Agreement be deemed to limit any right of Buyers against Sellers for
statutory or equitable contribution with respect to liabilities not
arising from this Agreement.
6.5 Notice of Indemnity Claim. A party seeking indemnity hereunder
("Indemnified Party") shall notify the other party ("Indemnifying Party")
of its Indemnity Claim and the Indemnity Event in question within a
reasonable time after the Indemnified Party becomes aware of the existence
of such Indemnity Event, but in no event more than ninety (90) days;
provided, that the failure so to timely notify shall relieve the
Indemnifying Party from the obligation to indemnify against the liability
respecting such Indemnity Event only to the extent the Indemnifying Party
establishes by competent evidence that it is prejudiced thereby. Such
Indemnity Claim must be delivered in any event prior to the expiration of
Sellers' indemnity obligations with respect to the Indemnity Event
relating to the Indemnity Claim as set forth in Section 6.4. In any case,
if any such action shall be brought, and the Indemnified Party shall
notify the Indemnifying Party of the commencement thereof, such
Indemnified Party shall be entitled to participate in the defense thereof
at his own expense; provided, however, that the Indemnifying Party shall
have sole discretion to determine whether to contest, compromise, enter
pleas, or settle any action brought against the Indemnified Party. If an
Indemnity Claim includes a
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request for relief other than monetary damages and such relief would be
performed by an Indemnified Party or if the cumulative total of all
Indemnity Claims exceeds the Aggregate Indemnity Limit, the Indemnified
Party shall be entitled to assume control of the defense and/or compromise
of the portion of the Indemnity Claim in excess of the Aggregate Indemnity
Limit or of all of such Indemnity Claim if the amount of the Indemnity
Claim in excess of the Aggregate Indemnity Limit is greater than the
amount of the Indemnity Claims below the Aggregate Indemnity Limits.
ARTICLE 7.
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Subject to the provisions of Section 7.7 hereof, the obligations of Buyer
hereunder are, at its option, subject to the satisfaction, on or prior to the
Closing Date, of the following conditions.
7.1 Accuracy of Representations; Performance of Covenants. The representations
and warranties of BFI contained in Article 3 of this Agreement shall be
true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each
and all of the agreements of BFI and the Buyer to be performed on or
before the Closing Date pursuant to the terms hereof shall have been
performed; and BFI shall have delivered to Buyer a certificate dated the
Closing Date to such effect.
7.2 Governmental Consents; No Litigation. All necessary consents of any
governmental authority or agency relating to the consummation of the
transactions contemplated in this Agreement shall have been obtained,
including (i) consent to use all Permits necessary for Buyers to provide
service contemplated by the Contracts and (ii) consents required pursuant
to any municipal contracts included in the Contracts; and no action or
proceeding before a court or any other governmental agency or body shall
have been instituted or threatened to restrain or prohibit the appropriate
Buyer's acquisition of the Shares, the Oklahoma City Assets or the Idaho
Assets.
7.3 No Material Adverse Change. Since the date of this Agreement, there shall
have occurred no material adverse change in (i) the business of the
Company and Fibres, taken as a whole, (ii) the condition of the Idaho
Assets, or (iii) the condition of the Oklahoma City Assets.
7.4 Updated Material Contracts. BFI shall have updated SCHEDULE 3.12 as of the
Closing Date.
7.5 Conveyancing Documents. Buyers shall have received the documents referred
to in Section 1.3 executed by the appropriate Seller.
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7.6 Lease of Maltby and Issaquah Properties. BFI and one or more of the Buyers
shall have entered into a mutually satisfactory lease pursuant to which
such Buyer shall have agreed to lease from BFI or an Affiliate of BFI the
two tracts of property described in SCHEDULE 7.6 for a term of six (6)
months and month-to-month thereafter, with rentals of $2,500 per month for
the property at Maltby and $3,500 per month for the property at Issaquah.
7.7 Vancouver Sublease. BFI and one of the Buyers shall have entered into
sublease of the property and facilities subject to the Vancouver Lease for
the remaining term of the Vancouver Lease for $11,000 per month plus other
expenses on a "triple-net basis" and with other mutually satisfactory
terms.
7.8 Noncompete Agreement. Buyers and Seller shall have entered into a
noncompete agreement in substantially the form of ANNEX O hereto
("Noncompete Agreement") providing in general for BFI and its Affiliates
not to engage in the business described in, and in the areas set forth in,
the Noncompete Agreement for a period of five (5) years after the Closing
Date.
7.9 Termination of Plans. BFI shall have terminated as to the Company and
Fibres all employee benefit plans that are profit sharing plans, pension
plans, plans described under Code Section 401(k), or any other employee
benefit pension plans (as described in Section 3(2) of ERISA).
7.10 Corporate Resignations, Terminations, Etc. BFI shall have delivered to
Buyers (i) resignations of all officers and directors of the Company and
Fibres requested by Buyers, (ii) a list of all bank accounts of the
Company and Fibres, and (iii) evidence of termination of all employees of
the Company and Fibres requested by Buyers.
7.11 Section 338(h)(10) Election. BFI shall have joined with the appropriate
Buyer in making an election under Section 338(h)(10) of the Internal
Revenue Code of 1986 with respect to the purchase and sale of the Company
Shares (but not with respect to Fibres or the Fibres Shares or CPH and the
CPH Shares) and allocated to the Company Shares the amount set forth in
SCHEDULE 7.11 (the "Section 338 Election").
7.12 Financing. Buyers shall each have obtained on terms and conditions
reasonably acceptable to each of them debt and/or equity financing in an
amount sufficient to permit Buyers to complete the transactions
contemplated by this Agreement and to provide adequate working capital for
a reasonable period after the Closing Date.
ARTICLE 8.
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CONDITIONS PRECEDENT TO OBLIGATIONS OF BFI
The obligations of BFI hereunder are, at its option, subject to the conditions
that:
8.1 Accuracy of Representations; Performance of Covenants. The representations
and warranties of Buyers contained in Article 4 of this Agreement shall be
true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; each
and all of the agreements of Buyers to be performed on or before the
Closing Date pursuant to the terms hereof shall have been performed; and
Buyers shall have delivered to BFI a certificate dated the Closing Date to
such effect.
8.2 Governmental Consents. BFI shall have received all governmental consents
required from any governmental authority or agency relating to
consummation of the transactions contemplated in this Agreement.
8.3 Receipt of Purchase Price, Etc. BFI shall have received (i) the Notes
executed by the appropriate Buyers, (ii) the Deeds of Trust executed by
Fibres, (iii) the Idaho Security Agreement executed by the appropriate
Buyer, (iv) the Vancouver Sublease executed by the appropriate Buyer, (v)
the Guarantee executed by the Guarantors, (vi) cash in the amount of
$11,471,950, and (vii) the documents referred to in Section 1.3 executed
by Waste of Idaho and Continental.
8.4 Carryover Lease of Brokerage Operations. Buyer and BFI shall have entered
into a mutually satisfactory lease agreement permitting BFI to conduct its
brokerage operations in space leased from Fibres or the Company for a
period of ninety (90) days after the Closing.
ARTICLE 9.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
9.1 Customer Names. BFI agrees that it will not disclose the customer names
and addresses and material terms in the Contracts to any person, firm,
corporation, association or other entity not affiliated with BFI for any
purpose or reason whatsoever for two (2) years after the Closing Date,
except to authorized representatives of Buyers, or as required by
applicable law. If any Seller becomes legally compelled to disclose such
information, such Seller shall provide Buyers with prompt notice of such
requirement so that Buyers may seek a protective order or other
appropriate remedy. In the event of a breach or threatened breach of the
provisions of this Section 9.1, Buyers shall be entitled to an injunction
restraining BFI from disclosing, in whole or in part, such information.
Nothing herein shall be construed as prohibiting Buyers from pursuing any
other
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<PAGE> 33
available remedy for such breach or threatened breach, including the
recovery of damages.
9.2 Confidentiality.
(a) Buyers shall hold in confidence and not disclose to any person for
any purpose the information received from BFI, Fibres or the
Company, except that Buyers may disclose to their representatives,
officers, directors, employees, agents and consultants ("Buyer
Representatives") who need to evaluate the information on their
behalf for the purposes described herein; provided, however, that
Buyers may disclose the information in response to any legally
enforceable summons or subpoena or in order to comply with any
order, law, ruling, or regulation applicable to Buyers. If any Buyer
becomes legally compelled to disclose such confidential information,
Buyer shall provide BFI with prompt notice of such requirement so
that BFI may seek a protective order or other appropriate remedy.
Each Buyer shall take all steps necessary to assure adherence by
Buyer's Representatives to the provisions of this Agreement
respecting the confidentiality of information. The obligation of any
Buyer to keep information confidential shall not apply to any
information which:
(i) is known to a Buyer prior to its disclosure by BFI;
(ii) is in general use by competitors of a Buyer;
(iii) is or becomes part of the public domain without any breach by
a Buyer of any obligation of confidentiality set forth herein;
or
(iv) is communicated to a Buyer by a third party who is not bound
by a confidentiality agreement with BFI with respect to such
information.
(b) Upon termination of this Agreement, each Buyer will, upon request of
BFI, return to BFI or provide evidence satisfactory to BFI that it
has destroyed, all information received from BFI, Fibres or the
Company in connection with the transactions contemplated by this
Agreement.
ARTICLE 10.
SURVIVAL OF REPRESENTATIONS
The representations, warranties, covenants and agreements of the parties
contained in this Agreement or in any writing delivered pursuant to the
provisions of this Agreement shall survive the consummation of the transactions
contemplated hereby and any examination on behalf of the
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parties in accordance with the terms of this Agreement; provided, that the right
of BFI or any Buyer to bring any action or make any claim for breach of any
representation or warranty or default in the performance of any covenant or
agreement shall be limited as set forth in Sections 6.3 and 6.4 hereof.
ARTICLE 11.
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual written consent of Buyers and BFI.
(b) by either Buyers or BFI:
(i) if any court of competent jurisdiction or other governmental
agency shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the transactions
contemplated hereby and such order, decree, ruling or other
action shall have become final and nonappealable; or
(ii) if the transactions contemplated hereby have not been
consummated on or before September 30, 1997, unless the
failure to consummate the transactions is the result of a
material breach of this Agreement by the party seeking to
terminate this Agreement.
(c) by Buyers if BFI breaches in any material respect any of its
representations or warranties herein or BFI fails to perform in any
material respect any of its covenants, agreements or obligations
under this Agreement, and any such breach or failure is not cured
within thirty (30) days after written notice from Buyer;
(d) by BFI if any Buyer breaches any of its representations or
warranties in any material respect herein or fails to perform in any
material respect any of its covenants, agreements, or obligations
under this Agreement, and any such breach or failure is not cured
within thirty (30) days after written notice from BFI.
11.2 Effect of Termination. In the event of termination of this Agreement by
either BFI or Buyers as provided in Section 11.1, this Agreement shall
forthwith become void and have no effect, without any liability or
obligation on the part of BFI or Buyers, other than the provisions of
Sections 9.2, 13.5 and 13.6, and except to the extent that such
termination
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results from the breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement as
provided in Sections 11.1(c) and 11.1(d).
ARTICLE 12.
POST CLOSING COVENANTS
12.1 Access to Records. From and after the Closing, the Buyers will be entitled
(i) to possession of all documents, instruments, agreements, books, and
records (including the corporate minute books and the stock transfer
records, but excluding financial records and tax records) of the Company
and Fibres, and (ii) to copies of financial records and tax records of the
Company and Fibres. BFI shall make copies of any such records as soon as
practicable after requested by Buyers.
The Buyers shall make available to BFI, following receipt of reasonable
advance notice, copies of any records delivered by BFI to the Buyers in
conjunction with the transactions contemplated hereby, if BFI requires
such copies in conjunction with any administrative or legal proceeding
involving BFI or for any other reasonable purpose.
12.2 Severance Pay. BFI shall pay or shall reimburse the Buyer for all
severance pay and related taxes, costs and expenses for any employee of
the Company or any Seller who as of the Closing was employed directly or
indirectly by the Company or Fibres or in connection with the Oklahoma
City Business or the Idaho Business and who is hired at or after the
Closing by any Buyer or retained by Fibres or the Company and terminated
without cause by a Buyer, Fibres or the Company within 120 days after the
Closing. Any such severance pay shall not exceed two weeks pay for each
full year of employment.
12.3 Employee Benefits. The Buyers shall cause each employee of the Company or
Fibres or any employee of any Seller who was employed directly in
connection with the Oklahoma City Business or the Idaho Business and who
is hired at or after the Closing by a Buyer or retained by Fibres or the
Company to be covered (i) effective immediately following the Closing by
all employee welfare benefit plans (as defined by ERISA) generally
applicable to employees with similar job descriptions of the Buyer, and
(ii) by any pension or profit sharing plans of the Buyer in which such
employees are eligible to participate, subject to applicable participation
requirements. For purposes of all employee benefit plans of a Buyer, such
employees shall be given credit for all years of service with BFI or any
affiliate of BFI. For purposes of medical and dental plans, the Buyer
shall waive or cause to be waived any deferral of coverage on account of
any prior existing condition.
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12.4 BFI Name and Logos. As soon as practicable (but in any event within 180
days) after the Closing Date, each Buyer, at its expense, shall remove all
names and logos of BFI from all Equipment. Nothing in this Agreement shall
constitute a license or authorization for a Buyer to use in any manner any
name, logo or mark owned by or licensed to BFI and its Affiliates, except
for names, logos or marks owned by Fibres or relating to the name "Fibres"
or variations thereof.
12.5 Termination of Insurance Policies. BFI will on the Closing Date or
promptly thereafter cancel any insurance policies maintained by the
Company or Fibres prior to the Closing and shall be entitled to any
refunds or other amounts paid in connection with any such cancellations.
12.6 Public Announcements. Neither Buyers nor BFI will make any public
disclosure of this Agreement or the transactions contemplated hereby
without prior consultation with the other party hereto, except such
disclosure as may be required by applicable laws or by obligations
pursuant to any listing agreement with any national securities exchange to
which either may be a party.
ARTICLE 13.
GENERAL
13.1 Assignment. This Agreement and the rights of the parties hereunder may not
be assigned (except by operation of law) prior to the Closing except with
the prior written consent of the other party, and this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
authorized successors and assigns.
13.2 Arbitration. Any controversy or claim arising out of or related to this
Agreement, or any transactions contemplated herein, that cannot be
amicably resolved, including, without limitation, whether such controversy
or claim is subject to arbitration, shall be resolved by binding
arbitration held in Seattle, Washington, in accordance with the rules of
the American Arbitration Association, subject to this Section 13.2.
Arbitration proceedings shall be conducted by a panel of three (3) persons
selected as follows: The party initiating arbitration shall select one
qualified arbitrator and the other party shall select a second qualified
arbitrator. Each party shall provide prompt written notice of the
arbitrator selected by it in accordance with the terms of this Agreement.
The two arbitrators shall select a third qualified arbitrator as soon as
possible; provided, that if the two arbitrators cannot agree on a third
arbitrator, the parties shall ask the Presiding Judge in Seattle,
Washington to appoint the third arbitrator. No arbitrator shall have or
previously have had any significant relationship with any of the parties.
The decision of any two (2) of the arbitrators on any submitted matter
shall be final.
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13.3 Definition of Affiliate. As used herein the term "Affiliate" of any person
or entity means any entity controlling, controlled by, or under common
control with, such person or entity.
13.4 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.5 Brokers. Each party agrees to indemnify the other against all loss, cost,
damage or expense arising out of claims for fees or commissions of brokers
or agents employed or alleged to have been employed by such indemnifying
party.
13.6 Fees and Expenses. Whether or not the transactions herein contemplated
shall be consummated, (i) BFI will pay the fees, expenses and
disbursements of BFI and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement
and any amendments thereto, and (ii) Buyers will pay the fees, expenses
and disbursements of Buyers and their agents, representatives, accountants
and counsel incurred in connection with the subject matter of this
Agreement and any amendments hereto.
13.7 Notices. Any notice or communication required or permitted hereunder shall
be sufficiently given if sent by first class mail, postage prepaid:
(a) If to Sellers, addressed as follows:
P.O. Box 3151
Houston, Texas 77253
Attention: Secretary
(b) If to Buyers, addressed as follows:
If to Waste or Waste of Idaho:
3510 Trenton Way
El Dorado Hills, CA 95762
If to Continental:
6950 S.W. Hampton Street
Portland, OR 97223
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13.8 Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of Washington.
13.9 Captions. The captions in this Agreement are for convenience only and
shall not be considered a part hereof or affect the construction or
interpretation of any provisions of this Agreement.
13.10 Entire Agreement. This Agreement (including the schedules and annexes
hereto) and the documents delivered pursuant hereto constitute the entire
agreement and understanding between Buyers and Sellers and supersede any
prior agreement and understanding relating to the subject matter of this
Agreement. This Agreement may be modified or amended only by a written
instrument executed by Sellers and Buyers acting through their duly
elected officers or authorized agents.
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<PAGE> 39
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
BROWNING-FERRIS
INDUSTRIES, INC.
By: ____________________________________
Title: _________________________________
BROWNING-FERRIS, INC.
By: ____________________________________
Title: _________________________________
BROWNING-FERRIS INDUSTRIES
OF IDAHO, INC.
By: ____________________________________
Title: _________________________________
CONTINENTAL PAPER
RECYCLING, L.L.C.
By: ____________________________________
Title: _________________________________
WASTE CONNECTIONS, INC.
By: ____________________________________
Title: _________________________________
WASTE CONNECTIONS OF
IDAHO, INC.
By: ____________________________________
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<PAGE> 40
Title: _________________________________
35
<PAGE> 41
SCHEDULE 1.9
DEFINITIONS
The following terms are defined in the Agreement:
"Affiliate(s)" has the meaning set forth in Section 3.13.
"Aggregate Indemnity Limit" has the meaning set forth in Section 6.3.
"Assets" means the Idaho Assets and the Oklahoma City Assets.
"BFI" means Browning-Ferris Industries, Inc., a Delaware corporation, and its
successors.
"BFI Idaho" means Browning-Ferris Industries of Idaho, Inc., an Idaho
corporation, and its successors.
"BFI OKC" means Browning-Ferris, Inc., a Delaware corporation, and its
successors.
"Buyer Representative" has the meaning set forth in Section 9.2.
"Buyers" means Continental, Waste of Idaho and Waste and their respective
successors.
"Closing" has the meaning set forth in Article 2.
"Code" has the meaning set forth in Section 6.1.
"Company" means Browning-Ferris Industries of Washington, Inc., a Washington
corporation, and its successors.
"Company Inventory" has the meaning set forth in Section 1.6(a).
"Company Receivables" has the meaning set forth in Section 1.6(a).
"Company Shares" or "Shares" means the shares of common stock, par value $10 per
share, of the Company.
"Continental" means Continental Paper Recycling L.L.C., an Oregon limited
liability company, and its successors.
"Continental Inventory Note" has the meaning set forth in Section 1.2(i).
1.9-1
<PAGE> 42
"Continental Working Capital Note" has the meaning set forth in Section 1.2(f).
"Contracts" has the meaning set forth in Section 3.12.
"CPH" means Continental Property Holdings, Inc., and its successors.
"CPH Shares" means the shares of common stock, par value $1 per share, of CPH.
"Deeds of Trust" means the First Lien Deed of Trust and the Second Lien Deed of
Trust.
"Environmental Laws" has the meaning set forth in Section 3.16.
"Equipment" has the meaning set forth in Section 3.6 and includes the equipment
set forth in Schedule 3.6.
"ERISA" has the meaning set forth in Section 6.1.
"Estimated Working Capital" has the meaning set forth in Section 1.6(a).
"Fibres" means Fibres International, Inc., a Washington corporation, and its
successors.
"Fibres Environmental Indemnity Claim" has the meaning set forth in Section
6.3(e).
"Fibres Inventory" has the meaning set forth in Section 1.6(a).
"Fibres Purchase Agreement" has the meaning set forth in Section 3.10.
"Fibres Receivables" has the meaning set forth in Section 1.6(a).
"Fibres Recycling Assets" means the assets related to recycling operations of
Fibres, including the assets described in Schedule 5.4(e).
"Fibres Recycling Business" means the recycling business conducted by Fibres.
"Fibres Remediation Loss Claim" has the meaning set forth in Section 6.3(e).
"Fibres Shares" means the shares of common stock, par value $10 per share, of
Fibres.
"Fibres Stockholders" has the meaning set forth in Section 3.10.
"Final Working Capital" has the meaning set forth in Section 1.6(b).
"Financial Data" has the meaning set forth in Section 3.15.
1.9-2
<PAGE> 43
"First Lien Deed of Trust" has the meaning set forth in Section 1.2(b).
"Guarantee" has the meaning set forth in Section 1.2(b).
"Guarantors" has the meaning set forth in Section 1.2(b).
"Hazardous Waste" has the meaning set forth in Section 3.17.
"Idaho Assets" includes the Idaho Recycling Assets and the Idaho Solid Waste
Assets.
"Idaho Business" means the Idaho Recycling Business and the Idaho Solid Waste
Business.
"Idaho Contracts" means the Idaho Recycling Contracts and the Idaho Solid Waste
Contracts.
"Idaho Inventory" has the meaning set forth in Section 1.1(c).
"Idaho Recycling Assets" has the meaning set forth in Section 1.1(c).
"Idaho Recycling Business" means the recycling processing business conducted by
BFI Idaho in and around Idaho Falls and Pocatello, Idaho.
"Idaho Recycling Contracts" has the meaning set forth in Section 1.1(c).
"Idaho Recycling Receivables" has the meaning set forth in Section 1.1(c).
"Idaho Security Agreement" has the meaning set forth in Section 1.2(d).
"Idaho Solid Waste Assets" has the meaning set forth in Section 1.1(d).
"Idaho Solid Waste Business" means the solid waste collection and transportation
business conducted by BFI Idaho in and around Idaho Falls and Pocatello, Idaho.
"Idaho Solid Waste Contracts" has the meaning set forth in Section 1.1(d).
"Idaho Solid Waste Receivables" has the meaning set forth in Section 1.1(c).
"Indemnified Party" has the meaning set forth in Section 6.5.
"Indemnifying Party" has the meaning set forth in Section 6.5.
"Indemnity Claim" has the meaning set forth in Section 6.6.
"Indemnity Event" has the meaning set forth in Section 6.1.
1.9-3
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"Indemnity Losses" has the meaning set forth in Section 6.1.
"Leases" has the meaning set forth in Section 3.13.
"Material Contracts" has the meaning set forth in Section 3.12 and includes the
Contracts set forth in Schedule 3.12.
"Material Idaho Recycling Contracts" has the meaning set forth in Section
1.1(c).
"Material Idaho Recycling Leases" has the meaning set forth in Section 1.1(c).
"Material Idaho Solid Waste Contracts" has the meaning set forth in Section
1.1(d).
"Material Idaho Solid Waste Leases" has the meaning set forth in Section 1.1(d).
"Material Leases" has the meaning set forth in Section 3.13 and includes the
Leases set forth in Schedule 3.13.
"Material OKC Contracts" has the meaning set forth in Section 1.1(b) and
includes the Contracts of BFI OKC set forth in Schedule 3.12.
"Material OKC Leases" has the meaning set forth in Section 1.1(b) and includes
the Leases of BFI OKC set forth in Schedule 3.13.
"Noncompete Agreement" has the meaning set forth in Section 7.7.
"Notes" means the $3 Million Note, the $2.5 Million Note, the $1.45 Million
Note, the Continental Working Capital Note, the Waste Working Capital Note, the
Waste Inventory Note, the Waste Bridge Note and the Continental Inventory Note.
"OKC Contracts" has the meaning set forth in Section 1.1(b).
"OKC Inventory" has the meaning set forth in Section 1.1(b).
"OKC Leases" has the meaning set forth in Section 1.1(b).
"OKC Receivables" has the meaning set forth in Section 1.1(b).
"Oklahoma City Assets" has the meaning set forth in Section 1.1(b).
"Oklahoma City Business" means the recycling processing business conducted by
BFI OKC in and around Oklahoma City, Oklahoma.
"$1.45 Million Note" has the meaning set forth in Section 1.2(d).
1.9-4
<PAGE> 45
"Permits" has the meaning set forth in Section 3.14 and includes the permits set
forth in Schedule 3.14.
"Purchase Price" has the meaning set forth in Section 1.2.
"RCRA" has the meaning set forth in Section 3.17.
"Remediation Losses" has the meaning set forth in Section 6.3(e).
"Second Lien Deed of Trust" has the meaning set forth in Section 1.2(c).
"Seller(s)" means BFI, BFI OKC, and BFI Idaho collectively or individually.
"Special Remediation Site" has the meaning set forth in Section 6.3(e).
"Stock" means the shares of common stock, par value $10 per share, of the
Company.
"$2.5 Million Note" has the meaning set forth in Section 1.2(c).
"$3 Million Note" has the meaning set forth in Section 1.2(b).
"Vancouver Business" means the solid waste collection and recycling collection
and processing business conducted by the Company in and around Vancouver,
Washington.
"Vancouver Lease" has the meaning set forth in Section 5.4.
"Vancouver Purchase Agreement" has the meaning set forth in Section 3.10.
"Waste" means Waste Connections, Inc., a Delaware corporation, and its
successors.
"Waste of Idaho" means Waste Connections of Idaho, Inc., a California
corporation, and its successors.
"Waste Bridge Note" has the meaning set forth in Section 1.2(g).
"Waste Inventory Note" has the meaning set forth in Section 1.2(h).
"Waste Working Capital Note" has the meaning set forth in Section 1.2(e).
1.9-5
<PAGE> 1
EXHIBIT 10.18
STOCK PURCHASE AGREEMENT
Dated as of January 26, 1998, by and among
Waste Connections, Inc.
Waste Connections of Idaho, Inc.
Ronald J. Mittelstaedt
James N. Cutler, Jr.
J. Bradford Bishop
<PAGE> 2
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of January 26, 1998, is entered into by
and among Waste Connections, Inc., a Delaware corporation ("WCI"), Waste
Connections of Idaho, Inc., a Delaware corporation (the "Corporation") and J.
Bradford Bishop, Ronald J. Mittelstaedt and James N. Cutler, Jr. (collectively,
the "Stockholders").
WHEREAS, the Corporation is engaged in the collection and transport of
solid waste in Idaho, and other related activities;
WHEREAS, the Stockholders own all of the issued and outstanding capital
stock of the Corporation in the amount set forth on Schedule 3.2 hereto (the
"Corporation's Stock");
WHEREAS, WCI wishes to acquire from the Stockholders all of the issued and
outstanding capital stock of the Corporation;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto, each intending to be bound hereby, agree as
follows:
1. PURCHASE OF CORPORATION'S STOCK
1.1 SHARES TO BE PURCHASED. At the Closing (as hereinafter defined), the
Stockholders shall sell and deliver to WCI all of the issued and outstanding
Corporation's Stock, being the number of shares of the Corporation set forth on
Schedule 3.2. At the Closing, WCI shall purchase the Corporation's Stock and in
exchange therefor shall deliver to the Stockholders at the Closing the purchase
price described in Section 1.2 (the "Purchase Price").
1.2 PURCHASE PRICE. The Purchase Price shall be $3,000.00. WCI shall pay
$1,000.00 to each of the Stockholders at the Closing in cash by wire transfer or
check payable in clearinghouse funds.
2. CLOSING TIME AND PLACE
Subject to the terms and conditions of this Agreement, the closing of the
transactions contemplated herein (the "Closing") shall take place concurrent
with the closing of WCI's Credit Agreement with Bank Boston, N.A. and certain
other financial institutions (the "Credit Agreement") (the "Closing Date"). The
Closing shall take place at the Law Offices of Shartsis, Friese & Ginsburg LLP,
One Maritime Plaza, Suite 1800, San Francisco, California 94111. At the Closing,
WCI, the Corporation and the Stockholders shall deliver to each other the
documents, instruments and other items described in Section 7 of this Agreement.
1
<PAGE> 3
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND THE
STOCKHOLDERS
The Corporation and the Stockholders, jointly and severally, (i) represent
and warrant that each of the following representations and warranties is true as
of the Closing Date, and (ii) agree that such representations and warranties
shall survive the Closing.
3.1 ORGANIZATION, STANDING AND QUALIFICATION. The Corporation is duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Corporation has full corporate power and authority to own and
lease its properties and to carry on its business as now conducted.
3.2 CAPITALIZATION. Schedule 3.2 sets forth, as of the Closing Date, the
authorized and outstanding capital of the Corporation, the names and addresses
of the record and beneficial owners thereof, and the number of shares so owned.
On the Closing Date, all of the issued and outstanding shares of the capital
stock of the Corporation shall be owned of record and beneficially by the
Stockholders as set forth in Schedule 3.2 and shall be free and clear of all
liens, security interests, encumbrances and claims of every kind except as set
forth in Schedule 3.2. Each share of the capital stock of the Corporation is
duly and validly authorized and issued, fully paid and nonassessable, and was
not issued in violation of any preemptive rights of any past or present
stockholder of the Corporation. No option, warrant, call, conversion right or
commitment of any kind (including any of the foregoing created in connection
with any indebtedness of the Corporation) exists which obligates the Corporation
to issue any of its authorized but unissued capital stock or other equity
interest or which obligates the Stockholders to transfer any Corporation's Stock
to any person.
3.3 ALL STOCK BEING ACQUIRED. The Corporation's Stock being acquired by
WCI hereunder constitutes all of the outstanding capital stock of the
Corporation.
3.4 AUTHORITY FOR AGREEMENT. The Corporation and each of the
Stockholders has full right, power and authority to enter into this Agreement
and to perform its or his obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Corporation. This
Agreement has been duly and validly executed and delivered by the Corporation
and each of the Stockholders, subject to the due authorization, execution and
delivery by WCI, constitutes the legal, valid and binding obligation of the
Corporation and each of the Stockholders enforceable against each of them in
accordance with its terms.
4. REPRESENTATIONS AND WARRANTIES OF WCI
2
<PAGE> 4
WCI represents and warrants to the Stockholders that the following
representations and warranties are true as of the Closing Date, and agrees that
such representations and warranties shall survive the Closing:
AUTHORIZATION OF AGREEMENT. This Agreement has been duly authorized,
executed and delivered by WCI and, subject to the due authorization, execution
and delivery by the Stockholders and the Corporation, constitutes a legal, valid
and binding obligation of WCI. WCI has full corporate power, legal right and
corporate authority to enter into and perform its obligations under this
Agreement and to carry on its business as presently conducted. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and the fulfillment of and compliance with the terms and conditions
hereof do not and will not, after the giving of notice, or the lapse of time or
otherwise: (a) violate any provisions of any judicial or administrative order,
award, judgment or decree applicable to WCI; (b) conflict with any of the
provisions of the Certificate of Incorporation or Bylaws of WCI; or (c) conflict
with, result in a breach of or constitute a default under any material agreement
or instrument to which WCI is a party or by which it is bound.
5. CONDITION PRECEDENT TO OBLIGATION OF WCI TO CLOSE
The obligations of WCI under this Agreement are subject to the
Stockholders delivery of the items which they are required to deliver under
Section 7 of this Agreement and to the concurrent closing of the Credit
Agreement.
6. CONDITION PRECEDENT TO OBLIGATION OF THE STOCKHOLDERS TO CLOSE
The obligations of the Stockholders under this Agreement are subject to
WCI's delivery of the items which it is required to deliver under Section 7 of
this Agreement and to the concurrent closing of the Credit Agreement.
7. CLOSING DELIVERIES
At the Closing, the respective parties shall make the deliveries
indicated:
7.1 WCI DELIVERIES.
WCI shall deliver the cash portion of the Purchase Price required to
be delivered on the Closing Date pursuant to Section 1.
7.2 STOCKHOLDERS DELIVERIES.
3
<PAGE> 5
(a) The Stockholders shall deliver to WCI the endorsed
certificates representing the outstanding Corporation's Stock free and
clear of all liens, security interests, claims and encumbrances.
(b) the Stockholders shall execute and deliver such other
documents and instruments as are reasonably requested by WCI in order to
consummate the transactions contemplated by this Agreement.
8. GENERAL
8.1 ADDITIONAL CONVEYANCES. Following the Closing, the Stockholders and
WCI shall each deliver or cause to be delivered at such times and places as
shall be reasonably agreed upon such additional instruments as WCI or the
Stockholders may reasonably request for the purpose of carrying out this
Agreement. The Stockholders will cooperate with WCI and/or the Corporation on
and after the Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any actions, proceedings or disputes of any
nature with respect to matters pertaining to all periods prior to the date of
this Agreement.
8.2 ASSIGNMENT. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, the successors or assigns of WCI and the
heirs, legal representatives or assigns of the Stockholders; provided, however,
that any such assignment shall be subject to the terms of this Agreement and
shall not relieve the assignor of its or his responsibilities under this
Agreement.
8.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
8.4 NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if in writing and either
delivered personally, sent by facsimile transmission or by air courier service,
or mailed by postage prepaid registered or certified U.S. mail, return receipt
requested, to the addresses designated below or such other addresses as may be
designated in writing by notice given hereunder, and shall be effective upon
personal delivery or facsimile transmission thereof or upon delivery by
registered or certified U.S. mail or one business day following deposit with an
air courier service:
If to the Stockholders: at their respective addresses set forth on
Schedule 3.2
If to WCI: Waste Connections, Inc.
4
<PAGE> 6
2260 Douglas Boulevard, Suite 280
Roseville, California 95661
Attention: Ronald J. Mittelstaedt
Fax: (916) 772-2920
With a copy to: Robert D. Evans, Esq.
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Fax: (415) 421-2922
8.5 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to its
conflict of laws provisions.
8.6 CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered a part hereof or affect the construction or
interpretation of any provisions of this Agreement.
8.7 NUMBER AND GENDER OF WORDS; CORPORATION. Whenever the singular
number is used herein, the same shall include the plural where appropriate, and
shall apply to all of such number, and to each of them, jointly and severally,
and words of any gender shall include each other gender where appropriate.
8.8 ENTIRE AGREEMENT. This Agreement (including the Schedule hereto) and
the other documents delivered pursuant hereto constitute the entire Agreement
and understanding between the Corporation, the Stockholders and WCI and
supersedes any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement may be modified or amended only by a written
instrument executed by the Corporation, the Stockholders and WCI acting through
its officers, thereunto duly authorized by its Board of Directors.
8.9 WAIVER. No waiver by any party hereto at any time of any breach of,
or compliance with, any condition or provision of this Agreement to be performed
by any other party hereto may be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or at any prior or subsequent time.
8.10 CONSTRUCTION. The language in all parts of this Agreement must be in
all cases construed simply according to its fair meaning and not strictly for or
against any party. Unless expressly set forth otherwise, all references herein
to a "day" are deemed to be a reference to a calendar day. All references to
"business day" mean any day of the year other than a Saturday, Sunday or a
public or bank holiday in California. Unless expressly stated otherwise,
cross-references herein refer to provisions within this Agreement and are not
references to the overall transaction or to any other document.
5
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
persons thereunto duly authorized as of the date first above written.
THE CORPORATION: WASTE CONNECTIONS OF IDAHO, INC.
By: ____________________________________
Ronald J. Mittelstaedt, President
THE STOCKHOLDERS:
________________________________________
J. Bradford Bishop
________________________________________
Ronald J. Mittelstaedt
________________________________________
James N. Cutler, Jr.
WCI: WASTE CONNECTIONS, INC.
By: ____________________________________
Ronald J. Mittelstaedt
Chief Executive Officer & President
7
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. PURCHASE OF CORPORATION'S STOCK................................... 1
1.1 SHARES TO BE PURCHASED...................................... 1
1.2 PURCHASE PRICE.............................................. 1
2. CLOSING TIME AND PLACE............................................ 1
3. REPRESENTATIONS AND WARRANTIES OF THE
CORPORATION AND THE STOCKHOLDERS.................................. 2
3.1 ORGANIZATION, STANDING AND QUALIFICATION.................... 2
3.2 CAPITALIZATION.............................................. 2
3.3 ALL STOCK BEING ACQUIRED.................................... 2
3.4 AUTHORITY FOR AGREEMENT..................................... 2
4. REPRESENTATIONS AND WARRANTIES OF WCI............................. 2
AUTHORIZATION OF AGREEMENT........................................ 2
5. CONDITION PRECEDENT TO OBLIGATION OF WCI TO
CLOSE............................................................. 3
6. CONDITION PRECEDENT TO OBLIGATION OF THE
STOCKHOLDERS TO CLOSE............................................. 3
7. CLOSING DELIVERIES................................................ 3
7.1 WCI DELIVERIES.............................................. 3
7.2 STOCKHOLDERS DELIVERIES..................................... 3
8. GENERAL........................................................... 4
8.1 ADDITIONAL CONVEYANCES...................................... 4
8.2 ASSIGNMENT.................................................. 4
8.3 COUNTERPARTS................................................ 4
8.4 NOTICES..................................................... 4
8.5 APPLICABLE LAW.............................................. 4
8.6 CAPTIONS.................................................... 5
8.7 NUMBER AND GENDER OF WORDS; CORPORATION..................... 5
8.8 ENTIRE AGREEMENT............................................ 5
8.9 WAIVER...................................................... 5
8.10 CONSTRUCTION................................................ 5
</TABLE>
i
<PAGE> 9
SCHEDULE 3.2
Authorized capital of Waste Connections of Idaho, Inc.: 10,000 shares
of Common Stock, with a par value of $0.01 per share.
Record owners:
(1) Ronald J. Mittelstaedt owns 100 shares of the Common Stock of Waste
Connections of Idaho, Inc. represented by Stock Certificate number 1.
Ronald J. Mittelstaedt's address is c/o Waste Connections, Inc., 2260
Douglas Boulevard, Suite 280, Roseville, California 95661.
(2) J. Bradford Bishop owns 100 shares of the Common Stock of Waste
Connections of Idaho, Inc. represented by Stock Certificate Number 2.
J. Bradford Bishop's address is c/o Continental Paper Recycling, Inc.,
6950 SW Hampton Street, Suite 200, Portland, Oregon 97223.
(3) James N. Cutler, Jr., owns 100 shares of the Common Stock of Waste
Connections of Idaho, Inc. represented by Stock Certificate Number 3.
James N. Cutler, Jr.'s address is 6950 SW Hampton Street, Suite 200,
Portland, Oregon 97223.
<PAGE> 1
EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
Dated as of February 4, 1998, by and among
Waste Connections, Inc.
Madera Disposal Systems, Inc.
Alma Sciacqua, as trustee of the Sciacqua Family Trust B
Eugene Dupreau
Melvin G. Dias
Charles B. Youngclaus
and
Alma Sciacqua
<PAGE> 2
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 4, 1998, is entered into
by and among Waste Connections, Inc., a Delaware corporation ("WCI"), Madera
Disposal Systems, Inc., a California corporation (the "Corporation"), Alma
Sciacqua, as trustee of the Sciacqua Family Trust B, (the "Sciacqua Trust"),
Eugene Dupreau ("Dupreau"), Melvin G. Dias ("Dias"), Charles B. Youngclaus
("Youngclaus" and, collectively with the Sciacqua Trust, Dupreau and Dias, the
"Shareholders"), and Alma Sciacqua ("Alma").
WHEREAS, the Corporation is engaged in the collection and transport of
solid waste in the City of Chowchilla and in the unincorporated areas of Madera
County, California, the operation of two transfer stations and a recycling
facility for the County of Madera, operating the Fairmead Landfill pursuant to
an operating agreement with the County of Madera, and other related activities;
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of the Corporation in the amount set forth on Schedule 3.2 hereto (the
"Corporation's Stock") in the amount set forth on Schedule 3.2;
WHEREAS, WCI wishes to acquire from the Shareholders all of the issued
and outstanding capital stock of the Corporation;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto, each intending to be bound hereby, agree as
follows:
1. PURCHASE OF CORPORATION'S STOCK
1.1 SHARES TO BE PURCHASED. At the Closing (as hereinafter defined),
the Shareholders shall sell and deliver to WCI all of the issued and outstanding
Corporation's Stock, being the number of shares of the Corporation set forth on
Schedule 3.2. At the Closing, WCI shall purchase the Corporation's Stock and in
exchange therefor shall deliver to the Shareholders at the Closing or thereafter
as provided by this Agreement the purchase price described in Section 1.2, plus
any and all additions to the Purchase Price payable pursuant to Section 1.4 (the
"Purchase Price").
1.2 PURCHASE PRICE. The Purchase Price shall be payable as follows:
(a) eight million one hundred eighty five thousand dollars
($8,185,000), (i) minus the Closing Date Debt (as defined in Section
3.22(a)), and (ii) plus or minus, as the case may be, the amount by
which the Closing Date Current Assets (as defined in
1
<PAGE> 3
Section 3.22(b)) are greater or less than the Closing Date Current
Liabilities (as defined in Section 3.22(b)) shall be paid to the
Shareholders at Closing in cash by wire transfer or check payable in
clearinghouse funds. The adjustment to the Purchase Price based on the
Closing Date Debt, the Closing Date Current Assets and the Closing Date
Current Liabilities shall be based on estimates of such amounts provided
at the Closing. Within 120 days after the Closing, WCI and the
Shareholders' Representative (as hereinafter defined) shall determine
the actual Closing Date Debt, Closing Date Current Assets and Closing
Date Current Liabilities. If the difference between the actual amounts
of such items and the estimated amounts provided at the Closing Date
results in an increase in the amount that should have been paid at the
Closing over the amount that was so paid, WCI shall promptly pay such
amount to the Shareholders in the same proportion as cash was paid to
them at the Closing; if the result is a decrease in the amount that
should have been paid at the Closing below the amount that was so paid,
the Shareholders shall promptly pay such amount to WCI in the same
proportion as they received cash at the Closing. Of the cash portion of
the Purchase Price paid at the Closing, five million five hundred
forty-five thousand dollars ($5,545,000) shall be paid to the Sciacqua
Trust and the balance shall be paid to Dupreau, Dias and Youngclaus as
provided in Schedule 3.2.
(b) At the Closing, WCI shall deliver to Dupreau, Dias and
Youngclaus 1,000,000 shares (the "Shares") of its Common Stock, $0.01
par value (the "WCI Stock") as follows: Dupreau-333,333 shares;
Dias-333,334 shares; and Youngclaus- 333,333 shares.
(c) At the Closing, WCI shall deliver to Dupreau, Dias and
Youngclaus warrants (the "Warrants") to purchase an aggregate of 200,000
shares of WCI Stock, substantially in the form of Exhibit 1.2(c), with
an exercise price of four dollars ($4.00) per share of WCI Stock as
follows: Dupreau-Warrants for 66,667 shares; Dias-Warrants for 66,666
shares; and Youngclaus-Warrants for 66,667 shares.
The Shareholders acknowledge that the allocation of the Purchase Price
among the Shareholders has been agreed to by the Shareholders among themselves
as provided in Schedule 3.2. Such allocation provides that certain of the
Shareholders will receive more cash and fewer Shares and Warrants, and
conversely that certain of the Shareholders will receive more Shares and
Warrants and less cash, than would be the case if the cash, Shares and Warrants
were allocated in proportion to their ownership of the Corporation's Stock.
1.3 ADDITIONAL CONTINGENT PURCHASE PRICE. The Purchase Price may be
increased by the additional contingent payments described in this Section.
(a) If, prior to the third anniversary of the date of this
Agreement (the "Signing Date"), the Corporation enters into an exclusive
franchise agreement to provide residential refuse collection services to
the City of Madera for a minimum term of at least five years on terms
satisfactory to WCI, WCI shall pay to the Procuring Shareholders (as
2
<PAGE> 4
defined below) as additional contingent Purchase Price cash in the
amount of six hundred thousand dollars ($600,000), which amount shall be
paid on the Closing Date if such franchise agreement is entered into on
or prior to the Closing Date or thirty (30) days after the date such
franchise agreement is entered into if it is entered into after the
Closing Date.
(b) If, prior to the third anniversary of the Signing Date, the
Corporation enters into exclusive franchise agreements on terms
satisfactory to WCI with any of the municipalities of Los Banos, Kerman
or Dos Palos, or any other municipality in Madera, Kings, Merced and
Fresno Counties not otherwise provided for in this Agreement, WCI shall
pay to the Procuring Shareholders as additional contingent Purchase
Price a cash amount equal to ten percent (10%) of the projected gross
revenue (after deduction of any franchise fee) expected to be received
by the Corporation pursuant to such exclusive franchise agreement during
the first year of its term, which amount shall be paid on the Closing
Date if such franchise agreement is entered into on or prior to the
Closing Date or thirty (30) days after the date such franchise agreement
is entered into if it is entered into after the Closing Date.
(c) If, prior to the third anniversary of the Signing Date, the
Corporation enters into an extension, on terms at least as favorable to
the Corporation as the franchise agreement in effect on the Signing
Date, of its existing exclusive franchise agreement with the County of
Madera for at least seven (7) years from the present termination date of
such agreement or an extension, on terms at least as favorable to the
Corporation as the franchise agreement in effect on the Signing Date, of
its existing exclusive franchise agreement with the City of Chowchilla
for at least five (5) years from the present termination date of such
agreement, then, in each such case, WCI shall pay the Procuring
Shareholders as additional contingent Purchase Price a cash amount equal
to five percent (5%) of the projected gross revenue (after deduction of
any franchise fee) expected to be received by the Corporation pursuant
to such exclusive franchise agreement during the first year of such
extension, which amount shall be paid on the Closing Date if such
extension is entered into on or prior to the Closing Date or thirty (30)
days after the date such extension is entered into if it is entered into
after the Closing Date.
(d) If, prior to the third anniversary of the Signing Date, any
of the Shareholders provides substantial assistance to WCI or any of its
subsidiaries in acquiring directly or indirectly (through asset
purchase, stock purchase, merger or otherwise) the waste collection
operations of any other company providing such services within a
seventy-five (75) mile radius of Madera, California, including without
limitation the waste collection operations of Turlock Scavenger and
EMADCO, WCI shall pay the Procuring Shareholders as additional
contingent Purchase Price a cash amount equal to three percent (3%) of
the projected gross revenue (after deduction of any franchise fee) with
respect to such operations during the first year after they are acquired
by WCI, which amount shall be paid on the Closing Date if such
acquisition is consummated on or
3
<PAGE> 5
prior to the Closing Date or thirty (30) days after the date any such
acquisition is consummated if consummated after the Closing Date. WCI
shall have sole discretion in determining whether and on what terms it
will consummate any such acquisition, and WCI shall not be liable to any
of the Procuring Shareholders for any decision not to pursue any such
acquisition or its failure to consummate any such acquisition, without
regard to the reason therefor.
(e) If on March 1, 1999, the Corporation's franchise agreement
with the County of Madera (or any extension described in Section 1.3(c))
remains in effect and the County of Madera has not threatened to
terminate or revoke such franchise agreement, the Corporation shall pay
to Dupreau, Dias and Youngclaus, in equal shares, as additional
contingent Purchase Price cash in the amount of two million eight
hundred thousand dollars ($2,800,000), and upon receipt of such payment
Dupreau, Dias and Youngclaus shall return their shares of WCI Stock and
Warrants to WCI for cancellation. WCI's obligations under this Section
1.3(e) shall terminate and be of no further force or effect on the
closing date of a public offering of WCI common stock with an aggregate
net proceeds to WCI of at least five million dollars ($5,000,000). So
long as WCI's obligations under this Section 1.3(e) remain in effect,
Dupreau, Dias and Youngclaus shall not dispose of any of their WCI Stock
or Warrants. Dupreau, Dias and Youngclaus may elect, by written notice
to WCI, to forego such payment of additional contingent Purchase Price,
in which event they may retain their WCI Stock and Warrants.
(f) For purposes of this Section 1.3, a Shareholder shall be
deemed a "Procuring Shareholder" if such Shareholder is an employee of,
or consultant to, the Corporation or WCI at the time the event in
question occurs.
(g) Subject to satisfaction of Federal and State Securities laws
and execution by the Procuring Shareholders of such agreements
containing such representations as counsel for WCI shall advise is
reasonably necessary to satisfy such laws, the Procuring Shareholders
may elect to take all or any portion of the additional contingent
payments in shares of WCI Stock in lieu of receiving a cash payment. Any
Procuring Shareholder electing to receive shares of WCI Stock shall
advise WCI at least ten (10) days prior to the date any such payment is
due pursuant to this Section of such Procuring Shareholder's intention
to receive some or all of the additional continent payments in shares of
WCI Stock and of the amount of such payments with respect to which such
election is made. Subject to satisfaction of State and Federal
Securities laws as aforesaid, WCI shall issue to such Procuring
Shareholders on the date payment of such additional contingent payments
are due shares of WCI Stock in a number determined by dividing the
amount of the additional contingent payment elected to be received in
shares of WCI Stock by the Fair Market Value of a share of WCI Stock. If
such stock is to be delivered prior to the time that a public market for
the WCI Stock exists, the Fair Market Value of WCI Stock shall be
determined by the Board of Directors of WCI in good faith. If such stock
is to be delivered at a time when a public market for WCI Stock exists,
Fair Market Value shall
4
<PAGE> 6
mean the average of the closing price of the WCI Stock as quoted on the
NASDAQ Stock Market or the principal exchange on which the WCI Stock is
listed if such stock is listed on an exchange for the ten successive
trading days for which a closing price is quoted ending on the third
trading day prior to the date on which such additional contingent
payment is due. The Fair Market Value and the number of shares of WCI
Stock to be delivered pursuant to this Section shall be appropriately
adjusted in the event of any change in the WCI Stock between the first
day for which a closing price is quoted in determining the Fair Market
Value and such date, including without limitation any stock dividend,
stock split, reverse stock split, recapitalization, reorganization,
merger or consolidation. WCI shall not be obligated to issue any
fractional shares of WCI Stock, but shall instead pay the Shareholder
entitled thereto cash in lieu of any fractional share equal to the Fair
Market Value multiplied by the fraction of a share of WCI Stock that
would otherwise be issued.
1.4 EXCLUDED ASSETS. The Assets of the Corporation listed on Schedule
1.4 (the "Excluded Assets") shall be distributed to the Shareholders prior to
the Closing, and WCI shall acquire no interest in or claim to any of the
Excluded Assets.
2. CLOSING TIME AND PLACE
Subject to the terms and conditions of this Agreement, the closing of
the transactions contemplated herein (the "Closing") shall take place on such
date (the "Closing Date") after the consents required by Section 6.7 have been
obtained (or WCI has waived the requirement that one or more such consents be
obtained) as WCI and the Shareholders' Representative shall agree. The Closing
shall take place at the Law Offices of Shartsis, Friese & Ginsburg LLP, One
Maritime Plaza, Suite 1800, San Francisco, California 94111. At the Closing,
WCI, the Corporation and the Shareholders shall deliver to each other the
documents, instruments and other items described in Section 8 of this Agreement.
The Closing Date shall occur no earlier than February 5, 1998, but shall be
deemed effective as of February 1, 1998, for financial reporting purposes.
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION,
THE SHAREHOLDERS AND ALMA
The Corporation, the Shareholders and Alma, jointly and severally, (i)
represent and warrant that each of the following representations and warranties
is true as of the Signing Date and will be true as of the Closing Date, and (ii)
agree that such representations and warranties shall survive the Closing.
3.1 ORGANIZATION, STANDING AND QUALIFICATION. The Corporation is duly
organized, validly existing and in good standing under the laws of the State of
California. The Corporation has full corporate power and authority to own and
lease its properties and to carry on its business
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as now conducted. The Corporation is not required to be qualified or licensed to
conduct business as a foreign corporation in any other jurisdiction.
3.2 CAPITALIZATION. Schedule 3.2 sets forth, as of the Signing Date,
the authorized and outstanding capital of the Corporation, the name, addresses
and social security numbers or taxpayer identification numbers of the record and
beneficial owners thereof, the number of shares so owned, and the allocation of
the cash, Shares and Warrants among the Shareholders as agreed to among
themselves. On the Closing Date, all of the issued and outstanding shares of the
capital stock of the Corporation shall be owned of record and beneficially by
the Shareholders as set forth in Schedule 3.2 and shall be free and clear of all
liens, security interests, encumbrances and claims of every kind except as set
forth in Schedule 3.2. Each share of the capital stock of the Corporation is and
on the Closing Date will be duly and validly authorized and issued, fully paid
and nonassessable, and was not issued in violation of any preemptive rights of
any past or present shareholder of the Corporation. No option, warrant, call,
conversion right or commitment of any kind (including any of the foregoing
created in connection with any indebtedness of the Corporation) exists which
obligates the Corporation to issue any of its authorized but unissued capital
stock or other equity interest, which obligates the Shareholders to transfer any
Corporation's Stock to any person.
3.3 ALL STOCK BEING ACQUIRED. The Corporation's Stock being acquired
by WCI hereunder constitutes all of the outstanding capital stock of the
Corporation.
3.4 AUTHORITY FOR AGREEMENT. The Corporation, each of the
Shareholders and Alma has full right, power and authority to enter into this
Agreement and to perform its, his or her obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Corporation. This Agreement has been duly and validly executed and delivered by
the Corporation, each of the Shareholders and Alma and, subject to the due
authorization, execution and delivery by WCI, constitutes the legal, valid and
binding obligation of the Corporation, each of the Shareholders and Alma
enforceable against each of them in accordance with its terms.
3.5 NO BREACH OR DEFAULT. Except as disclosed on Schedule 3.5, the
execution and delivery by the Corporation and the Shareholders of this
Agreement, and the consummation by the Shareholders of the transactions
contemplated hereby, will not:
(a) result in the breach of any of the terms or conditions of,
or constitute a default under, or allow for the acceleration or
termination of, or in any manner release any party from any obligation
under, any mortgage, lease, note, bond, indenture, or material contract,
agreement, license or other instrument or obligation of any kind or
nature to which the Corporation or any of the Shareholders is a party,
or by which the Corporation, or any of its assets, is or may be bound or
affected; or
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(b) violate any law or any order, writ, injunction or decree of
any court, administrative agency or governmental authority, or require
the approval, consent or permission of any governmental or regulatory
authority; or
(c) violate the Articles of Incorporation or Bylaws of the
Corporation.
3.6 SUBSIDIARIES. Schedule 3.6 lists as of the Signing Date any and
all subsidiaries of the Corporation and any securities of any other corporation
or any securities or other interest in any other business entity owned by the
Corporation or any of its subsidiaries.
3.7 FINANCIAL STATEMENTS. The Corporation has delivered to WCI, as
Schedule 3.7, copies of financial statements ("Financial Statements") for the
fiscal years ended December 31, 1995 and 1996, audited by Larry A. Coffin, CPA,
and unaudited interim financial statements for the Corporation for the period
ended September 30, 1997 (the "Balance Sheet Date"), which interim financial
statements were not compiled, reviewed or audited by Larry A. Coffin, CPA. The
Financial Statements are true and correct and fairly present (i) the financial
position of the Corporation as of the respective dates of the balance sheets
included in said statements, and (ii) the results of operations for the
respective periods indicated. The Financial Statements have been prepared in
accordance with generally accepted accounting principles, applied consistently
with prior periods. Except to the extent reflected or reserved against in the
Corporation's balance sheet as of the Balance Sheet Date, or as disclosed on
Schedule 3.7 or Schedule 3.8, the Corporation did not have as of the Balance
Sheet Date, nor will it have as of the Closing Date, any liabilities of any
nature, whether accrued, absolute, contingent or otherwise, including, without
limitation, tax liabilities due or to become due except, with respect to the
period from the Signing Date through the Closing Date, as permitted by Section
5.2(d).
3.8 LIABILITIES. Parts I, II, III and IV of Schedule 3.8, are
accurate lists and descriptions of all liabilities of the Corporation required
to be described below in the format set forth below.
(a) Part I of Schedule 3.8 list, as of the Signing Date, other
than with respect to trade payables and as of the end of the month prior
to the Signing Date with respect to trade payables, all indebtedness for
money borrowed and all other fixed and uncontested liabilities of any
kind, character and description, whether reflected or not reflected on
the Financial Statements and whether accrued or absolute, and states as
to each such liability the amount of such liability and to whom payable.
From the date as of which information is provided with respect to trade
payables, trade payables have been incurred only in the ordinary course
of business consistent with comparable prior periods.
(b) Part II of Schedule 3.8 lists, as of the Signing Date, all
claims, suits and
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proceedings which are pending against the Corporation and, to the
knowledge of the Corporation and the Shareholders, all contingent
liabilities and all claims, suits and proceedings threatened or
anticipated against the Corporation. For each such liability, the
following is provided in Part II of Schedule 3.8:
(i) a summary description of such liability together
with copies of all material documents, reports and other records
relating thereto;
(ii) all amounts claimed or relief sought with respect
to such liability and the identity of the claimant; and
(iii) without limitation of the foregoing, (A) the name
of each court, agency, bureau, board or body before which any
such claim, suit or proceeding is pending, including, without
limitation, those arising under Environmental Laws (as defined
in Section 3.24), those relating to personal injury or property
damage (including all workers' compensation and occupational
disease and injury claims, suits and proceedings) and those
citations arising under the Federal Occupational Safety and
Health Act or any comparable state law, (B) the date such claim,
suit or proceeding was instituted, (C) the parties to such
claim, suit or proceeding, (D) a description of the factual
basis alleged to underlie such claim, suit or proceeding,
including the date or dates of all material occurrences, (E) the
amount claimed and other relief sought, and (F) all material
pleadings, briefs and other documents relating thereto to the
extent the same are in the possession or under the control of
the Corporation or the Shareholders.
(c) Part III of Schedule 3.8 list, as of the Signing Date and to
the extent not otherwise included in Part I of Schedule 3.8, all liens,
claims and encumbrances secured by or otherwise affecting any asset of
the Corporation (including any Corporate Property, as hereafter
defined), including a description of the nature of such lien, claim or
encumbrance, the amount secured if it secures a liability, the nature of
the obligation secured, and the party holding such lien, claim or
encumbrance.
(d) Part IV of Schedule 3.8 lists, as of the Signing Date and to
the extent not otherwise included in Part I or Part III of Schedule 3.8,
all real and material personal property leasehold interests or to which
the Corporation is a party as lessor or lessee or, to the knowledge of
the Corporation or the Shareholders, affecting or relating to any
Corporate Property, including a description of the nature and principal
terms of such leasehold interest and the identity of the other party
thereto.
Except as described on the applicable part of Schedule 3.8,
neither the Corporation nor any of the Shareholders has made any payment or
committed to make any payment since the Balance Sheet Date on or with respect to
any of the liabilities or obligations listed on Schedule 3.8 except, in the case
of liabilities and obligations listed on Parts I, III and IV of Schedule 3.8,
periodic payments required to be made under the terms of the agreements or
instruments governing such obligations or liabilities.
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3.9 CONDUCT OF BUSINESS. Except as set forth on Schedule 3.21, since the
Balance Sheet Date:
(a) The business of the Corporation has been conducted only in
the ordinary course; and
(b) There has been no change in the condition (financial or
otherwise) of the assets, liabilities or operations of the Corporation
other than changes in the ordinary course of business, none of which
either singly or in the aggregate has been materially adverse.
3.10 PERMITS AND LICENSES.
(a) Schedule 3.10(a) is a full and complete list, and includes
copies, of all material permits, licenses, franchises, and service
agreements pursuant to which the Corporation is authorized to collect
and haul industrial, commercial and residential solid waste (the
"Collection Franchises"), and of all other material permits, licenses,
titles (including motor vehicle titles and current registrations), fuel
permits, zoning and land use approvals and authorizations, including,
without limitation, any conditional or special use approvals or zoning
variances, occupancy permits, and any other similar documents
constituting a material authorization or entitlement or otherwise
material to the operation of the business of the Corporation
(collectively the "Governmental Permits") owned by, issued to, held by
or otherwise benefiting the Corporation or the Shareholders as of the
Signing Date. The status of the Governmental Permits related to the
disposal areas owned or used by the Corporation, including, without
limitation, any conditions thereto and, if applicable, the expiration
dates thereof, are also described in Schedule 3.10(a). Schedule 3.10(a)
also sets forth the name of any third party from whom the Shareholders,
the Corporation or WCI must obtain consent (the "Required Governmental
Consents") in order to effect a direct or indirect transfer of the
Collection Franchises or other Governmental Permits required as a result
of the consummation of the transactions contemplated by this Agreement.
Except as set forth on Schedule 3.10(a), all of the Collection
Franchises and other Governmental Permits enumerated and listed on
Schedule 3.10(a) are adequate for the operation of the business of the
Corporation and of each Corporate Property as presently operated and are
valid and in full force and effect. All of said Collection Franchises
and other Governmental Permits and agreements have been duly obtained
and are in full force and effect, and there are no proceedings pending
or, to the knowledge of the Corporation or the Shareholders, threatened
which may result in the revocation, cancellation, suspension or adverse
modification of any of the same. Neither the Corporation nor any of the
Shareholders has any knowledge of any reason why all such Governmental
Permits and agreements will not remain in effect after consummation of
the transactions contemplated hereby.
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(b) Schedule 3.10(b) includes: (i) all records, notifications,
reports, permit and license applications, engineering and geologic
studies, and environmental impact reports, tests or assessments
(collectively, "Records, Notifications and Reports") that (A) are
material to the operation of the business of the Corporation, or (B)
relate to the discharge or release of materials into the environment
and/or the handling or transportation of waste materials or hazardous or
toxic substances or otherwise relate to the protection of the public
health or the environment, or (C) were filed with or submitted to
appropriate governmental agencies during the past 24 months by the
Corporation or any of the Shareholders or their agents, and (ii) all
material notifications from such governmental agencies to the
Corporation, the Shareholders or their agents in response to or relating
to any of such Records, Notifications and Reports.
(c) Schedule 3.10(c) lists, as of the Signing Date, each
facility owned, leased, operated or otherwise used by the Corporation,
the ownership, lease, operation or use of which is being transferred to,
assumed by or otherwise acquired directly or indirectly by WCI pursuant
to this Agreement (each, a "Facility" and collectively, the
"Facilities"). Except as otherwise disclosed on Schedule 3.10(c):
(i) Each Facility is fully licensed, permitted and
authorized to carry on its current business under all applicable
federal, state and local statutes, orders, approvals, zoning or
land use requirements, rules and regulations and no Facility is a
non-conforming use or otherwise subject to any restrictions
regarding reconstruction.
(ii) All activities and operations at each Facility are
being and have been conducted in compliance in all material
respects with the requirements, criteria, standards and
conditions set forth in all applicable federal, state and local
statutes, orders, approvals, permits, zoning or land use
requirements and restrictions, variances, licenses, rules and
regulations.
(iii) Each Facility is located on real property owned or
leased by a Corporation (each a "Facility Property") and each
Facility Property owned by the Corporation is legally described
on the surveys or site plans attached to Schedule 3.10(c) (the
"Facility Surveys/Site Plans"), each of which when delivered will
accurately depict the respective Facility Property.
(iv) There are no circumstances, conditions or reasons
which are likely to be the basis for revocation or suspension of
any Facility's site assessments, permits, licenses, consents,
authorizations, zoning or land use permits, variances or
approvals relating to any Facility owned by a Corporation or
owned by any of the Shareholders or an Affiliate (as hereinafter
defined) of any of the Shareholders and leased to the
Corporation, and to the knowledge of the Corporation and the
Shareholders there are no circumstances, conditions or
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reasons which are likely to be the basis for revocation or
suspension of any site assessment, permits, licenses, consents,
authorizations, zoning or land use permits, variances or
approvals relating to any Facility.
3.11 CERTAIN RECEIVABLES. Schedule 3.11 is an accurate list as of the
Signing Date of the accounts and notes receivable of the Corporation from and
advances to employees, former employees, officers, directors, the Shareholders
and Affiliates of the foregoing. For purposes of this Agreement, the term
"Affiliate" means, with respect to any person, any person that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with such person, and in the case of a Corporation
includes directors and officers, in the case of individuals includes the
individual's spouse, father, mother, grandfather, grandmother, brothers,
sisters, children and grandchildren and in the case of a trust includes the
grantors, trustees and beneficiaries of the trust.
3.12 FIXED ASSETS AND REAL PROPERTY.
(a) Schedule 3.12(a) lists, as of the Signing Date,
substantially all the fixed assets (other than real estate) of each
Corporation, including, without limitation, identification of each
vehicle by description and serial number, identification of machinery,
equipment and general descriptions of parts, supplies and inventory.
Except as described on Schedule 3.12(a), all of the Corporation's
containers, vehicles, machinery and equipment necessary for the
operation of its business are in operable condition, and all of the
motor vehicles and other rolling stock of each Corporation are in
material compliance with all applicable laws, rules and regulations. All
leases of fixed assets are in full force and effect and binding upon the
parties thereto; neither the Corporation nor, to the knowledge of the
Corporation or the Shareholders, any other party to such leases is in
breach of any of the material provisions thereof.
(b) Each parcel of real property leased, owned or being
purchased by the Corporation as of the Signing Date (the "Corporate
Property"), including the legal description and address thereof, is
listed on Schedule 3.12(b) - Part I, and attached to said Schedule
3.12(b) - Part I are copies of all leases, deeds, outstanding mortgages,
other encumbrances and title insurance policies or lawyer's title
opinions relating to each Corporate Property, as well as a current
commitment for title insurance issued by a title insurance company
satisfactory to WCI with respect to each Corporate Property together
with copies of all of the title exceptions referred to in said
commitments. All leases listed on Schedule 3.12(b) - Part I are and
shall be in full force and effect and binding on the parties thereto.
Except as described on Schedule 3.12(b) - Part II, there are no material
physical or mechanical defects in or any Facility located on any
Corporate Property and each such Facility is in good condition and
repair.
(c) The Corporation has good, valid and marketable title to all
properties and assets, real, personal, and mixed, tangible and
intangible, actually used or necessary for
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the conduct of its business, free of any encumbrance or charge of any
kind except: (i) liens for current taxes not yet due; (ii) minor
imperfections of title and encumbrances, if any, that are not
substantial in amount, do not materially detract from the value of the
property subject thereto, do not materially impair the value of the
Corporation, and have arisen only in the ordinary course of business and
consistent with past practice; and (iii) the liens identified on Part
III of Schedule 3.8 (collectively, the "Permitted Liens"). Except as
described on Schedule 3.12(b) - Part I, there are and as of the Closing
Date will be no leases, occupancy agreements, options, rights of first
refusal or any other agreements or arrangements, either oral or written,
that create or confer in any person or entity the right to acquire,
occupy or possess, now or in the future, any Facility, any Corporate
Property, or any portion thereof, or create in or confer on any person
or entity any right, title or interest therein or in any portion
thereof.
3.13 ACQUISITION/DISPOSAL OF ASSETS. Except as indicated on Schedule
3.13, since the Balance Sheet Date, the Corporation has not acquired or sold or
otherwise disposed of any properties or assets which, singly or in the
aggregate, have a value in excess of $10,000, or which are material to the
operation of the Corporation's business as presently conducted, without the
prior written consent of WCI.
3.14 CONTRACTS AND AGREEMENTS; ADVERSE RESTRICTIONS.
(a) Schedule 3.14(a) lists, as of the Signing Date, and includes
copies of, all material contracts and agreements (other than leases
included with Schedule 3.12(b) and documents included with Schedule
3.12(b)) to which the Corporation is a party or by which it or any of
its property is bound (including, but not limited to, joint venture or
partnership agreements, contracts with any labor organizations,
promissory notes, loan agreements, bonds, mortgages, deeds of trust,
liens, pledges, conditional sales contracts or other security
agreements). Except as disclosed on Schedule 3.14(a), all such contracts
and agreements included in Schedule 3.14(a) are and on the Closing Date
shall be in full force and effect and binding upon the parties thereto.
Except as described or cross referenced on Schedule 3.14(a), neither the
Corporation nor, to the Corporation's or any of the Shareholders'
knowledge, any other parties to such contracts and agreements is in
breach thereof, and none of the parties has threatened to breach any of
the material provisions thereof or notified the Corporation or any of
the Shareholders of a default thereunder, or exercised any options
thereunder. None of such contracts, agreements and licenses requires
notice to, or consent or approval of, any third party to any of the
transactions contemplated hereby, except such consents and approvals as
are listed on Schedule 3.14(a).
(b) Except as set forth on Schedule 3.14(b), there is no
outstanding judgment, order, writ, injunction or decree against the
Corporation, the result of which could materially adversely affect the
Corporation or its business or any of the Corporate
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Properties, nor has the Corporation been notified that any such
judgment, order, writ, injunction or decree has been requested.
3.15 INSURANCE. Schedule 3.15 is a complete list and includes copies,
as of the Signing Date, of all insurance policies in effect on the Signing Date
or, with respect to "occurrence" policies that were in effect, carried by the
Corporation in respect of the Corporate Properties or any other property used by
the Corporation specifying, for each policy, the name of the insurer, the type
of risks insured, the deductible and limits of coverage, and the annual premium
therefor. The Corporation currently carries insurance in the type and amount
ordinarily carried by owners or corporations in similar circumstances, in
respect to the Corporation' properties, assets and business. During the last
five years, there has been no lapse in any material insurance coverage of the
Corporation. For each insurer providing coverage for any of the contingent or
other liabilities listed on Schedule 3.8, except to the extent otherwise set
forth in Part II of Schedule 3.8, each such insurer, if required, has been
properly and timely notified of such liability, no reservation of rights letters
have been received by the Corporation and the insurer has assumed defense of
each suit or legal proceeding. All such proceedings are fully covered by
insurance, subject to normal deductibles.
3.16 PERSONNEL. Schedule 3.16 is a complete list, as of the Signing
Date, of all officers, directors and employees (by type or classification) of
the Corporation and their respective rates of compensation, including (i) the
portions thereof attributable to bonuses, (ii) any other salary, bonus, stock
option, equity participation, or other compensation arrangement made with or
promised to any of them, and (iii) copies of all employment agreements with
non-union officers, directors and employees. Schedule 3.16 shall also lists the
driver's license number for each driver of the Corporation's motor vehicles.
3.17 BENEFIT PLANS AND UNION CONTRACTS.
(a) Schedule 3.17(a) is a complete list as of the Signing Date,
and includes complete copies, of all employee benefit plans and
agreements currently maintained or contributed to by the Corporation,
including employment agreements and any other agreements containing
"golden parachute" provisions, retirement plans, welfare benefit plans
and deferred compensation agreements, together with copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Signing Date. Except for the
employee benefit plans described on Schedule 3.17(a), the Corporation
has no other pension, profit sharing, deferred compensation, stock
option, employee stock purchase or other employee benefit plans or
arrangements with any party. Except as disclosed on Schedule 3.17(a),
all employee benefit plans listed on Schedule 3.17(a) are and shall be
fully funded and in substantial compliance with all applicable federal,
state and local statutes, ordinances and regulations. All such plans
that are intended to qualify under Section 401(a) of the Internal
Revenue Code have been determined by the Internal Revenue Service to be
so qualified, and copies of such determination letters are included as
part of Schedule 3.17(a). Except as disclosed on Schedule 3.17(a), all
reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including,
but not limited to, actuarial reports, audits or tax returns) have been
timely filed or distributed, and copies thereof are included as part of
Schedule
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3.17(a). All employee benefit plans listed on such Schedule have been
operated in accordance with the terms and provisions of the plan
documents and all related documents and policies. The Corporation has
not incurred any liability for excise tax or penalty due to the Internal
Revenue Service or U.S. Department of Labor nor any liability to the
Pension Benefit Guaranty Corporation for any employee benefit plan, nor
has the Corporation, nor party-in-interest or disqualified person,
engaged in any transaction or other activity which would give rise to
such liability. The Corporation has not participated in or made
contributions to any "multi-employer plan" as defined in the Employee
Retirement Income Security Act of 1974 ("ERISA"), nor would the
Corporation or any affiliate be subject to any withdrawal liability with
respect to such a plan if any such employer withdrew from such a plan
immediately prior to the Signing Date. No employee pension benefit plan
is under funded on a termination basis as of the date of this Agreement.
(b) Schedule 3.17(b) is a complete list, as of the Signing Date,
and includes complete copies of all union contracts and agreements
between the Corporation and any collective bargaining group. The
Corporation is in compliance in all material respects with all
applicable federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, and is not engaged in any unfair labor
practice. There is no charge pending or, to the Corporation's or the
Shareholders' knowledge, threatened, against the Corporation before any
court or agency and alleging unlawful discrimination in employment
practices and there is no charge of or proceeding with regard to any
unfair labor practice against it pending before the National Labor
Relations Board. There is no labor strike, dispute, slow down or
stoppage as of the Signing Date, existing or threatened against the
Corporation nor has the Corporation experienced any labor strike,
slow-down, work stoppage, labor difficulty or other job action during
the last five years. No union organizational activity exists respecting
employees of the Corporation not currently subject to a collective
bargaining agreement. The union contracts or other agreements delivered
as part of Schedule 3.17(b) constitute all agreements with the unions or
other collective bargaining groups, and there are no other arrangements
or established practices relating to the employees covered by any
collective bargaining agreement; and Schedule 3.17(b) will contain as of
the date it is delivered a list of all arbitration or grievance
proceedings that have occurred since the Balance Sheet Date. No one has
petitioned within the last five years, and no one is now petitioning,
for union representation of any employees of the Corporation.
(c) No payment made to any employee, officer, director or
independent contractor of the Corporation (the "Recipient") pursuant to
any employment contract,
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severance agreement or other arrangement (the "Golden Parachute
Payment") will be nondeductible by the Corporation because of the
application of Sections 280G and 4999 of the Code to the Golden
Parachute Payment, nor will the Corporation be required to compensate
any Recipient because of the imposition of an excise tax (including any
interest or penalties related thereto) on the Recipient by reason of
Sections 280G and 4999 of the Code.
3.18 TAXES.
(a) The Corporation has timely filed or will timely file all
requisite federal, state, local and other tax and information returns
due for all fiscal periods ended on or before the date of this
Agreement. All such returns are accurate and complete. Except as set
forth on Schedule 3.18, there are no open years (other than those within
the statute of limitations), examinations in progress, extensions of any
statute of limitations or claims against the Corporation relating to
federal, state, local or other taxes (including penalties and interest)
for any period or periods prior to and including the Signing Date and no
notice of any claim for taxes has been received. Copies of (i) any tax
examinations, (ii) extensions of statutory limitations and (iii) the
federal income, and state franchise, income and sales tax returns of the
Corporation for its last three fiscal years are attached as part of
Schedule 3.18. Copies of all other federal, state, local and other tax
and information returns for all prior years of the Corporation's
existence have been made available to WCI and are among the records of
the Corporation which will accrue to WCI at the Closing. The Corporation
has not been contacted by any federal, state or local taxing authority
regarding a prospective examination.
(b) Except as set forth on Schedule 3.18 (which schedule also
includes the amount due with respect to such Corporation) the
Corporation has duly paid all taxes and other related charges required
to be paid prior to the date of this Agreement. The reserves for taxes
contained in the Financial Statements of the Corporation are adequate to
cover its tax liability as of the date of this Agreement.
(c) The Corporation has withheld all required amounts from its
employees for all pay periods in full and complete compliance with the
withholding provisions of applicable federal, state and local laws. All
required federal, state and local and other returns with respect to
income tax withholding, social security, and unemployment taxes have
been duly filed by the Corporation for all periods for which returns are
due, and the amounts shown on all such returns to be due and payable
have been paid in full.
3.19 COPIES COMPLETE. Except as disclosed on Schedule 3.19, the
certified copies of the Articles of Incorporation and Bylaws of the Corporation,
both as amended to the Signing Date, and the copies of all leases, instruments,
agreements, licenses, permits, certificates or other documents that have been
delivered to WCI in connection with the transactions contemplated hereby are
complete and accurate as of the Signing Date and are true and correct
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copies of the originals thereof. Except as specifically disclosed on Schedule
3.19, the rights and benefits of the Corporation will not be adversely affected
by the transactions contemplated hereby, and the execution of this Agreement and
the performance of the obligations hereunder will not violate or result in a
breach or constitute a default under any of the terms or provisions thereof.
None of such leases, instruments, agreements, licenses, permits, site
assessments, certificates or other documents requires notice to, or consent or
approval of, any governmental agency or other third party to any of the
transactions contemplated hereby, except such consents and approvals as are or
shall be listed on Schedule 3.19 and which will have been obtained prior to the
Closing.
3.20 CUSTOMERS, BILLINGS, CURRENT RECEIPTS AND RECEIVABLES. Schedule
3.20 is a current, accurate and complete list of, and includes:
(a) the customers the Corporation serves on an ongoing basis,
including name, location and current billing rate, as of the Signing
Date;
(b) an accurate and complete aging of all accounts and notes
receivable from customers as of the last day of the month preceding the
month in which such Schedule is delivered, showing amounts due in 30-day
aging categories. Except to the extent of the allowance for bad debts
reflected on the Financial Statements or otherwise disclosed on
Schedules 3.11 and 3.20, the Corporation's accounts and notes receivable
are and on the date such Schedule is delivered shall be collectible in
the amounts shown on Schedules 3.11 and 3.20; and
(c) the average monthly revenues of the Corporation derived from
billings to its customers for each of the twelve months preceding the
Signing Date. Except as set forth on Schedule 3.20, the Corporation and
the Shareholders have no knowledge of any reason why the Corporation's
average monthly revenues derived from billings to its customers after
the Closing Date should not continue at approximately the same rate as
before the Signing Date.
3.21 NO CHANGE WITH RESPECT TO CORPORATION. Except as set forth on
Schedule 3.21, with respect to the Corporation, since the Balance Sheet Date,
there has not been:
(a) any change in its financial condition, assets, liabilities
(contingent or otherwise), income, operations or business which would
have a material adverse effect on the financial condition, assets,
liabilities (contingent or otherwise), income, operations or business of
the Corporation, taken as a whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting any material portion of its properties or
business;
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(c) any change in or agreement to change (i) its shareholders,
(ii) ownership of its authorized capital or outstanding securities, or
(iii) its securities;
(d) any declaration or payment of, or any agreement to declare
or pay, any dividend or distribution in respect of its capital stock or
any direct or indirect redemption, purchase or other acquisition of any
of its capital stock;
(e) any increase or bonus or promised increase or bonus in the
compensation payable or to become payable by it, in excess of usual and
customary practices, to any of its directors, officers, employees or
agents, or any accrual or arrangement for or payment of any bonus or
other special compensation to any employee or any severance or
termination pay paid to any of its present or former officers or other
key employees;
(f) any labor dispute or any other event or condition of any
character, materially adversely affecting its business or future
prospects;
(g) any sale or transfer, or any agreement to sell or transfer,
any of its material assets, property or rights to any other person,
including, without limitation, the Shareholders and their Affiliates,
other than in the ordinary course of business;
(h) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to it, including,
without limitation, any indebtedness or obligation of any of the
Shareholders or any Affiliate thereof;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets,
property or rights or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or any agreement, plan or
arrangement to purchase or acquire, any of its property, rights or
assets outside the ordinary course of its business;
(k) any waiver of any of its material rights or claims;
(l) any new or any amendment or termination of any existing
material contract, agreement, license, permit or other right to which it
is a party;
(m) any decline in the stockholders equity of the Corporation to
an amount less than the stockholders equity of the Corporation as of the
Balance Sheet Date;
(n) any decline in the current assets of the Corporation to an
amount less than the current assets of the Corporation as of the Balance
Sheet Date;
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(o) any increase in the amount of indebtedness owed by the
Corporation to the Shareholders or their respective Affiliates;
(p) any increase in the amount of indebtedness owed by the
Shareholders or their Affiliates to any person other than the
Corporation and secured by one or more Corporate Properties;
(q) any decline in any indebtedness of the type described in
Sections 3.21(o) and 3.21(p) other than reductions attributable to
normal, recurring installment payments due in the ordinary course under
the terms of the instruments governing such indebtedness;
(r) any increase in the amount of aggregate indebtedness owed by
the Shareholders or its Affiliate to the Corporation; or
(s) any other transaction outside the ordinary course of its
business.
3.22 DEBT; CURRENT ASSETS AND CURRENT LIABILITIES.
(a) At the Closing, the Corporation shall prepare and deliver to
WCI Schedule 3.22(a), which shall set forth (i) the amount of the
aggregate debt (excluding trade payables) of the Corporation outstanding
on the Closing Date required to be repaid by WCI at or immediately after
the Closing Date, (ii) the amount of the debt (excluding trade payables)
of the Corporation outstanding on the Closing Date which will remain
outstanding obligations of either Corporation after the Closing Date,
including in each case all interest accrued through and including the
Closing Date and all prepayment penalties (other than prepayment
penalties associated with any obligations due Bank of America Leasing
Company) to be incurred by WCI in connection with the repayment of any
such debt required to be repaid, (iii) the present value of all
capitalized lease obligations (determined in accordance with generally
accepted accounting principals) of the Corporation and (iv) the present
value, discounted at the lease rate factor, if known, inherent in the
lease or, if the lease rate factor is not known, at the rate charged to
the Corporation by a third party lender in connection with its most
recent borrowing to finance equipment, of all lease obligations of the
Corporation that are not capitalized lease obligations (the "Closing
Date Debt").
(b) At the Closing, the Corporation shall prepare and deliver to
WCI Schedule 3.22(b), which shall set forth the amount of the aggregate
current liabilities (excluding the current portion of long-term debt to
the extent such current portion is included in Closing Date Debt) and
trade payables of the Corporation as of the Closing Date (the "Closing
Date Current Liabilities") and the amount of the aggregate current
assets of the Corporation as of the Closing Date and the accounts
receivable of the Corporation earned
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prior to the Closing Date and collectible (less an allowance for
doubtful accounts) on or after the Closing Date (the "Closing Date
Current Assets").
3.23 BANK ACCOUNTS. Schedule 3.23 is a complete and accurate list,
as of the Signing Date, of:
(a) the name of each bank in which the Corporation has
accounts or safe deposit boxes;
(b) the name(s) in which the accounts or boxes are held;
(c) the type of account; and
(d) the name of each person authorized to draw thereon or have
access thereto.
3.24 COMPLIANCE WITH LAWS. Except as disclosed on Schedule 3.24, the
Corporation has materially complied with, and the Corporation is presently in
material compliance with, federal, state and local laws, ordinances, codes,
rules, regulations, Governmental Permits, orders, judgments, awards, decrees,
consent judgments, consent orders and requirements applicable to it
(collectively "Laws"), including, but not limited to, Laws relating to the
public health, safety or protection of the environment (collectively,
"Environmental Laws"). Except as disclosed on Schedule 3.24, there has been no
assertion by any party that a Corporation is in material violation of any Laws.
Specifically and without limiting the generality of the foregoing, except as
disclosed on Schedule 3.24:
(a) Except as permitted under applicable laws and regulations,
including, without limitation, the federal Resource Conservation
Recovery Act, 42 USC Section 6901 et seq. ("RCRA"), the Corporation has
not accepted, processed, handled, transferred, generated, treated,
stored or disposed of any Hazardous Material (as defined in Section
3.24(e) below) nor has it accepted, processed, handled, transferred,
generated, treated, stored or disposed of asbestos, medical waste,
radioactive waste or municipal waste, except in compliance with
Environmental Laws.
(b) During the Corporation's ownership or leasing of the
Corporate Property owned or leased by it and, to the knowledge of the
Corporation and the Shareholders, prior to the Corporation's ownership
or leasing of such Corporate Property, no Hazardous Material, other than
that allowed under Environmental Laws, including, without limitation,
RCRA, has been disposed of, or otherwise released on any Corporate
Property.
(c) During the Corporation's ownership or leasing of the
Corporate Property owned or leased by it and, to the knowledge of the
Corporation and the Shareholders,
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prior to the Corporation's ownership or leasing of such Corporate
Property, no Corporate Property has ever been subject to or received any
notice of any private, administrative or judicial action, or notice of
any intended private, administrative or judicial action relating to the
presence or alleged presence of Hazardous Material in, under, upon or
emanating from any Corporate Property or any real property now or
previously owned or leased by the Corporation. There are no pending and,
to the Corporation's and Shareholders' knowledge, no threatened actions
or proceedings from any governmental agency or any other entity
involving remediation of any condition of the Corporate Property,
including, without limitation, petroleum contamination, pursuant to
Environmental Laws.
(d) Except as allowed under Environmental Laws, the Corporation
has not knowingly sent, transported or arranged for the transportation
or disposal of any Hazardous Material, to any site, location or
facility.
(e) As used in this Agreement, "Hazardous Material" shall mean
the substances (i) defined as "Hazardous Waste" in 40 CFR 261, and
substances defined in any comparable California statute or regulation;
(ii) any substance the presence of which requires remediation pursuant
to any Environmental Laws; and (iii) any substance disposed of in a
manner not in compliance with Environmental Laws.
3.25 POWERS OF ATTORNEY. The Corporation has not granted any power of
attorney (except routine powers of attorney relating to representation before
governmental agencies) or entered into any agency or similar agreement whereby a
third party may bind or commit either Corporation in any manner.
3.26 UNDERGROUND STORAGE TANKS. Except as set forth on Schedule 3.26,
no underground storage tanks containing petroleum products or wastes or other
hazardous substances regulated by 40 CFR 280 or Environmental Laws are currently
or have been located on any Corporate Property. Except as set forth on Schedule
3.26, no Corporation has ever owned or leased any real property not included in
the Corporate Property having any underground storage tanks containing petroleum
products or wastes or other hazardous substances regulated by 40 CFR 280. As to
each such underground storage tank ("UST") identified on Schedule 3.26, the
Corporation has provided to WCI, on Schedule 3.26:
(a) the location of the UST, information and material, including
any available drawings and photographs, showing the location, and
whether the Corporation currently owns or leases the property on which
the UST is located (and if the Corporation does not currently own or
lease such property, the dates on which it did and the current owner or
lessee of such property);
(b) the date of installation and specific use or uses of the
UST;
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(c) copies of tank and piping tightness tests and cathodic
protection tests and similar studies or reports for each UST;
(d) a copy of each notice to or from a governmental body or
agency relating to the UST;
(e) other material records with regard to the UST, including,
without limitation, repair records, financial assurance compliance
records and records of ownership; and
(f) to the extent not otherwise set forth pursuant to the above,
a summary description of instances, past or present, in which, to the
Corporation's, or the Shareholders' knowledge, the UST failed to meet
applicable standards and regulations for tightness or otherwise and the
extent of such failure, and any other operational or environmental
problems with regard to the UST, including, without limitation, spills,
including spills in connection with delivery of materials to the UST,
releases from the UST and soil contamination.
Except to the extent set forth on Schedule 3.26, the Corporation has
complied with Environmental Laws regarding the installation, use, testing,
monitoring, operation and closure of any UST described on Schedule 3.26.
3.27 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Schedule 3.27 lists all
patents, tradenames, trademarks, service marks, and copyrights owned by the
Corporation or which it is licensed to use (other than licenses to use software
for personal computer operating systems that are provided when the computer is
purchased and licenses to use software for personal computers that are granted
to retail purchasers of such software). No patents, trade secrets, know-how,
intellectual property, trademarks, trade names, assumed names, copyrights, or
designations used by the Corporation in its business infringe on any patents,
trademarks, or copyrights, or any other rights of any person. Neither the
Corporation nor any of the Shareholders knows or has any reason to believe that
there are any claims of third parties to the use of any such names or any
similar name, or knows of or has any reason to believe that there exists any
basis for any such claim or claims.
3.28 ASSETS, ETC., NECESSARY TO BUSINESS. The Corporation owns or
leases all properties and assets, real, personal, and mixed, tangible and
intangible, and, except as disclosed on Schedules 3.5, 3.10(a), 3.10(c), 3.14(a)
and 3.19, is a party to all Collection Franchises and Governmental Permits and
other agreements necessary to permit it to carry on its business as presently
conducted. All of said Collection Franchises and Governmental Permits and
agreements have been duly obtained and, except as disclosed on Schedules 3.5,
3.8-Part II, 3.10(a), 3.10(c) 3.14(a) and 3.19, are in full force and effect and
there are no proceedings pending or threatened which may result in the
revocation, cancellation, suspension or adverse modification of any of the same.
Neither the Corporation nor any of the Shareholders has any
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knowledge of any reason why all such Collection Franchises and Governmental
Permits and agreements will not remain in effect after consummation of the
transactions contemplated hereby.
3.29 CONDEMNATION. No Corporate Property owned or leased by the
Corporation is the subject of, or would be affected by, any pending condemnation
or eminent domain proceedings, and, to the knowledge of the Corporation and the
Shareholders, no such proceedings are threatened.
3.30 SUPPLIERS AND CUSTOMERS. The relations between the Corporation
and its customers are good. Neither the Corporation nor any of the Shareholders
has knowledge of any fact (other than general economic and industry conditions)
which indicates that any of the suppliers supplying products, components,
materials or providing use of, or access to, landfills or disposal sites to the
Corporation intends to cease providing such items to the Corporation, nor does
the Corporation or any of the Shareholders have knowledge of any fact (other
than general economic and industry conditions) which indicates that any of the
customers of a Corporation intends to terminate, limit or reduce its business
relations with the Corporation.
3.31 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Corporation
nor any of the Shareholders or Alma has directly or indirectly within the past
five years given or agreed to give any gift or similar benefit to any customer,
supplier, governmental employee or other person who is or may be in a position
to help or hinder the business of a Corporation in connection with any actual
or proposed transaction which (a) might subject a Corporation to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (b) if
not given in the past, might have had an adverse effect on the financial
condition, business or results of operations of the Corporation, or (c) if not
continued in the future, might adversely affect the financial condition,
business or operations of the Corporation or which might subject the Corporation
to suit or penalty in any private or governmental litigation or proceeding.
3.32 RELATED PARTY TRANSACTIONS. Since January 1, 1992, none of the
Shareholders or Alma nor their respective Affiliates has entered into any
transaction with or is a party to any agreement, lease or other instrument, or
as of the date of this Agreement is indebted to or is owed money by, the
Corporation not disclosed on the Financial Statements (with respect to the
period since January 1, 1995) or on the financial statements of a Corporation
for each of the years ended December 31, 1992, 1993 and 1994 delivered to WCI
prior to the date of this Agreement. Except as disclosed in the Financial
Statements or such financial statements, none of the Shareholders or Alma nor
their Affiliates owns any direct or indirect interest of any kind in, or
controls or is a director, officer, employee, shareholder or partner of, or
consultant to or lender to or borrower from or has the right to participate in
the profits of, any Person which is a competitor, supplier, customer, landlord,
tenant, creditor or debtor of the Corporation.
3.33 DISCLOSURE SCHEDULES. Any matter disclosed on any Schedule to
this Agreement shall be deemed to have been disclosed on every other Schedule
that refers to such Schedule by
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cross reference so long as the nature of the matter disclosed is obvious from a
fair reading of the Schedule on which the matter is disclosed.
3.34 NO MISLEADING STATEMENTS. The representations and warranties of
the Corporation, the Shareholders and Alma contained in this Agreement, the
Exhibits and Schedules hereto and all other documents and information furnished
to WCI and its representatives pursuant hereto are complete and accurate in all
material respects and do not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements made and to be
made not misleading.
3.35 ACCURATE AND COMPLETE RECORDS. The corporate minute books, stock
ledgers, books, ledgers, financial records and other records of the Corporation:
(a) have been made available to WCI and its agents at the
Corporation's offices or at the offices of WCI's attorneys or the
Corporation's attorneys;
(b) have been, in all material respects, maintained in
accordance with all applicable laws, rules and regulations; and
(c) are accurate and complete, reflect all material corporate
transactions required to be authorized by the Boards of Directors and/or
shareholders of the Corporation and do not contain or reflect any
material discrepancies.
3.36 KNOWLEDGE. Wherever reference is made in this Agreement to the
"knowledge" of the Shareholders, such term means the actual knowledge of the
Shareholders or any knowledge which should have been obtained by the
Shareholders upon reasonable inquiry by a reasonable business person. In the
case of a Shareholder that is a trust, the term "knowledge" means the actual
knowledge of the trustee or trustees of the trust or any knowledge which should
have been obtained by the trustee or trustees upon reasonable inquiry by a
reasonable business person. Wherever reference is made in this Agreement to the
"knowledge" of the Corporation, such term means the actual knowledge of any
management employee, officer or director of the Corporation or any knowledge
which should have been obtained by any such person upon reasonable inquiry by a
reasonable business person.
3.37 BROKERS; FINDERS. No person has acted directly or indirectly as a
broker, finder or financial advisor for the Corporation or the Shareholders in
connection with the transactions contemplated by this Agreement and no person is
entitled to any broker's, finder's, financial advisory or similar fee or payment
in respect thereof based in any way on any agreement, arrangement or
understanding made by or on behalf of the Corporation or the Shareholders.
3.38 INVESTMENT REPRESENTATIONS. The Shareholders further represent
that:
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(a) Each of the Shareholders is an "accredited investor" as
defined in Rule 501(a) under the Securities Act of 1933, as amended (the
"Act"). Each of the Shareholders has such knowledge and experience in
financial matters, either alone or with the Shareholder's professional
advisors, that he or she is capable of evaluating the merits and risks
of the investment in the Securities.
(b) Each is a resident of the State of California.
(c) Each of the Shareholders has had access to such information
relating to WCI as such Shareholder feels is reasonably necessary to
make an informed investment decision with respect to the Shares, and the
Warrants (collectively, together with shares of WCI Stock issuable on
exercise of the Warrants and any additional shares of WCI Stock issued
pursuant to Section 1.3(c), the "Securities").
(d) Each of the Shareholders has had the opportunity to ask
questions and receive answers concerning the terms and conditions of the
transactions contemplated by this Agreement and to obtain additional
information that WCI possesses or can obtain without unreasonable effort
or expense that is necessary to verify the accuracy of the information
provided.
(e) Each of the Shareholders is acquiring the Securities
pursuant to this Agreement for its own account, not as a nominee or
agent. No one else has any interest, beneficial or otherwise, in any of
the Securities.
(f) Each of the Shareholders is able to bear the economic risk of
such an investment in the Securities is aware that he, she or it must be
prepared to hold such Securities for an indefinite period and is aware
that the Securities have not been registered under the Act, or
registered or qualified under the California Corporate Securities Law of
1968, as amended (the "Law"), or any other securities law, on the
ground, among others, that no unregistered distribution or public
offering of Securities is to be effected and the are being issued by WCI
without any public offering within the meaning of section 4(2) of the
Act.
(g) Without in any way limiting the representations herein, each
of the Shareholders further agrees that such Shareholder shall not
encumber, pledge, hypothecate, sell, transfer, assign or otherwise
dispose of, or receive any consideration for, any shares of the
Securities or any interest in them, unless and until prior to any
proposed encumbrance, pledge, hypothecation, sale, transfer, assignment
or other disposition, (i) a registration statement on Form S-1 or S-3
(or any other form appropriate for the purpose or replacing such form)
under the Act with respect to the shares proposed to be transferred or
otherwise disposed of shall be then effective (ii)(a) he, she or it
shall have furnished WCI with a detailed statement of the circumstances
of the proposed disposition, and (b) he, she or it shall have furnished
WCI with an opinion of counsel or
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no-action letter issued by the Staff of the Securities and Exchange
Commission ("SEC") (obtained at the Shareholders' expense) in form and
substance satisfactory to WCI to the effect that such disposition will
not require registration of any such Securities under the Act or
qualification of any such shares under any other securities law; or
(iii) Rule 144 is available with respect to such transaction.
(h) Each of the Shareholders understands and agrees that each
certificate or other instrument representing the Securities will bear a
legend on the face thereof (or on the reverse thereof with a reference
to such legend on the face thereof) which legend restricts the sale,
transfer or other disposition of the Securities otherwise than in
accordance with Sections 3.38(g) of this Agreement provided, however,
that WCI shall, on the request of any of the Shareholders, cause such
legends to be removed from the certificates or other instrument
evidencing the Securities if such Shareholder has held such Securities
for the period contemplated by Rule 144(k) under the Act and if the
Shareholder is not then and has not been during the three months
preceding such request an affiliate of WCI (as defined in Rule 144 under
the Act).
(i) Each of the Shareholders understands and agrees that the
Securities will be "restricted securities" as that term is defined in
Rule 144 under the Act and, accordingly, that the Securities must be
held indefinitely unless subsequently registered under the Act or an
exemption from such registration is available.
(j) The Shareholders agree to be bound with respect to the
Securities by any "lock up" provisions to which the executive officers
and directors of WCI are also bound as may be requested by any
underwriters of any offering of WCI Stock or securities convertible into
WCI Stock.
3.39 MADERA COUNTY LANDFILL OPERATION. Any costs, expenses or
liabilities associated with, or arising from, the closure of the landfills
operated by the Corporation for Madera County, California, are the
responsibility of Madera County.
4. REPRESENTATIONS AND WARRANTIES OF WCI
WCI represents and warrants to the Shareholders that each of the
following representations and warranties is true as of the date of this
Agreement and will be true as of the Closing Date, and agrees that such
representations and warranties shall survive the Closing:
4.1 EXISTENCE AND GOOD STANDING. WCI is a Corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2 NO CONTRACTUAL RESTRICTIONS. No provisions exist in any article,
document or instrument to which WCI is a party or by which it is bound which
would be violated by consummation of the transactions contemplated by this
Agreement.
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4.3 AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by WCI and, subject to the due authorization,
execution and delivery by the Shareholders, constitutes a legal, valid and
binding obligation of WCI. WCI has full corporate power, legal right and
corporate authority to enter into and perform its obligations under this
Agreement and to carry on its business as presently conducted. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and the fulfillment of and compliance with the terms and conditions
hereof do not and will not, after the giving of notice, or the lapse of time or
otherwise: (a) violate any provisions of any judicial or administrative order,
award, judgment or decree applicable to WCI; (b) conflict with any of the
provisions of the Certificate of Incorporation or Bylaws of WCI; or (c) conflict
with, result in a breach of or constitute a default under any material agreement
or instrument to which WCI is a party or by which it is bound.
4.4 STATUS OF SHARES. When delivered to the Shareholders at the
Closing in accordance with the terms and conditions of this Agreement, the
Shares shall have been duly authorized and delivered shares of WCI, and shall be
fully paid and nonassessable.
4.5 NO MISLEADING STATEMENTS. The representations and warranties of
WCI contained in this Agreement, the Exhibits and Schedules hereto and all other
documents and information furnished to the Shareholders pursuant hereto are
materially complete and accurate, and do not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made and to be made not misleading as of the Closing Date.
4.6 BROKERS; FINDERS. No person has acted directly or indirectly as a
broker, finder or financial advisor for WCI in connection with the transactions
contemplated by this Agreement and no person is entitled to any broker's,
finder's, financial advisory or similar fee or payment in respect thereof based
in any way on any agreement, arrangement or understanding made by or on behalf
of WCI.
4.7 DISCLOSURE SCHEDULES. Any matter disclosed by WCI on any Schedule
to this Agreement shall be deemed to have been disclosed on every other Schedule
that refers to such Schedule by cross reference so long as the nature disclosed
is obvious from a fair reading of the Schedule on which the matter is disclosed.
5. COVENANTS FROM SIGNING TO CLOSING DATE
5.1 OPERATIONS. Between the Signing Date and the Closing Date, the
Corporation will, and the Shareholders will cause the Corporation to:
(a) carry on its business in substantially the same manner as it
has heretofore and not introduce any material new method, or discontinue
any existing material method, of operation or accounting;
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(b) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform all of its material obligations under agreements
relating to or affecting its assets, properties, business operations and
rights;
(d) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(e) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationship with suppliers, customers and others having business
relations with it;
(f) file on a timely basis all notices, reports or other filings
required to be filed with or reported to any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
any instrumentality of any of the foregoing wherever located with
respect to the continuing operations of the Corporation;
(g) maintain material compliance with all Collection Franchises
and Governmental Permits and all laws, rules, regulations and consent
orders;
(h) file on a timely basis all complete and correct applications
or other documents necessary to maintain, renew or extend any site
assessment, permit, license, variance or any other approval required by
any governmental authority necessary and/or required for the continuing
operation of the Corporation's business operations, whether or not such
approval would expire before or after the Closing; and
(i) advise WCI promptly in writing of any material change in any
document, Schedule, Exhibit, or other information delivered pursuant to
this Agreement.
5.2 NO CHANGE. Between the Signing Date and the Closing Date, the
Corporation will not, and the Shareholders will not permit the Corporation to,
take any action described below without the prior written consent of WCI:
(a) make any change in its Articles of Incorporation or Bylaws;
(b) authorize, issue, transfer or distribute any securities;
(c) declare or pay any dividend or make any distribution in
respect of its capital stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares of
its capital stock;
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(d) enter into any contract or commitment or incur or agree to
incur any liability other than in the ordinary course of business other
than the transactions contemplated by this Agreement or make any single
capital expenditure in excess of $10,000 or in excess of $25,000 in the
aggregate during any consecutive thirty (30) day period without regard
to whether such capital expenditure is in the ordinary course of
business;
(e) except as set forth on Schedule 3.16, change or promise to
change the compensation payable or to become payable to any director,
officer, employee or agent, or make or promise to make any bonus payment
to any such person;
(f) create, assume or otherwise permit the imposition of any
mortgage, pledge or other lien or encumbrance upon or grant any option
or right of first refusal with respect to any assets or properties
whether now owned or hereafter acquired;
(g) sell, assign, lease or otherwise transfer or dispose of any
property or equipment other than in the ordinary course of business;
(h) merge or consolidate or agree to merge or consolidate with
or into any firm, corporation or other entity;
(i) waive any material rights or claims;
(j) amend or terminate any material agreement or any site
assessment, permit, license or other right;
(k) enter into any other transaction outside the ordinary course
of the Corporation's business or prohibited hereunder; or
(l) take any action or suffer or permit any event to occur that
would cause any representation or warranty of the Corporation or the
Shareholders to become untrue as of the Closing Date.
5.3 OBTAIN CONSENTS. Promptly after the execution of this Agreement,
the Corporation will, and the Shareholders shall cause the Corporation to, make
all filings and take all steps reasonably necessary to obtain all other
approvals and consents required to be obtained by the Corporation or the
Shareholders to consummate the transactions contemplated by this Agreement and
otherwise to satisfy the conditions of Sections 6.7.
5.4 ACCESS; CONFIDENTIAL INFORMATION. Between the Signing Date and
the Closing Date, the Shareholders and the Corporation will, and the
Shareholders will cause the Corporation to, afford to the officers and
authorized representatives of WCI, including, without limitation,
its engineers, counsel, independent auditors and investment bankers, access to
the Facilities, plants,
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Corporate Properties and other properties, books and records of the Corporation,
and will furnish WCI with such additional financial and operating data and other
information as to the business and properties of the Corporation as WCI may from
time to time reasonably request. The Shareholders will and will cause the
Corporation to cooperate with WCI, its representatives and counsel in the
preparation of any documents or other material which may be required by any
governmental agency. WCI will cause all information obtained from the
Shareholders and the Corporation in connection with the negotiation and
performance of this Agreement which the Shareholders or the Corporation have
stamped or otherwise marked as confidential to be treated as confidential
(except such information which is in the public domain or which WCI may be
required to disclose to any governmental agency, or pursuant to any court or
regulatory agency order) and will not use, and will not knowingly permit others
to use, any such confidential information in a manner detrimental to the
Corporation or the Shareholders. The Corporation will not, and the Shareholders
will not and will cause the Corporation not to, disclose to any third persons
other than their accountants, bankers or legal counsel any of the terms or
provisions of this Agreement prior to or after the Closing Date without the
prior written consent of WCI.
5.5 NOTICE OF MATERIAL ADVERSE CHANGE. WCI shall promptly notify the
Shareholders' Representative of any material adverse change in its business or
financial condition between the Signing Date and the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATION OF WCI TO CLOSE
The obligations of WCI under this Agreement are subject to the
satisfaction, at or before Closing, of all of the following conditions
precedent, unless waived in writing by WCI:
6.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Corporation and the Shareholders contained in this Agreement
or in any statement, Exhibit, Schedule, certificate or document delivered by the
Corporation or the Shareholders under this Agreement shall be true, correct and
complete on and as of the date when made and at all times prior to the Closing
Date, shall be deemed to be made again on the Closing Date, and shall then be
true, correct and complete in all material respects as of the Closing Date.
6.2 CONDITIONS. The Corporation and the Shareholders shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by them
on or before the Closing Date.
6.3 NO MATERIAL ADVERSE CHANGE. Since the Signing Date, there shall
not have been any material adverse change in the condition (financial or
otherwise), business, properties or assets of the Corporation.
6.4 CERTIFICATES. The President of the Corporation shall have
delivered to WCI a certificate, dated as of the Closing Date, in form and
substance satisfactory to WCI, certifying to
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the fulfillment of the conditions set forth in Sections 6.1, 6.2 and 6.3, and
the Shareholders shall have delivered to WCI a certificate dated as of the
Closing Date, in form and substance satisfactory to WCI, certifying to the
fulfillment of the conditions set forth in Section 6.1, 6.2 and 6.3 applicable
to the Shareholders.
6.5 NO LITIGATION. None of the transactions contemplated hereby shall
have been enjoined by any court or by any federal or state governmental branch,
agency, commission or regulatory authority and no suit or other proceeding
challenging the transactions contemplated hereby shall have been threatened or
instituted and no investigative or other demand shall have been made by any
federal or state governmental branch, agency, commission or regulatory
authority.
6.6 OTHER DELIVERIES. The Shareholders shall have delivered the items
which they are required to deliver under Section 8 of this Agreement.
6.7 GOVERNMENTAL APPROVALS; CONSENTS TO TRANSFER. All governmental
consents and approvals, if any, necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been received, and each
other party whose consent is required to the transactions contemplated by this
Agreement, including without limitation (if applicable) each party to any
contract with the Corporation, each municipality or other jurisdiction that has
granted a franchise to the Corporation and each jurisdiction issuing or granting
any other Governmental Permit, shall have consented to such transactions, and
every other Required Governmental Consent shall have been obtained.
6.8 RELEASE OF SECURITY INTERESTS. All security interests in assets
of the Corporation that have been created in favor of financial institutions or
other lenders to secure indebtedness of the Shareholders or their Affiliates
shall have been released.
6.9 DUE DILIGENCE. WCI shall have reviewed all of the schedules to
this Agreement and all documents related to the Corporation's 401(k) plan, and
all such schedules and documents shall be satisfactory to WCI or any problems
reflected in, or indicated by, such schedules or documents shall have been
resolved to the satisfaction of WCI.
7. CONDITIONS PRECEDENT TO OBLIGATION OF THE
SHAREHOLDERS TO CLOSE
The obligations of the Shareholders under this Agreement are subject to
the satisfaction, at or before Closing, of all of the following conditions
precedent, unless waived in writing by the Shareholders:
7.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of WCI contained in this Agreement or in any statement, Exhibit,
Schedule, certificate or document delivered by WCI under this Agreement shall be
true, correct and complete on and as of the date
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when made and at all times prior to the Closing Date, shall be deemed to be made
again on the Closing Date, and shall then be true, correct and complete in all
respects as of the Closing Date.
7.2 CONDITIONS. WCI shall have performed, satisfied and complied with
all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by it on or before the Closing Date.
7.3 CERTIFICATE. WCI shall have delivered to the Shareholders a
certificate, dated as of the Closing Date, in form and substance satisfactory to
the Shareholders, certifying to the fulfillment of the conditions set forth in
Sections 7.1 and 7.2.
7.4 NO LITIGATION. None of the transactions contemplated hereby shall
have been enjoined by any court or by any federal or state governmental branch,
agency, commission or regulatory authority and no suit or other proceeding
challenging the transactions contemplated hereby shall have been threatened or
instituted and no investigative or other demand shall have been made by any
federal or state governmental branch, agency, commission or regulatory
authority.
7.5 OTHER DELIVERIES. WCI shall have delivered the items which it is
required to deliver under Section 8 of this Agreement.
7.6 ELECTION OF DIRECTOR AND ADVISORY DIRECTOR. At the Closing, a
nominee of the Shareholders, who shall be one of Dupreau, Youngclaus and Dias,
shall be elected to the Board of Directors of WCI for a term of one year. In
addition, a nominee of the Shareholders, who shall be one of Dupreau, Youngclaus
and Dias and who is not elected to the Board of Directors of WCI pursuant to the
preceding sentence, shall be an advisory director of WCI for a period of one
year from the Closing Date, with the right to attend meetings of the Board of
Directors of WCI at WCI's expense, but without authority to vote on any matter.
8. CLOSING DELIVERIES
At the Closing, the respective parties shall make the deliveries
indicated:
8.1 WCI DELIVERIES.
(a) WCI shall deliver the cash portion of the Purchase Price
required to be delivered on the Closing Date pursuant to Section 1.2(a).
(b) WCI shall deliver to Dupreau, Dias and Youngclaus
certificates for the Shares.
(c) WCI shall deliver to Dupreau, Dias and Youngclaus the
Warrants.
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(d) WCI shall deliver to the Procuring Shareholders any payments
due pursuant to Sections 1.3 (a)-(d).
(e) WCI shall execute and deliver an Employment Agreement with
Dupreau and Youngclaus substantially in the form of the draft included
in Exhibit 8.1(e).
(f) WCI shall execute and deliver the Consulting Agreement with
Dias, substantially in the form of the draft included in Exhibit 8.1(f)
with such changes therein as shall be applicable.
(g) WCI shall execute and deliver the Investors' Rights
Agreement, as amended, then in effect between WCI and its stockholders.
(h) WCI shall execute and deliver the Stockholders Agreement
with each Shareholder substantially in the form of Exhibit 8.1(h).
8.2 SHAREHOLDERS DELIVERIES.
(a) The Shareholders shall deliver to WCI the certificates
representing the outstanding Corporation's Stock free and clear of all
liens, security interests, claims and encumbrances, accompanied by a
stock power duly executed in blank.
(b) The Shareholders shall deliver to WCI Uniform Commercial
Code financing statement searches from the State of California, dated
within thirty (30) days prior to the Closing Date, with an unofficial
update on the Closing Date obtained from Information America or another
reporting service, showing that there are no security interests,
judgments, taxes, other liens or encumbrances outstanding against the
Corporation or its assets, other than as disclosed on Part III of
Schedule 3.8.
(c) the Shareholders shall deliver to WCI an opinion of counsel
for the Shareholders, dated as of the Closing Date, in substantially the
form attached hereto as Exhibit 8.2(c).
(d) the Shareholders shall execute and deliver such other
documents and instruments as are reasonably requested by WCI in order to
consummate the transactions contemplated by this Agreement.
(e) The Corporation shall deliver to WCI evidence satisfactory
to WCI showing that all written employment contracts and all oral
employment contracts other than those that are terminable "at will"
without payment of severance (other than normal severance benefits
approved by WCI) or other benefits with non-union employees of the
Corporation (including, without limitation, stock options or other
rights to obtain equity in the Corporation) have been terminated,
effective on or before the Closing Date.
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(f) The Shareholders shall execute and deliver, and shall cause
each officers and director of the Corporation who is not a Shareholder
to execute and deliver, a release substantially in the form of Exhibit
8.2(f).
(g) Each Shareholder shall execute and deliver the Investors'
Rights Agreement.
(h) Each Shareholder shall execute and deliver the Stockholders
Agreement substantially in the form of Exhibit 8.1(h).
9. ADDITIONAL COVENANTS OF WCI, THE CORPORATION AND THE
SHAREHOLDERS
9.1 NO DELAY. The Corporation, the Shareholders and WCI covenant and
agree from and after the date hereof not to hinder in any way or unreasonably
delay the Closing Date and to use their respective reasonable efforts to obtain
required Governmental Consents and otherwise to cause the Closing Date to occur
as soon as reasonably practicable after the Signing Date, provided, however,
that in using its reasonable efforts WCI shall not be required to take any
action or to agree to any condition, including without limitation any condition
imposed by any government authority with respect to the transfer of any
Governmental Permit, that, in WCI's reasonable judgment, imposes a materially
adverse financial burden or operating condition on WCI.
9.2 RELEASE OF GUARANTIES. WCI shall use reasonable efforts to obtain
the termination and release on or prior to the Closing Date of the personal
guaranties of the Shareholders of any indebtedness of the Corporation included
in the Financial Statements as of the Balance Sheet Date or WCI shall indemnify
the Shareholders and hold them harmless from and against all losses, expenses or
claims by third parties to enforce or collect indebtedness owed by the
Corporation as of the Closing Date which is personally guaranteed by the
Shareholders pursuant to such guaranties. The Shareholders shall cooperate with
WCI in obtaining such releases.
9.3 RELEASE OF SECURITY INTERESTS. Between the Signing Date and the
Closing Date, the Shareholders and their respective Affiliates shall cause those
security interests in the assets of the Corporation that have been created in
favor of financial institutions or other lenders to secure indebtedness (other
than indebtedness of the Corporation) of the Shareholders or their respective
Affiliates to be released in a manner reasonably satisfactory to WCI, and shall
cause all guaranties by the Corporation relating to the indebtedness of the
Shareholders to be released to the reasonable satisfaction of WCI.
9.4 CONFIDENTIALITY. Neither the Corporation nor any of the
Shareholders shall disclose or make any public announcements of the transactions
contemplated by this Agreement
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without the prior written consent of WCI, unless required to make such
disclosure or announcement by law, in which event the party making the
disclosure or announcement shall notify WCI at least 24 hours before such
disclosure or announcement is expected to be made. WCI shall not disclose or
make any public announcement of the transactions contemplated by this Agreement
without the prior written consent of the Shareholders' Representative, unless in
connection with the IPO or otherwise required to make such disclosure or
announcement by law, in which event WCI shall notify the Shareholders'
Representative at least 24 hours before such disclosure or announcement is
expected to be made.
9.5 BROKERS AND FINDERS FEES. Each party shall pay and be responsible
for any broker's, finder's or financial advisory fee incurred by such party in
connection with the transactions contemplated by this Agreement.
9.6 TAXES. WCI shall reasonably cooperate, at the expense of the
Shareholders, with the Shareholders with respect to any matters involving the
Shareholders arising out of the Shareholders' ownership of the Corporation prior
to the Closing, including matters relating to tax returns and any tax audits,
appeals, claims or litigation with respect to such tax returns or the
preparation of such tax returns. In connection therewith, WCI shall make
available to the Shareholders such files, documents, books and records of the
Corporation for inspection and copying as may be reasonably requested by the
Shareholders and shall cooperate with the Shareholders with respect to retaining
information and documents which relate to such matters.
9.7 SHORT YEAR TAX RETURNS. After the Closing Date, the Shareholders
shall prepare at their sole cost and expense, all short year federal, state,
county, local and foreign tax returns required by law for the period beginning
with the first day of each Corporation's fiscal year in which the Closing occurs
and ending with the Closing Date. Each such return shall be prepared in a
financially responsible and conservative manner and shall be delivered to WCI
together with all necessary supporting schedules within 120 days following the
Closing Date for its approval (but such approval shall not relieve the
Shareholders of their responsibility for the taxes assessed under these
returns). The Shareholders shall be responsible for the payment of all taxes
shown to be due or that may come to be due on such returns. The Shareholders
shall also be responsible for all taxes arising from the conversion of the
Corporation from a cash to accrual basis of reporting whether or not due on such
returns or on the first return filed by the Corporation for the period
commencing after the Closing Date. At the time of the delivery of the returns,
shall contemporaneously deliver to WCI checks payable to the respective taxing
authorities in amounts equal to the amount due. WCI shall sign tax returns and
cause such returns to be timely filed with the appropriate authorities. The
Shareholders shall be entitled to receive all refunds shown on said returns and
any such refunds received by the Corporation or WCI shall be remitted to the
Shareholders.
9.8 SHAREHOLDERS' REPRESENTATIVE.
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(a) In order to administer efficiently the rights and
obligations of the Shareholders under this Agreement, the Shareholders
hereby designate and appoint Dupreau as the Shareholders'
Representative, to serve as the Shareholders' agent, proxy and
attorney-in-fact for the limited purposes set forth in this Agreement.
(b) Each of the Shareholders hereby appoints the
Shareholders' Representative as such Shareholder's agent, proxy and
attorney-in-fact, with full power of substitution, for all purposes set
forth in this Agreement, including, without limitation, the full power
and authority on such Shareholder's behalf (i) to consummate the
transactions contemplated by this Agreement, (ii) to disburse any funds
received hereunder to the Shareholders, (iii) to execute and deliver on
behalf of each Shareholder any amendment or waiver under this Agreement,
to agree to the amount of the actual Closing Date Debt, Closing Date
Current Assets and Closing Date Current Liabilities pursuant to Section
1.2(a), and to agree to resolution of all Claims hereunder, (iv) to
retain legal counsel and other professional services, at the expense of
the Shareholders, in connection with the performance by the
Shareholders' Representative of this Agreement, and (v) to do each and
every act and exercise any and all rights which such Shareholder or
Shareholders are permitted or required to do or exercise under this
Agreement and the other agreements, documents and certificates executed
in connection herewith. Each of the Shareholders agrees that such agency
and proxy are coupled with an interest, are therefore irrevocable
without the consent of the Shareholders' Representative and shall
survive the death, bankruptcy or other incapacity of any Shareholder.
(c) Each of the Shareholders hereby agrees that any
amendment or waiver under this Agreement, and any action taken on behalf
of the Shareholders to enforce the rights of the Shareholders under this
Agreement, and any action taken with respect to any adjustment or Claim
(including any action taken to object to, defend, compromise or agree to
the payment of such adjustment or Claim), shall be effective if approved
in writing by the Shareholders' Representative and the holders of a
majority of the Corporation's Stock (including any Corporation's Stock
held by the Shareholders' Representative), or, in the case of any
amendment or waiver made or given or action taken after the Closing, if
so approved by persons who were the holders of a majority of the
Corporation's Stock immediately prior to the Closing, and that each and
every action so taken shall be binding and conclusive on every
Shareholder, whether or not such Shareholder had notice of, or approved,
such amendment or waiver.
(d) Dupreau shall serve as the Shareholders'
Representative until he resigns or is otherwise unable or unwilling to
serve. In the event that a Shareholders' Representative resigns from
such position or is otherwise unable or unwilling to serve, the
remaining Shareholders shall select, by the vote of the holders of a
majority of the Corporation's Stock immediately prior to the Closing, a
successor representative to fill such vacancy, shall provide prompt
written notice to WCI of such change and such
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substituted representative shall then be deemed to be the Shareholders'
Representative for all purposes of this Agreement.
9.9 CERTAIN TAX MATTERS. The Shareholders acknowledge that WCI has
indicated its intention to make an election under Section 338(h)(10) of the
Internal Revenue Code of 1986, as amended. The Shareholders agree that WCI, in
its discretion, may make such election; provided, however, that such election
shall be made no later than the due date for such election.
If such election is made by WCI:
(a) WCI shall be authorized to complete Form 8023-A;
(b) The Shareholders shall sign such completed Form 8023-A at
the Closing; and
(c) WCI and the Shareholders shall agree upon the allocation of
the Purchase Price among the assets (including intangible assets) of the
Corporation.
(d) If WCI does make its election under Section 338(h)(10) of
the Internal Revenue Code of 1986 as amended, WCI shall reimburse the
Shareholders and the Corporation for any additional taxes, penalties,
interest and costs of preparation of amended income tax returns incurred
due to such election resulting from the recapture of depreciation
previously taken on various assets of the Corporation at ordinary income
instead of capital gain rates. Such reimbursement shall be in a sum
computed by a simultaneous equation computing the additional tax owed by
stockholders, as well as the tax on the payment of that sum.
10. INDEMNIFICATION
10.1 INDEMNITY BY THE SHAREHOLDERS. The Shareholders and Alma jointly
and severally, subject to the limitations set forth in Section 10.2, covenant
and agree that they will indemnify and hold harmless WCI, the Corporation and
their respective directors, officers and agents and their respective successors
and assigns (collectively the "WCI Indemnitees"), from and after the date of
this Agreement, against any and all losses, damages, assessments, fines,
penalties, adjustments, liabilities, claims, deficiencies, costs, expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation), expenditures, including, without limitation, any
"Environmental Site Losses" (as such term is hereinafter defined) identified by
a WCI Indemnitee in a Claims Notice (as defined in Section 10.3(a)), or asserted
by a WCI Indemnitee in litigation commenced against the Shareholders provided
that in either case any such Claims Notice shall be given or the litigation
commenced prior to the third anniversary of the date of filing of the
Corporation's federal and California income tax returns for the fiscal year
ending on the Closing Date or, in the case of fraud, expiration of the
applicable statute of limitations, with respect to each of the following
contingencies (all, the "10.1 Indemnity Events"):
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(a) Any misrepresentation, breach of warranty, or nonfulfillment
of any agreement or covenant on the part of the Shareholders or the
Corporation pursuant to the terms of this Agreement or any
misrepresentation in or omission from any Exhibit, Schedule, list,
certificate, or other instrument furnished or to be furnished to WCI
pursuant to the terms of this Agreement, regardless of whether, in the
case of a breach of a representation or a warranty, WCI relied on the
truth of such representation or warranty or had any knowledge of any
breach thereof.
(b) The design, development, construction or operation of any
Facility or any other "Environmental Site" as hereinafter defined, or
the installation or operation of a UST during any period on or prior to
the Closing Date, in excess of the amount of liability with respect
thereto, if any, set forth on Part II of Schedule 3.8. As used in this
Agreement, "Environmental Site" shall mean any Facility, any UST and any
other waste storage, processing, treatment or disposal facility, and any
other business site or any other real property owned, leased, controlled
or operated by the Corporation or by any predecessor thereof on or prior
to the Closing Date, provided however, as to activities of such
predecessors, only to the extent that the Corporation or the
Shareholders had knowledge of such activities. As used in this
Agreement, "Environmental Site Losses" shall mean any and all losses,
damages (including exemplary damages and penalties), liabilities,
claims, deficiencies, costs, expenses, and expenditures (including,
without limitation, expenses in connection with site evaluations, risk
assessments and feasibility studies) arising out of or required by an
interim or final judicial or administrative decree, judgment,
injunction, mandate, interim or final permit condition or restriction,
cease and desist order, abatement order, compliance order, consent
order, clean-up order, exhumation order, reclamation order or any other
remedial action that is required to be undertaken under federal, state
or local law in respect of operating activities on or affecting any
Facility, any UST or any other Environmental Site, including, but not
limited to (x) any actual or alleged violation of any law or regulation
respecting the protection of the environment, including, but not limited
to, RCRA and CERCLA or any other law or regulation respecting the
protection of the air, water and land and (y) any remedies or
violations, whether by a private or public action, alleged or sought to
be assessed as a consequence, directly or indirectly, of any "Release"
(as defined below) of pollutants (including odors) or Hazardous
Substances from any Facility, any UST or any other Environmental Site
resulting from activities thereat, whether such Release is into the air,
water (including groundwater) or land and whether such Release arose
before, during or after the Closing Date. The term "Release" as used
herein means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the ambient environment. Notwithstanding anything in this
paragraph to the contrary, it is specifically understood and agreed that
a Release composed solely of Hazardous Substances contained in household
waste lawfully disposed of in a landfill during the time a Corporation
owned and/or operated such landfill does not constitute an Environmental
Site Loss.
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(c) All actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation)
incident to any of the foregoing. To the extent not covered by the
Company's insurance, all matters on Schedule 3.8, Part II.
10.2 LIMITATIONS ON SHAREHOLDERS' INDEMNITIES.
(a) Subject to Section 10.2(b), the obligations of the
Shareholders to indemnify the WCI Indemnitees as provided in Section
10.1 shall be equal to the amount by which the cumulative amount of all
such liabilities, claims, damages deficiencies, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses,
expenditures and Environmental Site Losses with respect to any or all
10.1 Indemnity Events exceed $100,000 (the "Deductible Amount");
provided, that the amount of any obligation of indemnity arising
pursuant to Section 10.1 with respect to any representation, warranty or
covenant contained in Sections 3.1 through 3.5, 3.18 and 3.22 hereof
shall not be subject to the Deductible Amount.
(b) Absent fraud, the maximum amount which WCI can recover as a
result of one or more 10.1 Indemnity Events pursuant to the provisions
hereof for Claims shall not in the aggregate exceed six million dollars
($6,000,000) with respect to Claims made prior to the first anniversary
of the Closing Date, five million dollars ($5,000,000) with respect to
Claims on or after the first anniversary of the Closing Date and prior
to the second anniversary of the Closing Date, four million dollars
($4,000,000) with respect to Claims made on or after the second
anniversary of the Closing Date and prior to the third anniversary of
the filing of the Corporation's federal and California income tax
returns for the fiscal year ending on the date of the Closing Date, and
thereafter nothing in the absence of fraud.
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10.3 NOTICE OF INDEMNITY CLAIM.
(a) In the event that any claim ("Claim") is hereafter asserted
against or arises with respect to any WCI Indemnitee as to which such
Indemnitee may be entitled to indemnification hereunder, the WCI
Indemnitee shall notify the Shareholders (as applicable collectively,
the "Indemnifying Party") in writing thereof (the "Claims Notice")
within 60 days after (i) receipt of written notice of commencement of
any third party litigation against such WCI Indemnitee, (ii) receipt by
such WCI Indemnitee of written notice of any third party claim pursuant
to an invoice, notice of claim or assessment, against such WCI
Indemnitee, or (iii) such WCI Indemnitee becomes aware of the existence
of any other event in respect of which indemnification may be sought
from the Indemnifying Party (including, without limitation, any
inaccuracy of any representation or warranty or breach of any covenant).
The Claims Notice shall describe the Claim and the specific facts and
circumstances in reasonable detail, and shall indicate the amount, if
known, or an estimate, if possible, of the losses that have been or may
be incurred or suffered by the WCI Indemnitee.
(b) The Indemnifying Party may elect to defend any Claim for
money damages where the cumulative total of all Claims (including such
Claims) do not exceed the limit set forth in Section 10.2 at the time
the Claim is made, by the Indemnifying Party's own counsel; provided,
however, the Indemnifying Party may assume and undertake the defense of
such a third party Claim only upon written agreement by the Indemnifying
Party that the Indemnifying Party is obligated to fully indemnify the
WCI Indemnitee with respect to such action. The WCI Indemnitee may
participate, at the WCI Indemnitee's own expense, in the defense of any
Claim assumed by the Indemnifying Party. Without the written approval of
the WCI Indemnitee, which approval shall not be unreasonably withheld,
the Indemnifying Party shall not agree to any compromise of a Claim
defended by the Indemnifying Party.
(c) If, within thirty (30) days of the Indemnifying Party's
receipt of a Claims Notice, the Indemnifying Party shall not have
provided the written agreement required by Section 10.3(b) and elected
to defend the Claim, the WCI Indemnitee shall have the right to assume
control of the defense and/or compromise of such Claim, and the costs
and expenses of such defense, including reasonable attorneys' fees,
shall be added to the Claim. The Indemnifying Party shall promptly, and
in any event within thirty (30) days reimburse the WCI Indemnitee for
the costs of defending the Claim, including attorneys' fees and
expenses.
(d) The party assuming the defense of any Claim shall keep the
other party reasonably informed at all times of the progress and
development of its or their defense of and compromise efforts with
respect to such Claim and shall furnish the other party with copies of
all relevant pleadings, correspondence and other papers. In addition,
the
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parties to this Agreement shall cooperate with each other and make
available to each other and their representatives all available relevant
records or other materials required by them for their use in defending,
compromising or contesting any Claim. The failure to timely deliver a
Claims Notice or otherwise notify the Indemnifying Party of the
commencement of such actions in accordance with this Section 10.3 shall
not relieve the Indemnifying Party from the obligation to indemnify
hereunder but only to the extent that the Indemnifying Party establishes
by competent evidence that it has been prejudiced thereby.
(e) In the event both the WCI Indemnitee and the Indemnifying
Party are named as defendants in an action or proceeding initiated by a
third party, they shall both be represented by the same counsel (on whom
they shall agree), unless such counsel the WCI Indemnitee, or the
Indemnifying Party shall determine that such counsel has a conflict of
interest in representing both the WCI Indemnitee and the Indemnifying
Party in the same action or proceeding and the WCI Indemnitee and the
Indemnifying Party do not waive such conflict to the satisfaction of
such counsel.
10.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties of the parties contained in this Agreement and in
any certificate, Exhibit or Schedule delivered pursuant hereto, or in any other
writing delivered pursuant to the provisions of this Agreement (the
"Representations and Warranties") and the liability of the party making such
Representations and Warranties for breaches thereof shall survive the
consummation of the transactions contemplated hereby. The parties hereto in
executing and delivering and in carrying out the provisions of this Agreement
are relying solely on the representations, warranties, Schedules, Exhibits,
agreements and covenants contained in this Agreement, or in any writing or
document delivered pursuant to the provisions of this Agreement, and not upon
any representation, warranty, agreement, promise or information, written or
oral, made by any persons other than as specifically set forth herein or
therein.
10.5 NO EXHAUSTION OF REMEDIES OR SUBROGATION; RIGHT OF SET OFF. The
Shareholders waive any right to require any WCI Indemnitee to (i) proceed
against the Corporation; (ii) proceed against any other person; or (iii) pursue
any other remedy whatsoever in the power of any WCI Indemnitee. WCI may, but
shall not be obligated to, set off against any and all payments due any
Shareholder any amount to which any WCI Indemnitee is entitled to be indemnified
hereunder with respect to any 10.1 Indemnity Event. Such right of set off shall
be separate and apart from any and all other rights and remedies that the
Indemnities may have against Shareholders or their successors.
11. OTHER POST-CLOSING COVENANTS OF THE SHAREHOLDERS AND WCI
11.1 RESTRICTIVE COVENANTS. As to the Corporation, the Shareholders,
Alma and their Affiliates acknowledge that (i) WCI, as the purchaser of the
Corporation's Stock, is and will be
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engaged in the same business as the Corporation (the "Business"); (ii) the
Shareholders, Alma and their Affiliates are intimately familiar with the
Business; (iii) the Business is currently conducted in the State of California
and WCI intends to continue the Business in California and intends, by
acquisition or otherwise, to expand the Business into other geographic areas of
California where it is not presently conducted; (iv) the Shareholders, Alma and
their Affiliates have had access to trade secrets of, and confidential
information concerning, the Business; (v) the agreements and covenants contained
in this Section 11.1 are essential to protect the Business and the goodwill
being acquired; and (vi) the Shareholders, Alma and their Affiliates have the
means to support themselves and their dependents other than by engaging in a
business substantially similar to the Business and the provisions of this
Section 11 will not impair such ability. The Shareholders covenant and agree as
set forth in (a), (b) and (c) below with respect to each Corporation:
(a) NON-COMPETE. For a period commencing on the Closing Date and
terminating five years thereafter (the "Restricted Period"), neither of
the Shareholders, Alma nor any of their Affiliates shall, anywhere in
the counties of Madera, Fresno, Stanislaus, San Joaquin, and Calaveras,
California where WCI or one of its subsidiaries owns or operates a
business similar to the Business (the "Restricted Counties"), directly
or indirectly, acting individually or as the owner, shareholder,
partner, or employee of any entity, (i) engage in the operation of a
solid waste collection, transporting, disposal and/or composting
business, transfer facility, recycling facility, materials recovery
facility or solid waste landfill; (ii) enter the employ of, or render
any personal services to or for the benefit of, or assist in or
facilitate the solicitation of customers for, or receive remuneration in
the form of salary, commissions or otherwise from, any business engaged
in such activities; or (iii) receive or purchase a financial interest
in, make a loan to, or make a gift in support of, any such business in
any capacity, including, without limitation, as a sole proprietor,
partner, shareholder, officer, director, principal, agent, trustee or
lender; provided, however, that any of the Shareholders and Alma may
own, directly or indirectly, solely as an investment, securities of any
business traded on any national securities exchange or NASDAQ, provided
none of the Shareholders is a controlling person of, or a member of a
group which controls, such business and further provided that the
Shareholders do not, in the aggregate, directly or indirectly, own 2% or
more of any class of securities of such business and provided further
that Youngclaus shall be permitted to continue the business described on
Schedule 11.1.
(b) CONFIDENTIAL INFORMATION. During the Restricted Period and
thereafter, the Shareholders, Alma and their Affiliates shall keep
secret and retain in strictest confidence, and shall not use for the
benefit of themselves or others, all data and information relating to
the Business ("Confidential Information"), including without limitation,
know-how, trade secrets, customer lists, supplier lists, details of
contracts, pricing policies, operational methods, marketing plans or
strategies, bidding information, practices, policies or procedures,
product development techniques or plans, and technical processes;
provided, however, that the term "Confidential Information" shall not
include
41
<PAGE> 43
information that (i) is or becomes generally available to the public
other than as a result of disclosure by the Shareholders and Alma or
(ii) is general knowledge in the solid waste handling and landfill
business and not specifically related to the Business.
(c) PROPERTY OF THE BUSINESS. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof) relating
to the Business, including such items stored in computer memories, on
microfiche or by any other means, made or compiled by or on behalf of
the Shareholders, Alma or the Corporation or made available to them
relating to the Business, but excluding any materials (other than the
minute books of the Corporation) maintained by any attorneys for the
Corporation or the Shareholders prior to the Closing, are and shall be
the property of WCI and have been delivered or will be delivered or made
available to WCI at the Closing.
(d) NON-SOLICITATION. Without the consent of WCI, which may be
granted or withheld by WCI in its discretion, the Shareholders, Alma and
their Affiliates shall not solicit any employees of the Corporation to
leave the employ of the Corporation and join the Shareholders or any
Affiliate in any business endeavor owned or pursued by the Shareholders.
(e) NO DISPARAGEMENT. From and after the Closing Date, none of
the Shareholders or Alma shall, in any way or to any person or entity or
governmental or regulatory body or agency, denigrate or derogate WCI or
any of its subsidiaries, or any officer, director or employee, or any
product or service or procedure of any such company whether or not such
denigrating or derogatory statements shall be true and are based on acts
or omissions which are learned by the Shareholders or Alma from and
after the date hereof or on acts or omissions which occur from and after
the date hereof, or otherwise. A statement shall be deemed denigrating
or derogatory to any person or entity if it adversely affects the regard
or esteem in which such person or entity is held by investors, lenders
or licensing, rating, or regulatory entities. Without limiting the
generality of the foregoing, none of the Shareholders or Alma shall,
directly or indirectly in any way in respect of any such company or any
such directors or officers, communicate with, or take any action which
is adverse to the position of any such company with any person, entity
or governmental or regulatory body or agency who or which has dealings
or prospective dealings with any such company or jurisdiction or
prospective jurisdiction over any such company. This paragraph does not
apply to the extent that testimony is required by legal process,
provided that WCI has received not less than five days' prior written
notice of such proposed testimony.
11.2 RIGHTS AND REMEDIES UPON BREACH. If the Shareholders or Alma or
any Affiliate breaches, or threatens to commit a breach of, any of the
provisions of Section 11.1 herein (the "Restrictive Covenants"), WCI shall have
the following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable, and each
42
<PAGE> 44
of which is in addition to, and not in lieu of, any other rights and remedies
available to WCI at law or in equity:
(a) SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of
the Restrictive Covenants would cause irreparable injury to WCI and that
money damages would not provide an adequate remedy to WCI. Accordingly,
in addition to any other rights or remedies, WCI shall be entitled to
injunctive relief to enforce the terms of the Restrictive Covenants and
to restrain the Shareholders and Alma from any violation thereof.
(b) ACCOUNTING. The right and remedy to require the Shareholders
and Alma to account for and pay over to WCI all compensation, profits,
monies, accruals, increments or other benefits derived or received by
the Shareholders and Alma as the result of any transactions constituting
a breach of the Restrictive Covenants.
(c) SEVERABILITY OF COVENANTS. The Shareholders and Alma
acknowledge and agree that the Restrictive Covenants are reasonable and
valid in geographical and temporal scope and in all other respects. If
any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect,
without regard to the invalid portions.
(d) BLUE-PENCILING. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, such court shall
reduce the duration or scope of such provision, as the case may be, to
the extent necessary to render it enforceable and, in its reduced form,
such provision shall then be enforced.
(e) ENFORCEABILITY IN JURISDICTION. WCI and the Shareholders and
Alma intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographic
scope of the Restrictive Covenants. If the courts of any one or more of
such jurisdictions hold the Restrictive Covenants unenforceable by
reason of the breadth of such scope or otherwise, it is the intention of
WCI and the Shareholders and Alma that such determination not bar or in
any way affect WCI's right to the relief provided above in the courts of
any other jurisdiction within the geographic scope of the Restrictive
Covenants as to breaches of such covenants in such other respective
jurisdictions, such covenants as they relate to each jurisdiction being,
for this purpose, severable into diverse and independent covenants.
43
<PAGE> 45
12. TERMINATION OF AGREEMENT
12.1 TERMINATION DATE.
(a) If the Closing Date has not occurred by March 31, 1998, this
Agreement shall be terminated at 5:00 p.m., Pacific Time, March 31,
1998, unless the Corporation has not then obtained all of the consents
required by Section 6.7, in which event this Agreement shall terminate
10 days after the later of (i) if any such consent is denied, the latest
time for filing any appeal or further appeal of such denial has lapsed;
(ii) if any such consent is denied and such denial is appealed, the day
the last appeal of such denial has been dismissed, refused or decided
adversely to the Corporation; and (iii) notice by WCI.
(b) This Agreement may be terminated at any time prior to the
Closing Date:
(i) by WCI, by written notice to the Corporation and the
Shareholders if the representations and warranties of the
Corporation and the Shareholders shall not have been true and
correct in all respects as of the date when made; or
(ii) by the Corporation and the Shareholders by written
notice to WCI if the representations and warranties of WCI shall
not have been true and correct in all respects as of the date
when made.
12.2 NOTICE AND EFFECT OF TERMINATION. On termination of this
Agreement, the transactions contemplated herein shall forthwith be abandoned and
all continuing obligations and liabilities of the parties under or in connection
with this Agreement shall be terminated and of no further force or effect;
provided, however, that nothing herein shall relieve any party from liability
for any misrepresentation, breach of warranty or breach of covenant contained in
this Agreement prior to such termination.
12.3 EXCLUSIVE NEGOTIATIONS. Following execution of this Agreement,
the Corporation, the Shareholders and Alma shall not, and the Shareholders and
Alma shall not permit the Corporation's or the Shareholders' and Alma's
officers, directors, employees or agents to, initiate, negotiate or discuss with
any other person or entity the possible sale of all or substantially all of the
assets, business or stock of either Corporation, or to effect the merger of a
Corporation with any party other than WCI. The Shareholders and Alma hereby
confirm that no person or entity presently has or may acquire any rights to
purchase or otherwise acquire the assets or the stock of the Corporation.
13. GENERAL
44
<PAGE> 46
13.1 ADDITIONAL CONVEYANCES. Following the Closing, the Shareholders
and WCI shall each deliver or cause to be delivered at such times and places as
shall be reasonably agreed upon such additional instruments as WCI or the
Shareholders may reasonably request for the purpose of carrying out this
Agreement. The Shareholders will cooperate with WCI and/or the Corporation on
and after the Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any actions, proceedings or disputes of any
nature with respect to matters pertaining to all periods prior to the date of
this Agreement.
13.2 ASSIGNMENT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto, the successors or assigns of WCI and the
heirs, legal representatives or assigns of the Shareholders; provided, however,
that any such assignment shall be subject to the terms of this Agreement and
shall not relieve the assignor of its or his responsibilities under this
Agreement.
13.3 PUBLIC ANNOUNCEMENTS. Except as required by law, no party shall
make any public announcement or filing with respect to the transactions provided
for herein prior to the Closing Date without the prior consent of the other
parties hereto and in no case shall any such announcement be made prior to the
filing by WCI of a registration statement under the Act relating to the IPO
without the consent of WCI.
13.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
13.5 NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if in writing and either
delivered personally, sent by facsimile transmission or by air courier service,
or mailed by postage prepaid registered or certified U.S. mail, return receipt
requested, to the addresses designated below or such other addresses as may be
designated in writing by notice given hereunder, and shall be effective upon
personal delivery or facsimile transmission thereof or upon delivery by
registered or certified U.S. mail or one business day following deposit with an
air courier service:
If to the Shareholders: at their respective addresses set forth on
Schedule 3.2
With a copy to: Richard W. Dietrich
Dietrich, Glasrud, Mallek & Aune
An Association Including Law Corporations
5250 North Palm, Suite 402
Fresno, California 93704
Fax: (209) 435-8776
If to WCI: Waste Connections, Inc.
45
<PAGE> 47
2260 Douglas Boulevard, Suite 280
Roseville, California 95661
Attention: Ronald J. Mittelstaedt
Fax: (916) 772-2920
With a copy to: Robert D. Evans, Esq.
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Fax: (415) 421-2922
13.6 ATTORNEYS' FEES. In the event of any dispute or controversy
between WCI on the one hand and the Corporation or the Shareholders on the other
hand relating to the interpretation of this Agreement or to the transactions
contemplated hereby, the prevailing party shall be entitled to recover from the
other party reasonable attorneys' fees and expenses incurred by the prevailing
party. Such award shall include post-judgment attorney's fees and costs.
13.7 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to its
conflict of laws provisions.
13.8 PAYMENT OF FEES AND EXPENSES. Whether or not the transactions
herein contemplated shall be consummated, each party hereto will pay its own
fees, expenses and disbursements incurred in connection herewith and all other
costs and expenses incurred in the performance and compliance with all
conditions to be performed hereunder (including, in the case of the
Shareholders, any such fees, expenses and disbursements paid or accrued by, or
charged to, the Corporation).
13.9 INCORPORATION BY REFERENCE. All Schedules and Exhibits attached
hereto are incorporated herein by reference as though fully set forth at each
point referred to in this Agreement.
13.10 CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered a part hereof or affect the construction or
interpretation of any provisions of this Agreement.
13.11 NUMBER AND GENDER OF WORDS; CORPORATION. Whenever the singular
number is used herein, the same shall include the plural where appropriate, and
shall apply to all of such number, and to each of them, jointly and severally,
and words of any gender shall include each other gender where appropriate.
13.12 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) and the other documents delivered pursuant hereto constitute
the entire Agreement and
46
<PAGE> 48
understanding between the Corporation, the Shareholders and WCI and supersedes
any prior agreement and understanding relating to the subject matter of this
Agreement. This Agreement may be modified or amended only by a written
instrument executed by the Corporation, the Shareholders (or the Shareholders'
Representative on their behalf) and WCI acting through its officers, thereunto
duly authorized by its Board of Directors.
13.13 WAIVER. No waiver by any party hereto at any time of any breach
of, or compliance with, any condition or provision of this Agreement to be
performed by any other party hereto may be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
13.14 CONSTRUCTION. The language in all parts of this Agreement must be
in all cases construed simply according to its fair meaning and not strictly for
or against any party. Unless expressly set forth otherwise, all references
herein to a "day" are deemed to be a reference to a calendar day. All references
to "business day" mean any day of the year other than a Saturday, Sunday or a
public or bank holiday in California. Unless expressly stated otherwise,
cross-references herein refer to provisions within this Agreement and are not
references to the overall transaction or to any other document.
47
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
persons thereunto duly authorized as of the date first above written.
THE CORPORATION: MADERA DISPOSAL SYSTEMS, INC.
By:
------------------------------------
Eugene Dupreau
President
WCI: WASTE CONNECTIONS, INC.
By:
------------------------------------
Ronald J. Mittelstaedt
Chief Executive Officer & President
48
<PAGE> 50
THE SHAREHOLDERS:
------------------------------------
Alma Sciacqua, as Trustee of the
Sciacqua Family Trust B
------------------------------------
Eugene Dupreau
------------------------------------
Melvin G. Dias
------------------------------------
Charles B. Youngclaus
49
<PAGE> 51
ALMA:
------------------------------------
Alma Sciacqua
50
<PAGE> 52
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. PURCHASE OF CORPORATION'S STOCK................................................. 1
1.1 SHARES TO BE PURCHASED................................................... 1
1.2 PURCHASE PRICE........................................................... 1
1.3 ADDITIONAL CONTINGENT PURCHASE PRICE..................................... 2
1.4 EXCLUDED ASSETS.......................................................... 5
2. CLOSING TIME AND PLACE.......................................................... 5
3. REPRESENTATIONS AND WARRANTIES OF THE
CORPORATION, THE SHAREHOLDERS AND ALMA.......................................... 5
3.1 ORGANIZATION, STANDING AND QUALIFICATION................................. 5
3.2 CAPITALIZATION........................................................... 5
3.3 ALL STOCK BEING ACQUIRED................................................. 6
3.4 AUTHORITY FOR AGREEMENT.................................................. 6
3.5 NO BREACH OR DEFAULT..................................................... 6
3.6 SUBSIDIARIES............................................................. 6
3.7 FINANCIAL STATEMENTS..................................................... 6
3.8 LIABILITIES.............................................................. 7
3.9 CONDUCT OF BUSINESS...................................................... 8
3.10 PERMITS AND LICENSES..................................................... 8
3.11 CERTAIN RECEIVABLES...................................................... 10
3.12 FIXED ASSETS AND REAL PROPERTY........................................... 10
3.13 ACQUISITION/DISPOSAL OF ASSETS........................................... 11
3.14 CONTRACTS AND AGREEMENTS; ADVERSE RESTRICTIONS........................... 11
3.15 INSURANCE................................................................ 12
3.16 PERSONNEL................................................................ 12
3.17 BENEFIT PLANS AND UNION CONTRACTS........................................ 12
3.18 TAXES.................................................................... 14
3.19 COPIES COMPLETE.......................................................... 14
3.20 CUSTOMERS, BILLINGS, CURRENT RECEIPTS AND RECEIVABLES.................... 15
3.21 NO CHANGE WITH RESPECT TO CORPORATION.................................... 15
3.22 DEBT; CURRENT ASSETS AND CURRENT LIABILITIES............................. 17
3.23 BANK ACCOUNTS............................................................ 17
3.24 COMPLIANCE WITH LAWS..................................................... 18
3.25 POWERS OF ATTORNEY....................................................... 19
3.26 UNDERGROUND STORAGE TANKS................................................ 19
3.27 PATENTS, TRADEMARKS, TRADE NAMES, ETC.................................... 20
3.28 ASSETS, ETC., NECESSARY TO BUSINESS...................................... 20
3.29 CONDEMNATION............................................................. 20
3.30 SUPPLIERS AND CUSTOMERS.................................................. 20
3.31 ABSENCE OF CERTAIN BUSINESS PRACTICES.................................... 20
3.32 RELATED PARTY TRANSACTIONS............................................... 21
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C> <C>
3.33 DISCLOSURE SCHEDULES..................................................... 21
3.34 NO MISLEADING STATEMENTS................................................. 21
3.35 ACCURATE AND COMPLETE RECORDS............................................ 21
3.36 KNOWLEDGE................................................................ 21
3.37 BROKERS; FINDERS......................................................... 22
3.38 INVESTMENT REPRESENTATIONS............................................... 22
3.39 MADERA COUNTY LANDFILL OPERATION......................................... 23
4. REPRESENTATIONS AND WARRANTIES OF WCI........................................... 24
4.1 EXISTENCE AND GOOD STANDING.............................................. 24
4.2 NO CONTRACTUAL RESTRICTIONS.............................................. 24
4.3 AUTHORIZATION OF AGREEMENT............................................... 24
4.4 STATUS OF SHARES......................................................... 24
4.5 NO MISLEADING STATEMENTS................................................. 24
4.6 BROKERS; FINDERS......................................................... 24
4.7 DISCLOSURE SCHEDULES..................................................... 24
5. COVENANTS FROM SIGNING TO CLOSING DATE.......................................... 25
5.1 OPERATIONS............................................................... 25
5.2 NO CHANGE................................................................ 25
5.3 OBTAIN CONSENTS.......................................................... 26
5.4 ACCESS; CONFIDENTIAL INFORMATION......................................... 26
5.5 NOTICE OF MATERIAL ADVERSE CHANGE........................................ 27
6. CONDITIONS PRECEDENT TO OBLIGATION OF WCI TO
CLOSE........................................................................... 27
6.1 REPRESENTATIONS AND WARRANTIES........................................... 27
6.2 CONDITIONS............................................................... 27
6.3 NO MATERIAL ADVERSE CHANGE............................................... 27
6.4 CERTIFICATES............................................................. 27
6.5 NO LITIGATION............................................................ 28
6.6 OTHER DELIVERIES......................................................... 28
6.7 GOVERNMENTAL APPROVALS; CONSENTS TO TRANSFER............................. 28
6.8 RELEASE OF SECURITY INTERESTS............................................ 28
6.9 DUE DILIGENCE............................................................ 28
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C> <C>
7. CONDITIONS PRECEDENT TO OBLIGATION OF THE
SHAREHOLDERS TO CLOSE........................................................... 28
7.1 REPRESENTATIONS AND WARRANTIES........................................... 28
7.2 CONDITIONS............................................................... 29
7.3 CERTIFICATE.............................................................. 29
7.4 NO LITIGATION............................................................ 29
7.5 OTHER DELIVERIES......................................................... 29
7.6 ELECTION OF DIRECTOR AND ADVISORY DIRECTOR............................... 29
8. CLOSING DELIVERIES.............................................................. 29
8.1 WCI DELIVERIES........................................................... 29
8.2 SHAREHOLDERS DELIVERIES.................................................. 30
9. ADDITIONAL COVENANTS OF WCI, THE CORPORATION
AND THE SHAREHOLDERS............................................................ 31
9.1 NO DELAY................................................................. 31
9.2 RELEASE OF GUARANTIES.................................................... 31
9.3 RELEASE OF SECURITY INTERESTS............................................ 31
9.4 CONFIDENTIALITY.......................................................... 31
9.5 BROKERS AND FINDERS FEES................................................. 32
9.6 TAXES.................................................................... 32
9.7 SHORT YEAR TAX RETURNS................................................... 32
9.8 SHAREHOLDERS' REPRESENTATIVE............................................. 32
9.9 CERTAIN TAX MATTERS...................................................... 33
10. INDEMNIFICATION................................................................. 34
10.1 INDEMNITY BY THE SHAREHOLDERS............................................ 34
10.2 LIMITATIONS ON SHAREHOLDERS' INDEMNITIES................................. 35
10.3 NOTICE OF INDEMNITY CLAIM................................................ 36
10.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS................... 37
10.5 NO EXHAUSTION OF REMEDIES OR SUBROGATION; RIGHT OF SET OFF............... 37
11. OTHER POST-CLOSING COVENANTS OF THE
SHAREHOLDERS AND WCI............................................................ 37
11.1 RESTRICTIVE COVENANTS.................................................... 37
11.2 RIGHTS AND REMEDIES UPON BREACH.......................................... 39
12. TERMINATION OF AGREEMENT........................................................ 40
12.1 TERMINATION DATE......................................................... 40
12.2 NOTICE AND EFFECT OF TERMINATION......................................... 41
</TABLE>
iii
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<TABLE>
<CAPTION>
Page
<S> <C> <C>
12.3 EXCLUSIVE NEGOTIATIONS................................................... 41
13. GENERAL......................................................................... 41
13.1 ADDITIONAL CONVEYANCES................................................... 41
13.2 ASSIGNMENT............................................................... 41
13.3 PUBLIC ANNOUNCEMENTS..................................................... 41
13.4 COUNTERPARTS............................................................. 42
13.5 NOTICES.................................................................. 42
13.6 ATTORNEYS' FEES.......................................................... 42
13.7 APPLICABLE LAW........................................................... 42
13.8 PAYMENT OF FEES AND EXPENSES............................................. 42
13.9 INCORPORATION BY REFERENCE............................................... 43
13.10 CAPTIONS................................................................. 43
13.11 NUMBER AND GENDER OF WORDS; CORPORATION.................................. 43
13.12 ENTIRE AGREEMENT......................................................... 43
13.13 WAIVER................................................................... 43
13.14 CONSTRUCTION............................................................. 43
</TABLE>
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<PAGE> 1
EXHIBIT 10.20
ASSET PURCHASE AGREEMENT
Dated as of March 1, 1998, by and among
Waste Connections, Inc.,
Waste Connections of Idaho, Inc.,
Hunter Enterprises, Inc.
and
Randy Hunter
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. PURCHASE AND SALE OF ASSETS.......................................... 1
1.1. Sale and Transfer of Assets.................................. 1
1.2. Assumption by IWCI of Assumed Contracts...................... 2
1.3. Excluded Liabilities......................................... 2
1.4. Purchase Price............................................... 2
1.5. Certain Taxes................................................ 3
2. CLOSING TIME AND PLACE............................................... 3
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER.......................................................... 3
3.1. Standing and Authority for Business.......................... 3
3.2. All Assets Being Acquired.................................... 4
3.3. Authority for Agreement...................................... 4
3.4. No Breach or Default......................................... 4
3.5. Financial Statements......................................... 4
3.6. Liabilities.................................................. 4
3.7. Conduct of Business.......................................... 5
3.8. Permits and Licenses......................................... 5
3.9. Certain Prepaid Customer Accounts............................ 5
3.10. Title........................................................ 5
3.11. Employees.................................................... 5
3.12. Contracts and Agreements; Adverse Restrictions............... 5
3.13. Personnel.................................................... 6
3.14. Benefit Plans and Union Contracts............................ 6
3.15. Taxes........................................................ 6
3.16. Copies Complete.............................................. 7
3.17. Customer List and Billings................................... 7
3.18. No Change With Respect to Seller............................. 7
3.19. Closing Date Debt............................................ 7
3.20. Compliance With Laws......................................... 7
3.21. Patents, Trademarks, Trade Names, etc........................ 7
3.22. Reserved..................................................... 7
3.23. Suppliers and Customers...................................... 8
3.24. Absence of Certain Business Practices........................ 8
3.25. Disclosure Schedules......................................... 8
3.26. No Misleading Statements..................................... 8
3.27. Accurate and Complete Records................................ 8
3.28. Knowledge.................................................... 8
3.29. Brokers; Finders............................................. 9
3.30. Bingham County, Idaho........................................ 9
</TABLE>
i
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4. REPRESENTATIONS AND WARRANTIES OF BUYERS............................. 9
4.1. Existence and Good Standing.................................. 9
4.2. No Contractual Restrictions.................................. 9
4.3. Authorization of Agreement................................... 9
4.4. No Misleading Statements..................................... 9
5. OPERATIONS FROM SIGNING TO CLOSING DATE.............................. 10
5.1. Operations................................................... 10
5.2. No Change.................................................... 10
5.3. Access; Confidential Information............................. 11
6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYERS TO CLOSE................ 12
6.1. Representations and Warranties............................... 12
6.2. Conditions................................................... 12
6.3. No Material Adverse Change................................... 12
6.4. No Litigation................................................ 12
6.5. Other Deliveries............................................. 12
6.6. Release of Security Interests................................ 12
7. CONDITIONS PRECEDENT TO OBLIGATION OF THE SELLER TO
CLOSE................................................................ 12
7.1. Representations and Warranties............................... 12
7.2. Conditions................................................... 13
7.3. No Litigation................................................ 13
7.4. Other Deliveries............................................. 13
8. CLOSING DELIVERIES................................................... 13
8.1. Buyers' Deliveries........................................... 13
8.2. Seller's Deliveries.......................................... 13
9. ADDITIONAL COVENANTS OF WCI, SELLER AND SHAREHOLDER.................. 14
9.1. Confidentiality.............................................. 14
9.2. Brokers and Finders Fees..................................... 14
9.3. Payments Recorded by Seller After Closing Date............... 14
10. INDEMNIFICATION...................................................... 14
10.1. Indemnity by Seller.......................................... 14
10.2. Limitations on Seller's Indemnities.......................... 15
10.3. Notice of Indemnity Claim.................................... 15
10.4. Survival of Representations, Warranties and Agreements....... 16
10.5. No Exhaustion of Remedies or Subrogation; Right of Set Off... 16
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
11. OTHER POST-CLOSING COVENANTS OF SELLER AND WCI....................... 17
11.1. Restrictive Covenants........................................ 17
11.2. Rights and Remedies Upon Breach.............................. 19
12. TERMINATION OF AGREEMENT............................................. 20
12.1. Termination Date............................................. 20
12.3. Notice and Effect of Termination............................. 20
12.4. Exclusive Negotiations....................................... 21
13. GENERAL.............................................................. 21
13.1. Additional Conveyances....................................... 21
13.2. Assignment................................................... 21
13.3. Public Announcements......................................... 21
13.4. Counterparts................................................. 21
13.5. Notices...................................................... 21
13.6. Attorneys' Fees.............................................. 22
13.7. Applicable Law............................................... 22
13.8. Payment of Fees and Expenses................................. 22
13.9. Incorporation by Reference................................... 22
13.10. Captions..................................................... 22
13.11. Number and Gender of Words................................... 22
13.12. Entire Agreement............................................. 22
13.13. Waiver....................................................... 23
13.14. Construction................................................. 23
</TABLE>
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of March 1, 1998, entered into by and
among Waste Connections, Inc., a Delaware corporation ("WCI"), Waste Connections
of Idaho, Inc., a Delaware corporation ("IWCI" and, collectively with WCI,
"Buyers"), Hunter Enterprises, Inc., an Idaho corporation ("Seller"), and Randy
Hunter (the "Shareholder").
WHEREAS, the Seller is engaged in the collection and transport of solid
waste in the City of Basalt, Idaho and in certain unincorporated areas of
Bingham, Bonneville, Jefferson, Madison and Power Counties, Idaho, and other
activities related to the collection and transport of solid waste in the
above-referenced areas (the "Business");
WHEREAS, Seller is the sole owner of the Business;
WHEREAS, the Shareholder owns all of the issued and outstanding Capital
Stock of the Seller;
WHEREAS, Buyers wish to purchase, and Seller wishes to sell certain
assets that are necessary to operate the Business;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto, each intending to be bound hereby, agree as
follows:
1. PURCHASE AND SALE OF ASSETS.
1.1. SALE AND TRANSFER OF ASSETS. Subject to and in accordance
with the terms and conditions of this Agreement, at the Closing on the Closing
Date (as defined below) Seller shall convey, transfer, deliver and assign to
Buyers (and as among Buyers, as they shall designate to Seller), and Buyers
shall accept from Seller all of the assets listed on Schedule 1.1 (collectively,
the "Assets"), including without limitation:
(a) five trucks (including a description of the model and
year and the serial number), containers and route lists, used primarily
in connection with the ownership, operation and management of the
Business:
(b) the agreement between Seller and Power County regarding
collection and transport of solid waste (the "Power County Agreement")
the terms of which are attached hereto as Exhibit 1.1(b), customer
accounts, and any other commitments and arrangements specifically
identified in Schedule 3.12(a) as contracts, agreements or accounts
contemplated to be assumed by IWCI pursuant to this Agreement (the
"Assumed Contracts");
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(c) all permits, licenses, titles (including motor vehicle
titles and current registrations) and any other similar documents from
any and all governmental authorities constituting a material
authorization or entitlement or otherwise material to the operation or
management of the Business owned by, issued to, or held by or otherwise
benefiting Seller (the "Governmental Permits");
(d) all customer lists of the Seller relating to the
Business;
(e) the good will of the Business;
(f) all deposits, credits, advance payments, claims or rights
relating to the Assets or the Business accruing after the Closing Date,
all guarantees, warranties, indemnities and similar rights in favor of
Seller with respect to any of the Assets and all books and records
primarily in connection with the operation of the Business; and
(g) a non-exclusive license to use the name "Hunter
Enterprises, Inc." on the Assets for up to 90 days after the Closing
Date.
Notwithstanding the foregoing, the Buyers shall not acquire any of the accounts
receivable of the Seller. The Buyers agree not to send out their first bills to
customer accounts acquired pursuant to this Agreement until at least March 17,
1998.
1.2. ASSUMPTION BY IWCI OF ASSUMED CONTRACTS. IWCI hereby assumes
and agrees to perform and discharge, effective the day after the Closing Date
all of the obligations and commitments of Seller accruing after the Closing Date
under or with respect to each Assumed Contract, but not including any obligation
or liability for any breach thereof occurring on or prior to the Closing Date.
1.3. EXCLUDED LIABILITIES. Notwithstanding the provisions of
Section 1.2 or any other provision hereof or any Schedule or Exhibit hereto and
regardless of any disclosure to Buyers, Buyers shall not assume or be bound by
any other duties, responsibilities, obligations or liabilities of Seller or to
which Seller or any of the Assets or the Business may be bound or affected, of
whatever kind or nature, whether known, unknown, contingent or otherwise,
arising before, on or after the Closing Date (including without limitation taxes
arising from the operation of the Business or the sale of the Assets) except, as
to obligations and liabilities arising after the Closing Date only, those
obligations and liabilities expressly assumed by Buyers pursuant to Section 1.2
(the "Excluded Liabilities").
1.4. PURCHASE PRICE. The purchase price (the "Purchase Price")
for the Assets shall be payable as follows:
(a) Five Hundred Thousand Dollars ($500,000), (i) minus the
Closing Date Debt as described on Schedule 3.19; (ii) minus the fees
listed on Schedule 3.9 that Seller collected in advance for services
that Buyers will render after the Closing; (iii) plus $9,828 for
containers purchased by the Seller for which Buyers agreed to pay; and
(iv) minus the fee
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<PAGE> 7
payable to Richard Kendall as listed on Schedule 3.29 hereto. The Purchase Price
shall be paid in cash by wire transfer or check payable in clearinghouse funds
at Closing. The cash portion of the Purchase Price paid at the Closing will be
based on Schedules 3.19 and 3.9 as delivered at the Closing.
(b) IWCI shall deliver to the Seller a non-interest bearing
Promissory Note (the "Note") in the aggregate principal amount of one hundred
and seventy-five thousand dollars ($175,000), which Note shall be paid in five
equal annual installments of thirty-five thousand dollars ($35,000) and shall be
substantially in the form of Exhibit 1.4(b)(i) attached hereto. The annual
installments of the Note shall be paid on July 1, 1998, 1999, 2000, 2001 and
2002. WCI shall deliver to the Seller a Guarantee for the Note (the "Guarantee")
substantially in the form of Exhibit 1.4(b)(ii). If prior to the first
anniversary of the Closing Date, Power County does not allow WCI or IWCI to
continue collecting and transporting solid waste for Power County pursuant to
the terms of the Power County Agreement, for any reason except WCI's or IWCI's
negligence or breach of the terms of the Power County Agreement, IWCI shall
deduct from the fifth annual installment of the Note an amount equal to
$21,600.00 multiplied by the product of the number of days that WCI or IWCI were
not allowed to collect and transport solid waste for Power County pursuant to
the terms of the Power County Agreement during the first year after the Closing
Date multiplied by .0027397.
1.5. CERTAIN TAXES. The Buyers shall pay any and all sales, use,
excise, transfer and conveyance taxes payable or assessable in connection with
or as a result of the transfer of the Assets under the terms of this Agreement
and the transactions contemplated hereby. Buyers shall not be responsible for
any business, occupation, withholding, possessory interest or similar tax or
assessment or any other tax or fee of any kind relating to any period on or
prior to the Closing Date with respect to Seller, the Assets or the ownership,
operation or management of the Business.
2. CLOSING TIME AND PLACE
Subject to the terms and conditions of this Agreement, the closing of
the transactions contemplated herein (the "Closing") shall take place at such
time on February 28, 1998, as the parties shall agree (the "Closing Date"). The
effective date of the Closing shall be March 1, 1998. At the Closing, Buyers and
Seller shall deliver to each other the documents, instruments and other items
described in Section 8 of this Agreement by Federal Express.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
Seller and the Shareholder, jointly and severally, (i) represent and
warrant that each of the following representations and warranties is true and
complete as of the date of this Agreement (the "Signing Date") with respect to
the Seller, the Assets and the Business, as the case may be, and will be true as
of the Closing Date, and (ii) agree that such representations and warranties
shall survive the Closing.
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3.1. STANDING AND AUTHORITY FOR BUSINESS. Seller has full power
and authority to own the Assets and to operate the Business as now conducted.
3.2. ALL ASSETS BEING ACQUIRED. The Assets being acquired by
Buyers hereunder constitute all of the assets of Seller used and necessary to
conduct and operate the Business as it is presently conducted, except for the
assets that Seller will retain to service the Bingham County Contract, a copy of
which is attached hereto as Schedule 3.2.
3.3. AUTHORITY FOR AGREEMENT. Each of the Seller and the
Shareholder has full right, power and authority to enter into this Agreement and
to perform its or his obligations hereunder. The execution and delivery of this
Agreement by the Seller has been duly authorized by its Board of Directors. This
Agreement has been duly and validly executed and delivered by Seller and the
Shareholder, and, subject to the due authorization, execution and delivery by
WCI and IWCI, constitutes the legal, valid and binding obligation of Seller and
the Shareholder, enforceable against Seller and the Shareholder in accordance
with its terms.
3.4. NO BREACH OR DEFAULT. Except as disclosed on Schedule 3.4,
the execution and delivery by Seller of this Agreement, and the consummation by
Seller of the transactions contemplated hereby, will not:
(a) result in the breach of any of the terms or conditions
of, or constitute a default under any obligation by which Seller, the
Shareholder, or any of the Assets, is or may be bound or affected; or
(b) violate any law or any order, writ, injunction or decree
of any court, administrative agency or governmental authority, or
require the approval, consent or permission of any governmental or
regulatory authority; or
(c) violate any agreements to which Seller or any Shareholder
is a party relating to the Assets and the Business.
3.5. FINANCIAL STATEMENTS. Seller has delivered to Buyers, as
Schedule 3.5, copies of the financial statements ("Financial Statements") of
Seller relating to the Business for the three years ended June 30, 1997 (June
30, 1997 shall be referred to as the "Balance Sheet Date"). The Financial
Statements are true and correct and fairly present (i) the financial position of
the Business as of the respective dates of the balance sheets included in the
Financial Statements, and (ii) the results of operations of the Business for the
respective periods indicated. The Financial Statements have been prepared in
accordance with generally accepted accounting principles, applied consistently
with prior periods. Except as disclosed on Schedules 3.5, 3.6, 3.19, Seller had,
as of the Signing Date, and will have, as of the Closing Date, no liabilities of
any nature, whether accrued, absolute, contingent or otherwise, including,
without limitation, tax liabilities due or to become due except, with respect to
the period from the date of this Agreement through the Closing Date, as
permitted by Section 5.2(a).
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<PAGE> 9
3.6. LIABILITIES. There are no liabilities related to the Assets
or the Business, except those described on Schedule 3.6, Part I hereto. There
are no claims, suits, proceedings pending against the Seller relating to the
Business or the Assets, except those described on Schedule 3.6, Part II hereof.
There are no liens, claims or encumbrances secured by any of the Assets, except
those listed on Schedule 3.6, Part III hereof.
3.7. CONDUCT OF BUSINESS. Except as set forth on Schedule 3.18,
since the Balance Sheet Date:
(a) The Business has been conducted only in the ordinary
course; and
(b) There has been no change in the condition (financial or
otherwise) of the Assets or the liabilities or operations of Seller
relating to the Business other than changes in the ordinary course of
business, none of which either singly or in the aggregate has been
materially adverse.
3.8. PERMITS AND LICENSES. No permits, licenses, franchises,
titles (except the motor vehicle titles and current registrations copies of
which are attached hereto as Schedule 3.8(a)(i)) or any other similar documents
are necessary to operate the Business as it is currently conducted or to use the
Assets as they are currently used.
3.9. CERTAIN PREPAID CUSTOMER ACCOUNTS. Schedule 3.9 is an
accurate and complete list as of the Closing Date of the fees that Seller has
collected from customers for services that have not yet been rendered and that
Buyers will render after the Closing. Such list includes the amount of the fees
paid in advance, the customer who paid such fees and the services owed to that
customer.
3.10. TITLE. Seller has good, valid and marketable title to all
the Assets to be sold pursuant to this Agreement, free of any encumbrance or
charge of any kind except: (i) liens for current taxes not yet due; and (ii)
minor imperfections of title and encumbrances, if any, that are not substantial
in amount, do not materially detract from the value of the property subject
thereto, do not materially impair the value of the Business or the Assets, and
have arisen only in the ordinary course of business and consistent with past
practice. There are and as of the Closing Date will be no leases, occupancy
agreements, options, rights of first refusal or any other agreements or
arrangements, either oral or written, that create or confer in any person or
entity the right to acquire, occupy or possess, now or in the future, any
Assets, or any portion thereof, or create in or confer on any person or entity
any right, title or interest therein or in any portion thereof.
3.11. EMPLOYEES. All written and oral employment contracts with
the Employees (as defined in Section 3.13 hereof) are terminable "at will"
without payment of severance.
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3.12. CONTRACTS AND AGREEMENTS; ADVERSE RESTRICTIONS.
(a) Schedule 3.12(a) lists, as of the Signing Date, and
includes copies of, all insurance policies and any other material
contracts and agreements relating to the Business to which Seller is a
party or by which any of the Assets is bound. Except as disclosed on
Schedule 3.12(a), all such contracts and agreements included in Schedule
3.12(a) are and on the Closing Date shall be in full force and effect
and binding upon the parties thereto. Except as described or cross
referenced on Schedule 3.12(a), neither the Seller nor, to the Seller'
knowledge, any other parties to such contracts and agreements is in
breach thereof, and none of the parties has threatened to breach any of
the material provisions thereof or notified Seller of a default
thereunder, or exercised any options thereunder.
(b) There is no outstanding judgment, order, writ,
injunction or decree against Seller, the result of which could
materially adversely affect the Business or any of the Assets, nor has
Seller been notified that any such judgment, order, writ, injunction or
decree has been requested.
3.13. PERSONNEL. Seller agrees that Buyers may hire three of its
employees whom are listed on Schedule 3.13 (the "Employees"). Schedule 3.13 also
contains a complete list, as of the Signing Date, of the Employees' respective
rates of compensation, including (i) the portions thereof attributable to
bonuses, (ii) any other salary, bonus, equity participation, or other
compensation arrangement made with or promised to any of them, and (iii) copies
of their current employment agreements, if any exist. Schedule 3.13 also lists
the driver's license number for each of the Employees that serves as a driver of
motor vehicles used in the Business.
3.14. BENEFIT PLANS AND UNION CONTRACTS.
(a) Except for the health care insurance provided to
employees pursuant to a health plan included as Schedule 3.14(a), the
Seller has no employee benefit plans relating to the Business, including
employment agreements and any other agreements containing "golden
parachute" provisions, retirement plans, welfare benefit plans and
deferred compensation agreements.
(b) There are no union contracts and agreements between the
Seller and any collective bargaining group relating to the Business. In
the operation of the Business, the Seller is in compliance in all
material respects with all applicable federal, state and local laws
respecting employment and employment practices, terms and conditions of
employment, wages and hours, and nondiscrimination in employment, and is
not engaged in any unfair labor practice. There is no charge pending
nor, to the Seller's or the Shareholder's knowledge, is there any charge
threatened against the Seller relating to the Business before any court
or agency and alleging unlawful discrimination in employment practices.
There is no charge of or proceeding with regard to any unfair labor
practice relating to the Business that is pending before the National
Labor Relations Board.
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3.15. TAXES. There are no outstanding taxes due on the Assets and
there are no liens on any of the Assets for taxes that have not been paid by the
Seller or the Shareholder. Copies of the federal income, and state franchise,
income and sales tax returns of Seller for the last three fiscal years are
attached as part of Schedule 3.15. Seller has withheld all required amounts from
its employees for all pay periods in full and complete compliance with the
withholding provisions of applicable federal, state and local laws. All required
federal, state and local and other returns with respect to income tax
withholding, social security, and unemployment taxes have been duly filed by
Seller for all periods for which returns are due, and the amounts shown on all
such returns to be due and payable have been paid in full. Seller will withhold
all required amounts from its employees for all pay periods up to and including
the Closing Date in full and complete compliance with the withholding provisions
of applicable federal, state and local laws.
3.16. COPIES COMPLETE. Except as disclosed on Schedule 3.16, the
copies of all instruments, agreements, licenses, certificates or other documents
that have been delivered to Buyers in connection with the transactions
contemplated hereby are complete and accurate as of the Signing Date and are
true and correct copies of the originals thereof. None of such instruments,
agreements, licenses, certificates or other documents requires notice to, or
consent or approval of, any governmental agency or other third party to any of
the transactions contemplated hereby.
3.17. CUSTOMER LIST AND BILLINGS. Schedule 3.17 is current,
accurate and complete list of, and includes the customers of the Business that
Seller serves on an ongoing basis, including name, location and current billing
rate, as of the Signing Date. Since the Balance Sheet Date, Seller has not lost
any customers and no customers have threatened or otherwise indicated to Seller
that they intend to discontinue doing business with Seller.
3.18. NO CHANGE WITH RESPECT TO SELLER. Except as set forth on
Schedule 3.18, with respect to Seller, since the Balance Sheet Date, there has
not been, and prior to the Closing there will not be, any change in the conduct
of the Business, the income, operations or financial condition of the Business,
or the Assets.
3.19. CLOSING DATE DEBT. At the Closing, Seller shall prepare and
deliver to Buyers Schedule 3.19, which shall set forth the amount of the
aggregate debt (excluding trade payables) of Seller outstanding on the Closing
Date relating to the Business or the Assets on the Closing Date (the "Closing
Date Debt"). Buyers are not assuming any other debt of the Seller other than the
debt listed on Schedule 3.19 which Buyers will pay on the Closing Date and which
will be deducted from the Purchase Price pursuant to Section 1.4(a) hereof.
3.20. COMPLIANCE WITH LAWS. Except as disclosed on Schedule 3.20,
Seller has complied with, and Seller is presently in compliance with, all
federal, state and local laws, ordinances, codes, rules, regulations, orders,
judgments, awards, decrees, consent judgments, consent orders and requirements
applicable to Seller relating to the Business (collectively "Laws"), including,
but not limited to, Laws relating to the public health, safety or protection of
the
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<PAGE> 12
environment. Except as disclosed on Schedule 3.20, there has been no assertion
by any party that Seller is in material violation of any Laws.
3.21. PATENTS, TRADEMARKS, TRADE NAMES, ETC. No patents,
tradenames, fictitious business names, trademarks, service marks, copyrights or
other intellectual property is currently used in the operation of the Business
or in connection with the Assets.
3.22. Reserved.
3.23. SUPPLIERS AND CUSTOMERS. The relations between Seller and
the customers of the Business are good. Seller has no knowledge of any fact
(other than general economic and industry conditions) which indicates that any
of the suppliers providing use of, or access to, landfills or disposal sites to
Seller intends to cease providing such items to Seller, nor does Seller have
knowledge of any fact (other than general economic and industry conditions)
which indicates that any of the customers of the Business intends to terminate,
limit or reduce its business relations with Seller relating to the Business.
3.24. ABSENCE OF CERTAIN BUSINESS PRACTICES. Seller has not
directly or indirectly within the past five years given or agreed to give any
gift or similar benefit to any customer, supplier, governmental employee or
other person who is or may be in a position to help or hinder the Business in
connection with any actual or proposed transaction which (a) if not given in the
past, might have had an adverse effect on the financial condition, business or
results of operations of the Business, or (b) if not continued in the future,
might adversely affect the financial condition, business or operations of the
Business or which might subject Buyers to suit or penalty in any private or
governmental litigation or proceeding.
3.25. DISCLOSURE SCHEDULES. Any matter disclosed by Seller on any
Schedule to this Agreement shall be deemed to have been disclosed on every other
Schedule that refers to such Schedule by cross reference so long as the nature
of the matter disclosed is obvious from a fair reading of the Schedule on which
the matter is disclosed.
3.26. NO MISLEADING STATEMENTS. The representations and
warranties of Seller and Shareholder contained in this Agreement, the Exhibits
and Schedules hereto and all other documents and information furnished to Buyers
and their representatives pursuant hereto are complete and accurate in all
material respects and do not include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements made and to be
made not misleading.
3.27. ACCURATE AND COMPLETE RECORDS. The books, ledgers,
financial records and other records of Seller relating to the Business:
(a) have been made available to Buyers and their agents
at Seller's offices or at the offices of Buyers' attorneys or Seller'
attorneys;
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<PAGE> 13
(b) have been, in all material respects, maintained in
accordance with all applicable laws, rules and regulations; and
(c) are accurate and complete, reflect all material
transactions.
3.28. KNOWLEDGE. Wherever reference is made in this Agreement to
the "knowledge" of Seller or the Shareholder, such term means the actual
knowledge of Seller or the Shareholder or any management employee of Seller
whose duties relate to the Business or any knowledge which should have been
obtained by Seller, Shareholder or such employee upon reasonable inquiry by a
reasonable business person.
3.29. BROKERS; FINDERS. Seller hired Richard Kendall to serve as
a broker for Seller in connection with the transactions contemplated by this
Agreement, and the fee owed to Richard Kendall for his services as a broker is
listed on Schedule 3.29. Such fee will be deducted from the Purchase Price and
paid to Richard Kendall on the Closing Date. No other person is entitled to any
broker's, finder's, financial advisory or similar fee or payment in respect
thereof based in any way on any agreement, arrangement or understanding made by
or on behalf of Seller.
3.30. BINGHAM COUNTY, IDAHO. Seller and the Shareholder represent
that as of the Signing Date and the Closing Date, they know of no discussions in
which Bingham County considered the possibility of granting an exclusive
contract for refuse collection and disposal from residential customers in
Bingham County, Idaho, and if Seller or Shareholder learn of any such
discussions prior to the Closing Date, they will inform the Buyers.
4. REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers represent and warrant to Seller that each of the following
representations and warranties is true as of the Closing Date, and agree that
such representations and warranties shall survive the Closing:
4.1. EXISTENCE AND GOOD STANDING. WCI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. IWCI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2. NO CONTRACTUAL RESTRICTIONS. No provisions exist in any
article, document or instrument to which IWCI or WCI is a party or by which IWCI
or WCI is bound which would be violated by consummation of the transactions
contemplated by this Agreement.
4.3. AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by Buyers and, subject to the due
authorization, execution and delivery by Seller, constitutes a legal, valid and
binding obligation of Buyers. Each of WCI and IWCI has full corporate power,
legal right and corporate authority to enter into and perform its obligations
under this Agreement and to carry on the Business as presently conducted. The
execution and
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<PAGE> 14
delivery of this Agreement and the consummation of the transactions contemplated
hereby and the fulfillment of and compliance with the terms and conditions
hereof do not and will not, after the giving of notice, or the lapse of time or
otherwise: (a) violate any provisions of any judicial or administrative order,
award, judgment or decree applicable to IWCI or WCI: (b) conflict with any of
the provisions of the Certificate or Articles of Incorporation or Bylaws of IWCI
or WCI; or (c) conflict with, result in a breach of or constitute a default
under any material agreement or instrument to which IWCI or WCI is a party or by
which either is bound.
4.4. NO MISLEADING STATEMENTS. The representations and warranties
of WCI and IWCI contained in this Agreement, the Exhibits and Schedules hereto
and all other documents and information furnished to Seller pursuant hereto are
materially complete and accurate, and do not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made and to be made not misleading as of the Closing Date.
5. OPERATIONS FROM SIGNING TO CLOSING DATE
5.1. OPERATIONS. Between the Signing Date and the Closing Date,
the Seller will:
(a) carry on the Business in substantially the same
manner as it has heretofore and not introduce any material new method,
or discontinue any existing material method, of operation or accounting;
(b) maintain the Assets, in as good working order and
condition as at present, ordinary wear and tear excepted;
(c) perform all of their material obligations under
agreements relating to or affecting the Assets or the Business;
(d) keep in full force and effect present insurance
policies or other comparable insurance coverage for the Assets and the
Business;
(e) use its best efforts to maintain and preserve the
Business intact, retain their present employees and maintain their
relationship with suppliers, customers and others having business
relations with the Business;
(f) file on a timely basis all notices, reports or
other filings required to be filed with or reported to any federal,
state, municipal or other governmental department, commission, board,
bureau, agency or any instrumentality of any of the foregoing wherever
located with respect to the continuing operations of the Business;
(g) maintain material compliance with all laws, rules and
regulations applicable to the Assets or the Business;
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(h) file on a timely basis all complete and correct
applications or other documents necessary for the continuing operation
of the Business, whether or not such approval would expire before or
after the Closing; and
(i) advise Buyers promptly in writing of any material
change in any document, Schedule, Exhibit, or other information
delivered pursuant to this Agreement.
5.2. NO CHANGE. Between the Signing Date and the Closing Date,
the Seller will not take any action described below without the approval of WCI:
(a) enter into any contract or commitment relating to the
Business or incur or agree to incur any liability other than in the
ordinary course of business other than the transactions contemplated by
this Agreement or make any single capital expenditure in excess of
$10,000 or in excess of $25,000 in the aggregate during any consecutive
thirty (30) day period without regard to whether such capital
expenditure is in the ordinary course of business;
(b) change or promise to change the compensation payable
or to become payable to any employee or agent, or make or promise
to make any bonus payment to any such person;
(c) create, assume or otherwise permit the imposition of any
mortgage, pledge or other lien or encumbrance upon or grant any option
or right of first refusal with respect to any of the Assets;
(d) sell, assign, lease or otherwise transfer or dispose
of any Assets other than in the ordinary course of business;
(e) waive any material rights or claims relating to the
Business or the Assets;
(f) amend or terminate any material agreement or any site
assessment, permit, license or other right relating to the Business or
the Assets; or
(g) enter into any other transaction outside the ordinary
course of business related to the Business or prohibited hereunder.
5.3. ACCESS; CONFIDENTIAL INFORMATION. Between the Signing Date
and the Closing Date, the Seller will afford to the officers and authorized
representatives of Buyers, including, without limitation, its engineers,
counsel, independent auditors and investment bankers, access to the Assets,
books and records of the Seller relating to the Business, and will furnish
Buyers with such additional financial and operating data and other information
as to the Business and Assets as Buyers may from time to time reasonably
request. The Seller will cooperate with Buyers, their representatives and
counsel in the preparation of any documents or other material which may be
required by any governmental agency. Buyers will cause all information obtained
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from the Seller in connection with the negotiation and performance of this
Agreement to be treated as confidential (except such information which is in the
public domain or which Buyers may be required to disclose to any governmental
agency, or pursuant to any court or regulatory agency order) and will not use,
and will not knowingly permit others to use, any such confidential information
in a manner detrimental to the Seller. Neither party will disclose to any third
persons other than its key employees, accountants, bankers, financial
consultants, insurance brokers or legal counsel any of the terms or provisions
of this Agreement prior to or after the Closing Date without the prior written
consent of the other party, but the parties agree that this Agreement may be
included in WCI's filings with the Securities and Exchange Commission.
6. CONDITIONS PRECEDENT TO OBLIGATION OF BUYERS TO CLOSE
The obligations of the Buyers under this Agreement are subject to the
satisfaction, at or before Closing, of all of the following conditions
precedent, unless waived in writing by the Buyers:
6.1. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Seller contained in this Agreement or in any statement,
Exhibit, Schedule, certificate or document delivered by the Seller under this
Agreement shall be true, correct and complete on and as of the date when made
and at all times prior to the Closing Date, shall be deemed to be made again on
the Closing Date, and shall then be true, correct and complete in all material
respects as of the Closing Date.
6.2. CONDITIONS. The Seller shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by it on or before the
Closing Date.
6.3. NO MATERIAL ADVERSE CHANGE. Since the date of the this
Agreement, there shall not have been any material adverse change in the
condition (financial or otherwise) in the Business or the Assets.
6.4. NO LITIGATION. None of the transactions contemplated hereby
shall have been enjoined by any court or by any federal or state governmental
branch, agency, commission or regulatory authority and no suit or other
proceeding challenging the transactions contemplated hereby shall have been
threatened or instituted and no investigative or other demand shall have been
made by any federal or state governmental branch, agency, commission or
regulatory authority.
6.5. OTHER DELIVERIES. The Seller shall have delivered the items
that they are required to deliver under Section 8 of this Agreement.
6.6. RELEASE OF SECURITY INTERESTS. All security interests in the
Assets of the Seller that have been created in favor of financial institutions
or other lenders to secure
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indebtedness of any of the Seller shall have been released, subject, where
applicable to payment of the Closing Date Debt.
7. CONDITIONS PRECEDENT TO OBLIGATION OF THE SELLER TO CLOSE
The obligations of the Seller under this Agreement are subject to the
satisfaction, at or before Closing, of all of the following conditions
precedent, unless waived in writing by the Seller:
7.1. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Buyers contained in this Agreement or in any statement,
Exhibit, Schedule, certificate or document delivered by the Buyers under this
Agreement shall be true, correct and complete on and as of the date when made
and at all times prior to the Closing Date, shall be deemed to be made again on
the Closing Date, and shall then be true, correct and complete in all material
respects as of the Closing Date.
7.2. CONDITIONS. The Buyers shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by them on or before the
Closing Date.
7.3. NO LITIGATION. None of the transactions contemplated hereby
shall have been enjoined by any court or by any federal or state governmental
branch, agency, commission or regulatory authority and no suit or other
proceeding challenging the transactions contemplated hereby shall have been
threatened or instituted and no investigative or other demand shall have been
made by any federal or state governmental branch, agency, commission or
regulatory authority.
7.4. OTHER DELIVERIES. The Buyers shall have delivered the items
that they are required to deliver under Section 8 of this Agreement.
8. CLOSING DELIVERIES
At the Closing, the respective parties shall make the deliveries
indicated:
8.1. BUYERS' DELIVERIES.
(a) WCI or IWCI shall deliver the cash portion of the
Purchase Price required to be delivered on the Closing Date pursuant to
Section 1.4(a) to Seller.
(b) WCI shall deliver the Note and the Guarantee required
to be delivered pursuant to Section 1.4(b) to the Seller.
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8.2. SELLER'S DELIVERIES.
(a) Seller shall deliver to IWCI (and/or its designee)
an executed bill of sale or bills of sale and other instruments of
transfer and conveyance for the full and complete transfer, conveyance,
assignment and delivery to IWCI on the Closing Date of all of Seller'
right, title and interest in and to all of the Assets, accompanied by
all third party consents required with respect thereto, including,
without limitation, written evidence of the release of the liens and
encumbrances with respect to the Assets;
(b) Reserved;
(c) Seller shall deliver to IWCI (and/or its designee)
all motor vehicle registrations and ownership documents for the motor
vehicles being acquired by Seller;
(d) Seller shall deliver to Buyers an opinion of counsel
for Seller, dated as of the Closing Date, in substantially the form
attached hereto as Exhibit 8.2(d).
(e) Seller shall execute and deliver such other documents
and instruments as are reasonably requested by WCI or IWCI in order to
consummate the transactions contemplated by this Agreement.
(f) Shareholder shall execute and deliver to Buyers a
letter that Buyers can send to the customer accounts that Buyers are
purchasing pursuant to this Agreement, substantially in the form of
Exhibit 8.2(f) hereto.
9. ADDITIONAL COVENANTS OF WCI, SELLER AND SHAREHOLDER
9.1. CONFIDENTIALITY. Seller and Shareholder shall not disclose
or make any public announcements of the existence or terms of this Agreement or
the transactions contemplated by this Agreement without the prior written
consent of WCI, unless required to make such disclosure or announcement by law,
in which event Seller shall notify WCI at least 24 hours before such disclosure
or announcement is expected to be made.
9.2. BROKERS AND FINDERS FEES. Each party shall pay and be
responsible for any broker's, finder's or financial advisory fee incurred by
such party in connection with the transactions contemplated by this Agreement.
Richard Kendall's fee shall be payable according to Section 1.4(a)(iv) hereof.
9.3. PAYMENTS RECORDED BY SELLER AFTER CLOSING DATE. Seller shall
receive in trust and pay over to IWCI any payments or other moneys received by
Seller after the Closing Date that relate to the Business or the Assets.
10. INDEMNIFICATION
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10.1. INDEMNITY BY SELLER. Subject to Section 10.2, Seller and
the Shareholder covenant and agree that they will, jointly and severally,
indemnify and hold harmless WCI and IWCI and their respective directors,
officers and agents and their respective successors and assigns (individually,
an "Indemnitee," and collectively the "Indemnitees"), from and after the date of
this Agreement, against any and all losses, damages, assessments, fines,
penalties, adjustments, liabilities, claims, deficiencies, costs, expenses
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation), expenditures, identified by a WCI Indemnitee with
respect to each of the following contingencies (all, the "Indemnity Events"):
(a) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of Seller
pursuant to the terms of this Agreement or any misrepresentation in or
omission from any Exhibit, Schedule, list, certificate, or other
instrument furnished or to be furnished to WCI or IWCI pursuant to the
terms of this Agreement, regardless of whether, in the case of a breach
of a representation or a warranty, WCI or IWCI relied on the truth of
such representation or warranty or had any knowledge of any breach
thereof.
(b) Any liability for Seller's or the Shareholder's
violation or alleged violation of any state, local or federal law or
regulation that occurred in connection with the use of the Assets or the
operation of the Business, including, but not limited to, laws related
to the environment or hazardous materials.
(c) All actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation)
incident to any of the foregoing.
10.2. LIMITATIONS ON SELLER'S INDEMNITIES. The maximum amount
which the Indemnitees can recover as a result of one or more Indemnity Events
pursuant to the provisions hereof for Claims shall not in the aggregate exceed
the Purchase Price.
10.3. NOTICE OF INDEMNITY CLAIM.
(a) In the event that any claim ("Claim") is hereafter
asserted against or arises with respect to any Indemnitee as to which
such Indemnitee may be entitled to indemnification hereunder, the
Indemnitee shall notify the Seller and the Shareholder (collectively,
the "Indemnifying Party") in writing thereof (the "Claims Notice")
within 60 days after (i) receipt of written notice of commencement of
any third party litigation against such Indemnitee, (ii) receipt by such
Indemnitee of written notice of any third party claim pursuant to an
invoice, notice of claim or assessment, against such Indemnitee, or
(iii) such Indemnitee becomes aware of the existence of any other event
in respect of which indemnification may be sought from the Indemnifying
Party (including, without limitation, any inaccuracy of any
representation or warranty or breach of any covenant). The Claims Notice
shall describe the Claim and the specific facts and circumstances in
reasonable detail, and shall indicate the amount, if known, or an
estimate, if possible, of the losses that have been or may be incurred
or suffered by the Indemnitee.
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(b) The Indemnifying Party may elect to defend any Claim for
money damages where the cumulative total of all Claims (including such
Claims) do not exceed the limit set forth in Section 10.2 at the time
the Claim is made, by the Indemnifying Party's own counsel; provided,
however, the Indemnifying Party may assume and undertake the defense of
such a third party Claim only upon written agreement by the Indemnifying
Party that the Indemnifying Party is obligated to fully indemnify the
Indemnitee with respect to such action. The Indemnitee may participate,
at the Indemnitee's own expense, in the defense of any Claim assumed by
the Indemnifying Party. Without the written approval of the Indemnitee,
which approval shall not be unreasonably withheld, the Indemnifying
Party shall not agree to any compromise of a Claim defended by the
Indemnifying Party.
(c) If, within 30 days of the Indemnifying Party's receipt
of a Claims Notice, the Indemnifying Party shall not have provided the
written agreement required by Section 10.3(b) and elected to defend the
Claims, the Indemnitee shall have the right to assume control of the
defense and/or compromise of such Claim, and the costs and expenses of
such defense, including reasonable attorneys' fees, shall be added to
the Claim. The Indemnifying Party shall promptly, and in any event
within 30 days reimburse the Indemnitee for the costs of defending the
Claim, including attorneys' fees and expenses.
(d) The party assuming the defense of any Claim shall keep
the other party reasonably informed at all times of the progress and
development of its or their defense of and compromise efforts with
respect to such Claim and shall furnish the other party with copies of
all relevant pleadings, correspondence and other papers. In addition,
the parties to this Agreement shall cooperate with each other and make
available to each other and their representatives all available relevant
records or other materials required by them for their use in defending,
compromising or contesting any Claim. The failure to timely deliver a
Claims Notice or otherwise notify the Indemnifying Party of the
commencement of such actions in accordance with this Section 10.3 shall
not relieve the Indemnifying Party from the obligation to indemnify
hereunder but only to the extent that the Indemnifying Party establishes
by competent evidence that it has been prejudiced thereby.
(e) In the event both the Indemnitee and the Indemnifying
Party are named as defendants in an action or proceeding initiated by a
third party, they shall both be represented by the same counsel (on whom
they shall agree), unless such counsel, the Indemnitee, or the
Indemnifying Party shall determine that such counsel has a conflict of
interest in representing both the Indemnitee and the Indemnifying Party
in the same action or proceeding and the Indemnitee and the Indemnifying
Party do not waive such conflict to the satisfaction of such counsel.
10.4. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties of the parties contained in this Agreement and in
any certificate, Exhibit or Schedule delivered pursuant hereto, or in any other
writing delivered pursuant to the
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provisions of this Agreement (the "Representations and Warranties") and the
liability of the party making such Representations and Warranties for breaches
thereof shall survive the consummation of the transactions contemplated hereby.
The parties hereto in executing and delivering and in carrying out the
provisions of this Agreement are relying solely on the representations,
warranties, Schedules, Exhibits, agreements and covenants contained in this
Agreement, or in any writing or document delivered pursuant to the provisions of
this Agreement, and not upon any representation, warranty, agreement, promise or
information, written or oral, made by any persons other than as specifically set
forth herein or therein.
10.5. NO EXHAUSTION OF REMEDIES OR SUBROGATION; RIGHT OF SET OFF.
Seller and the Shareholder waive any right to require any Indemnitee to (i)
proceed against any other person or (iii) pursue any other remedy whatsoever in
the power of any Indemnitee. The Buyers may, but shall not be obligated to, set
off against any and all payments due Seller on the Note, any amount to which
WCI, IWCI or any other Indemnitee is entitled to be indemnified hereunder with
respect to any Indemnity Event. Such right of set off shall be separate and
apart from any and all other rights and remedies that the Indemnities may have
against Seller and the Shareholder or their successors.
11. OTHER POST-CLOSING COVENANTS OF SELLER AND WCI
11.1. RESTRICTIVE COVENANTS. Seller and Shareholder acknowledge
that (i) Buyers, as the purchasers of the Assets (including the goodwill of the
Business), are and will be engaged in the same business as the Business; (ii)
Seller and Shareholder are intimately familiar with the Business; (iii) the
Business is currently conducted in the State of Idaho and Buyers, directly and
indirectly through their Affiliates, currently conduct business in Idaho and
intend, by acquisition or otherwise, to expand the Business into other
geographic areas of Idaho where it is not presently conducted; (iv) Seller and
Shareholder have had access to trade secrets of, and confidential information
concerning, the Business; (v) the agreements and covenants contained in this
Section 11.1 are essential to protect the Business and the goodwill being
acquired; and (vi) Seller and Shareholder have the means to support themselves
and their dependents other than by engaging in a business substantially similar
to the Business and the provisions of this Section 11 will not impair such
ability. Seller and Shareholder covenant and agree as set forth in (a), (b), (c)
and (d) below with respect to the Business:
(a) NON-COMPETE. For a period commencing on the Closing
Date and terminating five years thereafter (the "Restricted Period"),
Seller and Shareholder shall not, anywhere in the city of Basalt, Idaho
and Bingham, Bonneville, Power, Jefferson and Madison Counties, Idaho,
directly or indirectly, acting individually or as the owners,
shareholders, partners, or employees of any entity, (i) engage in the
operation of a solid waste collection, transporting, disposal and/or
composting business, transfer facility, recycling facility, materials
recovery facility or solid waste landfill; (ii) enter the employ of, or
render any personal services to or for the benefit of, or assist in or
facilitate the solicitation of customers for, or receive remuneration in
the form of salary, commissions or otherwise from, any business engaged
in such activities; or (iii) receive or purchase a financial interest
in, make a loan to, or make a gift in support of, any such business in
any
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capacity, including, without limitation, as a sole proprietor, partner,
shareholder, officer, director, principal, agent, trustee or lender;
provided, however, that Seller and Shareholder may own, directly or
indirectly, solely as an investment, securities of any business traded
on any national securities exchange or NASDAQ, provided Seller and
Shareholder are not controlling persons of, or members of a group which
controls, such business and further provided that Seller and Shareholder
do not, in the aggregate, directly or indirectly, own 2% or more of any
class of securities of such business.
(b) EXCEPTION TO THE NON-COMPETE. Despite the restrictions
imposed by section 11.1(a), Buyers and Seller agree that Seller may
continue to: (i) collect and dispose of refuse collected from containers
owned by Bingham County pursuant to Seller's contract with Bingham
County dated as of September 1992 (the "Bingham County Contract") until
the Bingham County Contract expires on September 30, 1999; (ii) bid or
negotiate for the contract to operate the Bingham County transfer
station, if such transfer station is built within five years after the
Closing Date, and perform under that contract if it is awarded to
Seller; and (iii) Seller may operate the Construction and Debris
Landfill owned by Bingham County that is currently located on Ridge
Street in Bingham County, Idaho but that the Seller expects to be
relocated within Bingham County shortly. These exceptions to the
non-competition provisions of Section 11.1(a) do not allow the Seller or
the Shareholder or any of their affiliates to: (i) collect or dispose of
refuse from any residential or other subscription customers in Bingham
County during the Restricted Period; (ii) renew its Bingham County
Contract or negotiate a new contract with Bingham County after the
Bingham County Contract expires; (iii) compete with the Buyers in
Bingham County after September 30, 1999; or (iv) bid or negotiate for
the right to operate the Bingham County Transfer Station or the Bingham
County Construction and Debris Landfill if Bingham County chooses to
bundle such services with the exclusive right to collect and transport
solid waste in Bingham County.
(c) CONFIDENTIAL INFORMATION. During the Restricted Period
and thereafter, Seller and Shareholder shall keep secret and retain in
strictest confidence, and shall not use for the benefit of themselves or
others, all data and information relating to the Business ("Confidential
Information"), including without limitation, the existence of and terms
of this Agreement, know-how, trade secrets, customer lists, supplier
lists, details of contracts, pricing policies, operational methods,
marketing plans or strategies, bidding practices and policies, product
development techniques or plans, and technical processes; provided,
however, that the term "Confidential Information" shall not include
information that (i) is or becomes generally available to the public
other than as a result of disclosure by Seller and Shareholder, or (ii)
is general knowledge in the solid waste handling and landfill business
and not specifically related to the Business.
(d) PROPERTY OF THE BUSINESS. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof) relating
to the Business, including such items stored in computer memories, on
microfiche or by any other means, made or compiled by or on behalf of
Seller or Shareholder or made available to Seller or Shareholder
relating to the Business, but excluding any materials maintained by any
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attorneys for Seller or Shareholder prior to the Closing, are and shall
be the property of WCI or IWCI and have been delivered or will be
delivered or made available to WCI or IWCI at the Closing.
(e) NON-SOLICITATION. Without the consent of WCI, which may
be granted or withheld by WCI in its discretion, Seller and Shareholder
shall not solicit any employees of WCI, IWCI or their Affiliates to
leave the employ of WCI, IWCI or their Affiliates and join Seller in any
business endeavor owned or pursued by Seller.
(f) NO DISPARAGEMENT. From and after the Closing Date, none
of the Seller or the Shareholder shall, in any way to any customer or
employee of the Business or the Buyers, denigrate or derogate Buyers or
any of its subsidiaries, or any officer, director or employee, or any
product or service or procedure of any such company whether or not such
denigrating or derogatory statements shall be true and are based on acts
or omissions which are learned by the Seller or Shareholder from and
after the date hereof or on acts or omissions which occur from and after
the date hereof, or otherwise. A statement shall be deemed denigrating
or derogatory to any person if it adversely affects the regard or esteem
in which such person or entity is held by such person. Without limiting
the generality of the foregoing, none of the Seller or Shareholder
shall, directly or indirectly in any way in respect of any such company
or any such directors or officers, communicate with, or take any action
which is adverse to the position of any such company with any customer
or employee of the Business or the Buyers. This paragraph does not apply
to the extent that testimony is required by legal process, provided that
WCI has received not less than five days' prior written notice of such
proposed testimony.
(g) ACCESS TO FINANCIAL STATEMENTS. For two years from the
Closing Date, if necessary for Buyers to obtain financing, Seller shall
allow Buyers or Buyers' designee to audit Seller's financial statements
and accounting records for the period of January 1, 1995 through the
Closing Date. Buyers shall assume any costs of such audit.
(h) BINGHAM COUNTY CONTRACT. If Seller continues to perform
under the Bingham County Contract after March 31, 1999, Seller agrees to
pay Buyers forty percent (40%) of the gross revenue that Seller bills to
Bingham County pursuant to the Bingham County Contract until the Bingham
County Contract terminates. Seller also agrees that Buyers may audit
Seller's invoices to Bingham County that are associated with the Bingham
County Contract.
11.2. RIGHTS AND REMEDIES UPON BREACH. If Seller or Shareholder
breach, or threaten to commit a breach of, any of the provisions of Section
11.1(a), (b), (c) or (e) herein (the "Restrictive Covenants"), WCI and IWCI
shall have the following rights and remedies, each of which rights and remedies
shall be independent of the others and severally enforceable, and each of which
is in addition to, and not in lieu of, any other rights and remedies available
to Buyers at law or in equity:
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(a) SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of
the Restrictive Covenants would cause irreparable injury to WCI and IWCI
and that money damages would not provide an adequate remedy to IWCI.
Accordingly, in addition to any other rights or remedies, WCI and IWCI
shall be entitled to injunctive relief to enforce the terms of the
Restrictive Covenants and to restrain Seller and Shareholder from any
violation thereof.
(b) ACCOUNTING. The right and remedy to require Seller and
Shareholder to account for and pay over to WCI or IWCI all compensation,
profits, monies, accruals, increments or other benefits derived or
received by Seller and Shareholder as the result of any transactions
constituting a breach of the Restrictive Covenants.
(c) SEVERABILITY OF COVENANTS. Seller and Shareholder
acknowledge and agree that the Restrictive Covenants are reasonable and
valid in geographical and temporal scope and in all other respects. If
any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect,
without regard to the invalid portions.
(d) BLUE-PENCILING. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of
the duration or geographic scope of such provision, such court shall
reduce the duration or scope of such provision, as the case may be, to
the extent necessary to render it enforceable and, in its reduced form,
such provision shall then be enforced.
(e) ENFORCEABILITY IN JURISDICTION. Buyers, Seller and
Shareholder intend to and hereby confer jurisdiction to enforce the
Restrictive Covenants upon the courts of any jurisdiction within the
geographic scope of the Restrictive Covenants. If the courts of any one
or more of such jurisdictions hold the Restrictive Covenants
unenforceable by reason of the breadth of such scope or otherwise, it is
the intention of Buyers, Seller and Shareholder that such determination
not bar or in any way affect Buyers' right to the relief provided above
in the courts of any other jurisdiction within the geographic scope of
the Restrictive Covenants as to breaches of such covenants in such other
respective jurisdictions, such covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and
independent covenants.
12. TERMINATION OF AGREEMENT
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12.1. TERMINATION DATE. If the Closing Date has not occurred by
April 1, 1998, this Agreement shall be terminated on April 15, 1998.
12.2. This Agreement may be terminated at any time prior to the
Closing Date:
(a) by the Buyers, by written notice to the Seller if the
representations and warranties of the Seller shall not have been true
and correct in all respects as of the date when made; or
(b) by the Seller by written notice to WCI if the
representations and warranties of the Buyers shall not have been true
and correct in all respects as of the date when made.
12.3. NOTICE AND EFFECT OF TERMINATION. On termination of this
Agreement, the transactions contemplated herein shall forthwith be abandoned and
all continuing obligations and liabilities of the parties under or in connection
with this Agreement shall be terminated and of no further force or effect;
provided, however, that nothing herein shall relieve any party from liability
for any misrepresentation, breach of warranty or breach of covenant contained in
this Agreement prior to such termination.
12.4. EXCLUSIVE NEGOTIATIONS. Following execution of this
Agreement, the Seller and the Shareholder shall not, and the Seller shall not
permit its employees or agents to, initiate, negotiate or discuss with any other
person or entity the possible sale of all or substantially all of the Assets or
the Business with any party other than the Buyers. The Seller and the
Shareholder hereby confirm that no person or entity presently has or may acquire
any rights to purchase or otherwise acquire the Assets or the Business.
13. GENERAL
13.1. ADDITIONAL CONVEYANCES. Following the Closing, Seller, the
Shareholder and Buyers shall each deliver or cause to be delivered at such times
and places as shall be reasonably agreed upon such additional instruments as
Buyers, the Shareholder or Seller may reasonably request for the purpose of
carrying out this Agreement. Seller and the Shareholder will cooperate with
Buyers on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings or
disputes of any nature with respect to matters pertaining to all periods prior
to the date of this Agreement.
13.2. ASSIGNMENT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, the successors or assigns of WCI,
IWCI and Seller and the Shareholder and Seller's and the Shareholder's heirs,
legal representatives or assigns; provided, however, that any such assignment
shall be subject to the terms of this Agreement and shall not relieve the
assignor of its or his responsibilities under this Agreement. The Buyers may
assign some or all of their rights hereunder to another affiliate of WCI.
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13.3. PUBLIC ANNOUNCEMENTS. Except as required by law, Seller
shall not make any public announcement or filing with respect to the
transactions provided for herein without the prior written consent of WCI.
13.4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
13.5. NOTICES. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given if in writing
and either delivered personally, or by air courier service, or mailed by postage
prepaid registered or certified U.S. mail, return receipt requested, to the
addresses designated below or such other addresses as may be designated in
writing by notice given hereunder, and shall be effective upon personal delivery
thereof or upon delivery by registered or certified U.S. mail or one business
day following deposit with an air courier service:
If to Seller: Randy Hunter
104 South Emerson
Shelley ID 83274
With a copy to: Steve Blaser, Esq.
Blaser, Sorensen & Hansen
285 NW Maine
P.O. Box 1047
Blackfoot, ID 83221
If to Buyers: Waste Connections, Inc.
2260 Douglas, Suite 280
Roseville, CA 95661
Attention: Ronald J. Mittelstaedt
With a copy to: Robert D. Evans, Esq.
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
13.6. ATTORNEYS' FEES. In the event of any dispute or controversy
between Buyers on the one hand and Seller and Shareholder on the other hand
relating to the interpretation of this Agreement or to the transactions
contemplated hereby, the prevailing party shall be entitled to recover from the
other party reasonable attorneys' fees and expenses incurred by the prevailing
party. Such award shall include post-judgment attorney's fees and costs.
13.7. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Idaho without regard to
its conflict of laws provisions.
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13.8. PAYMENT OF FEES AND EXPENSES. Whether or not the
transactions herein contemplated shall be consummated, each party hereto will
pay its own fees, expenses and disbursements incurred in connection herewith and
all other costs and expenses incurred in the performance and compliance with all
conditions to be performed hereunder.
13.9. INCORPORATION BY REFERENCE. All Schedules and Exhibits
attached hereto are incorporated herein by reference as though fully set forth
at each point referred to in this Agreement.
13.10. CAPTIONS. The captions in this Agreement are for
convenience only and shall not be considered a part hereof or affect the
construction or interpretation of any provisions of this Agreement.
13.11. NUMBER AND GENDER OF WORDS. Whenever the singular number
is used herein, the same shall include the plural where appropriate, and shall
apply to all of such number, and to each of them, jointly and severally, and
words of any gender shall include each other gender where appropriate.
13.12. ENTIRE AGREEMENT. This Agreement (including the Schedules
and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the entire Agreement and understanding between Seller and Shareholder
and the Buyers and supersedes any prior agreement and understanding relating to
the subject matter of this Agreement. This Agreement may be modified or amended
only by a written instrument executed by the Seller and the Shareholder and the
Buyers acting through their officers, thereunto duly authorized by their Boards
of Directors.
13.13. WAIVER. No waiver by any party hereto at any time of any
breach of, or compliance with, any condition or provision of this Agreement to
be performed by any other party hereto may be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
13.14. CONSTRUCTION. The language in all parts of this Agreement
must be in all cases construed simply according to its fair meaning and not
strictly for or against any party. Unless expressly set forth otherwise, all
references herein to a "day" are deemed to be a reference to a calendar day. All
references to "business day" mean any day of the year other than a Saturday,
Sunday or a public or bank holiday in California or Idaho. Unless expressly
stated otherwise, cross-references herein refer to provisions within this
Agreement and are not references to the overall transaction or to any other
document.
23
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by persons thereunto duly authorized as of the date first above
written.
SELLER: HUNTER ENTERPRISES, INC.
----------------------------------------
Randy Hunter
SHAREHOLDER:
----------------------------------------
Randy Hunter
WCI: Waste Connections, Inc.
By:
------------------------------------
Ronald J. Mittelstaedt
President
IWCI: Waste Connections of Idaho, Inc.
By:
------------------------------------
Ronald J. Mittelstaedt
President
24
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
Waste Connections of Idaho, Inc., a Delaware corporation
Waste Connections of Washington, Inc., a Washington corporation
Waste Connections International, Inc., a Washington corporation
Madera Disposal Systems, Inc., a California corporation
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 6, 1998, in the Registration Statement (Form S-1)
and related Prospectus of Waste Connections, Inc. for the registration of
2,300,000 shares of its common stock.
Our audits also included the financial statement schedule of Waste Connections,
Inc. and Predecessors listed in Item 16.b. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
We also consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 20, 1998, with respect to the financial
statements of Madera Disposal Systems, Inc. included in the Registration
Statement (Form S-1) and related Prospectus of Waste Connections, Inc. for the
registration of 2,300,000 shares of its common stock.
ERNST & YOUNG LLP
Sacramento, California
March 13, 1998
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> SEP-09-1997
<PERIOD-END> DEC-31-1997
<CASH> 820
<SECURITIES> 0
<RECEIVABLES> 3,940
<ALLOWANCES> 19
<INVENTORY> 0
<CURRENT-ASSETS> 339
<PP&E> 4,475
<DEPRECIATION> 290
<TOTAL-ASSETS> 18,880
<CURRENT-LIABILITIES> 4,282
<BONDS> 0
0
7,523
<COMMON> 23
<OTHER-SE> (82)
<TOTAL-LIABILITY-AND-EQUITY> 18,880
<SALES> 6,237
<TOTAL-REVENUES> 6,237
<CGS> 0
<TOTAL-COSTS> 8,653
<OTHER-EXPENSES> 36
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 600
<INCOME-PRETAX> (3,052)
<INCOME-TAX> (186)
<INCOME-CONTINUING> (2,866)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,866)
<EPS-PRIMARY> (1.48)
<EPS-DILUTED> (1.48)
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