<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO ___________
COMMISSION FILE NUMBER: 1-14267
REPUBLIC SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0716904
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
110 S.E. 6TH STREET
FT. LAUDERDALE, FLORIDA 33301
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 769-6000
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[ ]
On August 6, 1998 the registrant had 79,724,417 outstanding shares of
class A common stock, par value $.01 per share and had 95,688,083 outstanding
shares of class B common stock, par value $.01 per share.
<PAGE> 2
REPUBLIC SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets as
of June 30, 1998 and December 31, 1997.................................................... 3
Unaudited Condensed Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 1998 and
1997...................................................................................... 4
Unaudited Condensed Consolidated Statement of Shareholder's
Equity (Deficit) for the Six Months Ended June 30, 1998................................... 5
Unaudited Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1998 and 1997........................................... 6
Notes to Unaudited Condensed Consolidated Financial Statements............................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................................................. 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................... 20
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.................................................... 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................. 22
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....................................... $ 17.1 $ --
Restricted cash ................................................. 13.2 18.8
Accounts receivable, less allowance for
doubtful accounts of $16.3 and $13.6,
respectively ................................................ 155.8 131.0
Inventory ....................................................... 11.8 11.7
Other current assets ............................................ 17.1 14.4
---------- ----------
Total Current Assets ...................................... 215.0 175.9
PROPERTY AND EQUIPMENT, NET ........................................ 861.1 801.8
INTANGIBLE AND OTHER ASSETS, NET ................................... 505.9 370.3
---------- ----------
$ 1,582.0 $ 1,348.0
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ................................................ $ 41.0 $ 40.2
Accrued liabilities ............................................. 80.5 57.6
Deferred revenue ................................................ 38.4 29.5
Amounts due to Parent ........................................... 1,830.0 266.1
Other current liabilities ....................................... 48.7 42.7
---------- ----------
Total Current Liabilities ................................. 2,038.6 436.1
LONG-TERM DEBT, NET OF CURRENT MATURITIES .......................... 62.4 64.3
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS ........................... 49.0 46.0
DEFERRED INCOME TAXES AND OTHER LIABILITIES ........................ 55.7 50.8
COMMITMENTS AND CONTINGENCIES.......................................
SHAREHOLDER'S EQUITY (DEFICIT):
Investment by Parent ............................................ -- 749.8
Preferred stock, par value $.01 per share;
50,000,000 shares authorized; none issued .................... -- --
Common stock:
Class A, par value $.01 per share;
250,000,000 shares authorized; none
issued .................................................... -- --
Class B, par value $.01 per share;
125,000,000 shares authorized; 95,688,083
shares issued and outstanding ............................. 1.0 1.0
Additional paid-in capital (deficit) ............................ (624.7) --
---------- ----------
Total Shareholder's Equity (Deficit) ...................... (623.7) 750.8
---------- ----------
$ 1,582.0 $ 1,348.0
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE ................................... $ 335.9 $ 283.7 $ 636.7 $ 546.9
EXPENSES:
Cost of operations ..................... 231.7 210.8 441.4 401.1
Selling, general and administrative .... 33.5 25.8 65.6 57.7
--------- --------- --------- ---------
OPERATING INCOME .......................... 70.7 47.1 129.7 88.1
INTEREST EXPENSE .......................... (31.9) (6.8) (37.3) (14.4)
INTEREST AND OTHER INCOME ................. .4 .2 1.2 3.2
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES ..................... 39.2 40.5 93.6 76.9
PROVISION FOR INCOME TAXES ................ 14.1 14.6 33.7 27.8
--------- --------- --------- ---------
NET INCOME ................................ $ 25.1 $ 25.9 $ 59.9 $ 49.1
========= ========= ========= =========
BASIC AND DILUTED EARNINGS PER
SHARE .................................. $ .26 $ .27 $ .63 $ .51
========= ========= ========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING ............................ 95.7 95.7 95.7 95.7
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT)
(IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN
INVESTMENT ------------------- CAPITAL
BY PARENT CLASS A CLASS B (DEFICIT)
---------- ------- ------- --------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 ........ $ 749.8 $ -- $ 1.0 $ --
Net income ...................... 59.9 -- -- --
Business acquisitions contributed
by Parent .................... 128.3 -- -- --
Dividend to Parent .............. (2,000.0) -- -- --
Dividend from Resources ......... 437.3 -- -- --
Transfer to additional paid-in
capital (deficit) ............ 624.7 -- -- (624.7)
---------- ------ ------ --------
BALANCE AT JUNE 30, 1998 ............ $ -- $ -- $ 1.0 $ (624.7)
========== ====== ====== ========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
REPUBLIC SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1998 1997
-------- --------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES OF
CONTINUING OPERATIONS:
Net income ........................................... $ 59.9 $ 49.1
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ..................... 49.7 42.1
Changes in assets and liabilities, net of
effects from business acquisitions:
Accounts receivable ......................... (19.3) (8.9)
Prepaid expenses and other assets ........... (1.0) 22.6
Accounts payable and accrued liabilities .... (16.4) (5.7)
Other liabilities ........................... 67.7 30.5
-------- --------
140.6 129.7
-------- --------
CASH USED IN INVESTING ACTIVITIES:
Purchases of property and equipment .................. (71.1) (68.3)
Other ................................................ 9.8 (6.1)
-------- --------
(61.3) (74.4)
-------- --------
CASH USED IN FINANCING ACTIVITIES:
Proceeds from notes payable and long-term debt ....... .6 6.8
Payments of notes payable and long-term debt ......... (27.9) (62.7)
(Decrease) increase in amounts due to Parent ......... (34.9) 19.7
Other ................................................ -- 5.8
-------- --------
(62.2) (30.4)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS ................... 17.1 24.9
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........ -- 24.2
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ 17.1 $ 49.1
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(TABLES IN MILLIONS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Republic Services, Inc. and its subsidiaries (the
"Company") and have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
related to the Company's organization, significant accounting policies and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. As of June 30, 1998, the Company was a wholly owned subsidiary of
Republic Industries, Inc. (together with its subsidiaries, the "Parent"). These
unaudited condensed consolidated financial statements exclude the accounts of
the Company's subsidiary, Republic Resources Company, Inc. ("Resources"), the
common stock of which was distributed to Parent in June 1998. All significant
intercompany accounts and transactions have been eliminated. These unaudited
condensed consolidated financial statements reflect, in the opinion of
management, all material adjustments (which include only normal recurring
adjustments) necessary to fairly state the financial position and the results of
operations for the periods presented and the disclosures herein are adequate to
make the information presented not misleading. Operating results for interim
periods are not necessarily indicative of the results that can be expected for a
full year. These interim financial statements should be read in conjunction with
the Company's audited consolidated financial statements and notes thereto
appearing in the Company's Prospectus dated June 30, 1998.
These unaudited condensed consolidated financial statements reflect the
accounts of the Company as a subsidiary of Parent subject to corporate general
and administrative expense allocations as described in Note 11, Related Party
Transactions. Such information does not necessarily reflect the financial
position or results of operations of the Company as a separate, stand-alone
entity.
All historical share and per share data of the Company's common stock,
par value $.01 per share ("Common Stock" which is designated when issued as
either "Class A Common Stock" or "Class B Common Stock"), for all periods
included in the unaudited condensed consolidated financial statements and the
notes thereto have been retroactively adjusted for the recapitalization of
Parent's 100 shares of common stock previously outstanding into 95,688,083
shares of Class B Common Stock in July 1998, as more fully described in Note 7,
Shareholder's Equity.
In May 1998, Parent announced its intention to separate the Company
from the Parent (the "Separation"). Parent also announced its intention to
distribute its remaining shares of Common Stock in the Company as of the
distribution date to Parent's shareholders in 1999, subject to certain
conditions and consents (the "Distribution"). The Company and Parent have
entered into certain agreements providing for the Separation and governing
various interim and ongoing relationships between the companies. The
Distribution is contingent, in part, on Parent obtaining a private letter ruling
from the Internal Revenue Service to the effect that, among other things, the
Distribution will qualify as a tax-free distribution for federal income tax
purposes under Section 355 of the Internal Revenue Code of 1986, as amended, in
form and substance satisfactory to Parent.
7
<PAGE> 8
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In July 1998, the Company completed an initial public offering of
approximately 63.2 million shares of its Class A Common Stock ("Initial Public
Offering") resulting in net proceeds of approximately $1.4 billion. In addition,
in July 1998 the Company repaid in full all remaining amounts due to Parent
through the issuance of shares of Class A Common Stock and through proceeds from
the Initial Public Offering. Following the Initial Public Offering and the
repayment of amounts due to Parent, Parent owned approximately 63.9% of the
outstanding shares of Class A and Class B Common Stock which represents
approximately 88.7% of the combined voting power of all of the outstanding
shares of the Class A and Class B Common Stock. Following the Initial Public
Offering and the repayment of amounts due to Parent, the Company had the
following shares of Common Stock outstanding:
CLASS A CLASS B TOTAL
------ ------- -------
Recapitalization of Parent's common stock .... -- 95.7 95.7
Repayment of amounts due to Parent ........... 16.5 -- 16.5
Initial Public Offering ...................... 63.2 -- 63.2
------ ------- -------
79.7 95.7 175.4
====== ======= =======
The following unaudited pro forma consolidated financial data has been
prepared assuming the Initial Public Offering and the repayment in full of the
amounts due to Parent had occurred as of the beginning of each period presented
for pro forma statement of operations data and as of June 30, 1998 for pro forma
balance sheet data:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Pro Forma Statement of Operations Data:
Operating income ........................ $ 70.7 $ 47.1 $ 129.7 $ 88.1
Interest expense ........................ (.7) (2.2) (1.4) (3.7)
Interest and other income ............... .4 .2 1.2 3.2
--------- --------- --------- ---------
Income from continuing
operations before income taxes ...... 70.4 45.1 129.5 87.6
Provision for income taxes .............. 25.3 16.3 46.6 31.7
--------- --------- --------- ---------
Net income .............................. $ 45.1 $ 28.8 $ 82.9 $ 55.9
========= ========= ========= =========
Basic and diluted earnings per share .... $ .26 $ .16 $ .47 $ .32
========= ========= ========= =========
Weighted average shares outstanding ..... 175.4 175.4 175.4 175.4
========= ========= ========= =========
</TABLE>
JUNE 30, 1998
------------------------
PRO FORMA AS REPORTED
---------- ----------
Balance Sheet Data:
Amounts due to Parent ................... $ -- $ 1,830.0
Total debt .............................. 73.8 73.8
Total shareholders' equity (deficit) .... 1,206.3 (623.7)
The unaudited pro forma consolidated financial data are provided for
informational purposes only and should not be construed to be indicative of the
Company's consolidated financial position or results of operations had the
transactions and events described above been consummated on the dates assumed
and do not project the Company's financial condition or results of operations
for any future date or period.
8
<PAGE> 9
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. BUSINESS COMBINATIONS
Parent has acquired various businesses operating in the solid waste
services industry using cash and/or shares of its common stock ("Parent Common
Stock"). These businesses were contributed by Parent to the Company subsequent
to their acquisition. The Company has applied the same accounting method used by
Parent in accounting for business combinations.
Businesses acquired through June 30, 1998 and accounted for under the
purchase method of accounting are included in the unaudited condensed
consolidated financial statements from the date of acquisition.
During the six months ended June 30, 1998, Parent acquired various solid
waste services businesses which were contributed to the Company. The aggregate
purchase price paid by Parent in transactions accounted for under the purchase
method of accounting was $128.3 million consisting of $60.3 million in cash and
3.4 million shares of Parent Common Stock valued at $68.0 million.
The assets and liabilities contributed by Parent to the Company based upon
the preliminary purchase price allocations for business combinations accounted
for under the purchase method of accounting (including historical accounts of
1997 immaterial acquisitions accounted for under the pooling of interests method
of accounting) consummated during the six months ended June 30 were as follows:
SIX MONTHS ENDED
JUNE 30,
---------------------
1998 1997
-------- --------
Property and equipment ........ $ 23.9 $ 25.8
Intangible assets ............. 142.5 85.1
Other assets .................. 10.0 2.5
Working capital deficiency .... (22.7) (9.6)
Debt assumed .................. (25.4) (15.6)
Investment by Parent .......... (128.3) (88.2)
The Company's unaudited pro forma consolidated results of operations
assuming all significant acquisitions accounted for under the purchase method of
accounting had occurred as of the beginning of each period presented are as
follows:
SIX MONTHS ENDED
JUNE 30,
----------------------
1998 1997
--------- ---------
Revenue ................................. $ 646.7 $ 603.5
Net income .............................. $ 60.3 $ 51.1
Basic and diluted earnings per share .... $ .63 $ .53
Common shares outstanding ............... 95.7 95.7
The unaudited pro forma consolidated results of operations are
presented for informational purposes only and may not necessarily reflect the
future results of operations of the Company or what the results of operations
would have been had the Company owned and operated these businesses as of the
beginning of each period presented.
9
<PAGE> 10
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
JUNE 30, DECEMBER 31,
1998 1997
---------- -----------
Land, landfills and improvements ................. $ 441.4 $ 420.1
Furniture, fixtures, trucks and equipment ........ 726.9 668.9
Buildings and improvements ....................... 139.9 126.6
---------- ----------
1,308.2 1,215.6
Less: accumulated depreciation, amortization
and depletion ................................ (447.1) (413.8)
---------- ----------
$ 861.1 $ 801.8
========== ==========
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist primarily of the cost of acquired
businesses in excess of the fair value of net assets acquired and other
intangible assets. The cost in excess of the fair value of net assets acquired
is amortized over 40 years on a straight-line basis. Other intangible assets
include values assigned to customer lists, long-term contracts and covenants not
to compete and are amortized generally over periods ranging from 5 to 25 years.
Accumulated amortization of intangible assets at June 30, 1998 and
December 31, 1997 was $64.5 million and $57.9 million, respectively.
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------- -----------
<S> <C> <C>
Bonds payable under loan agreements with California Pollution Control Financing
Authority; interest
at prevailing market rates ...................................................... $ 43.1 $ 43.1
Other notes; secured by real property,
equipment and other assets ...................................................... 30.7 32.0
------- -------
73.8 75.1
Less: current portion (included in other
current liabilities) ................................................... (11.4) (10.8)
------- -------
$ 62.4 $ 64.3
======= =======
</TABLE>
In July 1998, the Company entered into a $1.0 billion unsecured revolving
credit facility with a group of banks. $500.0 million of the facility has a term
of 364 days and the remaining $500.0 million has a term of 5 years. Borrowings
under the facility bear interest at LIBOR based rates.
10
<PAGE> 11
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. AMOUNTS DUE TO PARENT
Amounts due to Parent consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Due to Republic Corporate Management Company
("RCMC")........................................................... $139.5 $107.8
Notes payable to Resources............................................. 255.9 158.3
Company notes payable.................................................. 1,434.6 --
-------- ------
$1,830.0 $266.1
======== ======
</TABLE>
Due to RCMC includes allocations of various expenses from Parent
including general and administrative expenses, risk management premiums, income
taxes and other costs. Such liabilities are non-interest bearing and have no
specified repayment terms. In July 1998, the Company repaid amounts due to RCMC
through the issuance of 5.8 million shares of Class A Common Stock.
Notes payable to Resources represent borrowings under revolving credit
facilities to fund the Company's operations and to repay debt assumed in
acquisitions. Borrowings under these facilities bear interest at prime plus 50
basis points and are payable on demand. Interest expense on notes payable to
Resources was $5.0 million and $4.6 million for the three months ended June 30,
1998 and 1997, respectively, and $9.7 million and $10.7 million for the six
months ended June 30, 1998 and 1997, respectively. In July 1998, the Company
repaid the notes payable to Resources through the issuance of 10.7 million
shares of Class A Common Stock.
Company notes payable ("Company Notes") were issued in April 1998 in
payment of the $2.0 billion dividend to Parent described in Note 7,
Shareholder's Equity. The Company Notes have a term of one-year and bear
interest at a rate of LIBOR plus 30 basis points. Interest expense on the
Company Notes was $26.2 million for the three months ended June 30, 1998. In
June 1998, the Company prepaid a portion of amounts outstanding under the
Company Notes totaling $565.4 million using cash, a receivable from Resources
and assets received from the Resources Dividend as described in Note 7,
Shareholder's Equity. In July 1998, the Company prepaid all remaining amounts
outstanding under the Company Notes using the net proceeds from the Initial
Public Offering.
7. SHAREHOLDER'S EQUITY
In April 1998, the Company declared a $2.0 billion dividend to Parent
that it paid in the form of the Company Notes.
In June 1998, the Company received a dividend of certain assets from
Resources totaling approximately $437.3 million (the "Resources Dividend") that
was used to prepay a portion of the Company Notes.
11
<PAGE> 12
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In July 1998, the Company amended and restated its Certificate of
Incorporation to authorize capital stock consisting of (a) 50,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), and (b)
750,000,000 shares of Common Stock, of which 250,000,000 shares have been
authorized as Class A Common Stock, 125,000,000 shares have been authorized as
Class B Common Stock and 375,000,000 shares may be designated by the Company's
Board of Directors as either Class A Common Stock or Class B Common Stock. In
addition, all 100 shares of common stock previously held by Parent were
converted into 95,688,083 shares of Class B Common Stock. The Class A Common
Stock and Class B Common Stock are identical in all respects, except holders of
Class A Common Stock are entitled to one vote per share while holders of Class B
Common Stock are entitled to five votes per share on all matters submitted to a
vote of the stockholders, including the election of directors.
8. INCOME TAXES
Income taxes have been provided for based upon the Company's
anticipated annual effective income tax rate.
9. STOCK OPTIONS
In July 1998, the Company adopted the 1998 Stock Incentive Plan ("Stock
Incentive Plan") to provide for grants of options to purchase shares of Class A
Common Stock to employees, non-employee directors and independent contractors of
the Company who are eligible to participate in the Stock Incentive Plan. The
Company has reserved 20,000,000 shares of Class A Common Stock for issuance
pursuant to options granted under the Stock Incentive Plan and Substitute
Options (as defined below). As of June 30, 1998, no options were outstanding
under the Stock Incentive Plan.
Following the Distribution the Company intends to issue substitute
options under the Stock Incentive Plan (collectively, "Substitute Options") in
substitution for grants under Parent's stock option plans as of the date of the
Distribution (collectively, "Parent Stock Options") held by individuals employed
by the Company as of the date of the Distribution (the "Company Employees").
Such Substitute Options will provide for the purchase of a number of shares of
Class A Common Stock determined based on a ratio of average trading prices of
Parent Common Stock and Class A Common Stock immediately prior to the
Distribution. It is not possible to specify how many shares of Class A Common
Stock will be subject to Substitute Options. It is expected that some Parent
Stock Options consisting of stock options held by the Company Employees will be
exercised and that some will be forfeited, and that additional Parent Stock
Options will be granted, prior to the date of the Distribution. In addition, the
remaining balance of unexercised Parent Stock Options will be converted into
Substitute Options by reference to the ratio described above, which will not be
known until the time of the Distribution.
10. EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the number of
common shares outstanding during the period after giving retroactive effect to
the recapitalization of the 100 shares of common stock held by Parent into
95,688,083 shares of Class B Common Stock. Diluted earnings per share equals
basic earnings per share for all periods presented since the Company had no
common share equivalents outstanding during the periods presented. As described
in Note 1, Basis of Presentation, following the Initial Public Offering, the
Company had approximately 175.4 million shares of Class A and Class B Common
Stock outstanding.
12
<PAGE> 13
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
11. RELATED PARTY TRANSACTIONS
Parent's corporate general and administrative costs not specifically
attributable to its operating subsidiaries have been allocated to the Company
based upon the ratio of the Company's invested capital to Parent's consolidated
invested capital. Such allocations are included in the Company's selling,
general and administrative costs and were approximately $3.7 million and $2.5
million for the three months ended June 30, 1998 and 1997, respectively, and
$7.5 million and $4.6 million for the six months ended June 30, 1998 and 1997,
respectively. These amounts approximate management's estimate of Parent's
corporate general and administrative costs required to support the Company's
operations. Management believes that the amounts allocated to the Company are
reasonable and are no less favorable to the Company than the expenses the
Company would incur to obtain such services on its own or from unaffiliated
third parties.
In June 1998, the Company and Parent entered into a services agreement
(the "Services Agreement") pursuant to which Parent will provide to the Company
certain accounting, auditing, cash management, corporate communications,
corporate development, financial and treasury, human resources and benefit plan
administration, insurance and risk management, legal, purchasing and tax
services. In exchange for the provision of such services, fees will be payable
by the Company to Parent in the amount of $1.25 million per month, subject to
review and adjustment as the Company reduces the amount of services it obtains
from Parent from time to time. The Company believes that the fees for services
that will or may be provided under the Services Agreement will be no less
favorable to the Company than could be obtained by the Company internally or
from unaffiliated third parties.
The Company participates in Parent's combined risk arrangement programs
for property, casualty and general liability insurance. The Company was charged
for annual premiums of $9.7 million and $7.6 million during the six months ended
June 30, 1998 and 1997, respectively. The Company's liability for unpaid and
incurred but not reported claims under the Parent's combined risk management
programs was estimated to be approximately $17.8 million and $12.6 million at
June 30, 1998 and December 31, 1997, respectively, and is included in other
current liabilities in the accompanying unaudited condensed consolidated balance
sheets.
12. LEGAL MATTERS
The Company is a party to various general legal proceedings which have
arisen in the ordinary course of business. While the results of these matters
cannot be predicted with certainty, the Company believes that losses, if any,
resulting from the ultimate resolution of these matters will not have a material
adverse effect on the Company's consolidated results of operations, cash flows
or financial position. However, unfavorable resolution could affect the
consolidated results of operations or cash flows for the quarterly periods in
which they are resolved.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and notes thereto included
under Item 1. In addition, reference should be made to the Company's audited
consolidated financial statements and notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of Operations. As of
June 30, 1998, the Company was a wholly owned subsidiary of Republic Industries,
Inc. (together with its subsidiaries, the "Parent"). All references to
historical share and per share data of the Company's common stock, par value
$.01 per share ("Common Stock" which is designated when issued as either "Class
A Common Stock" or "Class B Common Stock") have been retroactively adjusted for
the recapitalization of Parent's 100 shares of common stock previously
outstanding into 95,688,083 shares of Class B Common Stock in July 1998, as more
fully described in Note 7, Shareholder's Equity, of notes to unaudited condensed
consolidated financial statements.
In May 1998, Parent announced its intention to separate the Company
from the Parent (the "Separation"). Parent also announced its intention to
distribute its remaining shares of Common Stock in the Company as of the
distribution date to Parent's shareholders in 1999, subject to certain
conditions and consents (the "Distribution"). The Company and Parent have
entered into certain agreements providing for the Separation and governing
various interim and ongoing relationships between the companies. The
Distribution is contingent, in part, on Parent obtaining a private letter ruling
from the Internal Revenue Service to the effect that, among other things, the
Distribution will qualify as a tax-free distribution for federal income tax
purposes under Section 355 of the Internal Revenue Code of 1986, as amended, in
form and substance satisfactory to Parent.
In July 1998, the Company completed an initial public offering of
approximately 63.2 million shares of its Class A Common Stock ("Initial Public
Offering") resulting in net proceeds of approximately $1.4 billion. In addition,
in July 1998 the Company repaid in full all remaining amounts due to Parent
through the issuance of Class A shares of Common Stock and through proceeds from
the Initial Public Offering. Following the Initial Public Offering and the
repayment of amounts due to Parent, Parent owned approximately 63.9% of the
outstanding shares of Class A and Class B Common Stock which represents
approximately 88.7% of the combined voting power of all of the outstanding
shares of the Class A and Class B Common Stock. Following the Initial Public
Offering and the repayment of amounts due to Parent, the Company had the
following shares of Common Stock outstanding:
<TABLE>
<CAPTION>
CLASS A CLASS B TOTAL
------- ------- -------
<S> <C> <C> <C>
Recapitalization of Parent's common stock .... -- 95.7 95.7
Repayment of amounts due to Parent ........... 16.5 -- 16.5
Initial Public Offering ...................... 63.2 -- 63.2
------ ------- -------
79.7 95.7 175.4
====== ======= =======
</TABLE>
The accompanying unaudited condensed consolidated financial statements
reflect the accounts of the Company as a subsidiary of Parent subject to
corporate general and administrative expense allocations as described in Note
11, Related Party Transactions. Such information does not necessarily reflect
the financial position or results of operations of the Company as a separate,
stand-alone entity.
BUSINESS COMBINATIONS
The Company makes decisions to acquire or invest in businesses based on
financial and strategic considerations.
14
<PAGE> 15
Parent has acquired various businesses operating in the solid waste
services industry using cash and/or shares of its common stock ("Parent Common
Stock"). These businesses were contributed by Parent to the Company subsequent
to their acquisition. The Company has applied the same accounting method used by
Parent in accounting for business combinations.
Businesses acquired through June 30, 1998 and accounted for under the
purchase method of accounting are included in the unaudited condensed
consolidated financial statements from the date of acquisition.
During the six months ended June 30, 1998, Parent acquired various
solid waste services businesses which were contributed to the Company. The
aggregate purchase price paid by Parent in transactions accounted for under the
purchase method of accounting was $128.3 million consisting of $60.3 million in
cash and 3.4 million shares of Parent Common Stock valued at $68.0 million.
CONSOLIDATED RESULTS OF OPERATIONS
Net income was $25.1 million or $.26 per share for the three months
ended June 30, 1998 as compared to $25.9 million or $.27 per share for the three
months ended June 30, 1997. Net income was $59.9 million or $.63 per share for
the six months ended June 30, 1998 as compared to $49.1 million or $.51 per
share for the six months ended June 30, 1997.
The following table sets forth revenue and cost of operations, selling,
general and administrative expenses, Parent overhead allocations and operating
income with percentages of revenue for the periods indicated (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------------ ------------------------------------------
1998 % 1997 % 1998 % 1997 %
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue ...................... $ 335.9 100.0 $ 283.7 100.0 $ 636.7 100.0 $ 546.9 100.0
Expenses:
Cost of operations ......... 231.7 69.0 210.8 74.3 441.4 69.3 401.1 73.3
Selling, general
and administrative
expenses ............... 29.8 8.9 23.3 8.2 58.1 9.1 53.1 9.7
Parent overhead
allocations ............ 3.7 1.1 2.5 .9 7.5 1.2 4.6 .9
-------- ------- -------- ------- -------- ------- -------- -------
Operating Income ............. $ 70.7 21.0 $ 47.1 16.6 $ 129.7 20.4 $ 88.1 16.1
======== ======= ======== ======= ======== ======= ======== =======
</TABLE>
Revenue was $335.9 million and $283.7 million for the three months
ended June 30, 1998 and 1997, respectively, an increase of 18%. Acquisitions
accounted for 8% of the increase, price and primarily volume accounted for 5% of
the increase and "tuck-in" acquisitions accounted for 5% of the increase.
Revenue was $636.7 million and $546.9 million for the six months ended June 30,
1998 and 1997, respectively, an increase of 16%. Acquisitions accounted for 6%
of the increase, price and primarily volume accounted for 5% of the increase and
"tuck-in" acquisitions accounted for 5% of the increase.
15
<PAGE> 16
All of the Company's revenue sources showed increases in aggregate
dollar amounts for the three and six months ended June 30, 1998 versus the
comparable 1997 periods. The following table reflects total revenue of the
Company by revenue source excluding intercompany disposal revenue:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, INCREASE ENDED JUNE 30, INCREASE
-------------------- ----------------- -------------------- -----------------
1998 1997 $ % 1998 1997 $ %
-------- -------- ------- ------ -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Collection .............. $ 262.5 $ 223.8 $ 38.7 17.3 $ 502.3 $ 428.2 $ 74.1 17.3
Transfer and
disposal ............ 31.9 31.5 .4 1.3 62.3 61.3 1.0 1.6
Sale of recycling
materials ........... 11.4 10.7 .7 6.5 23.7 20.6 3.1 15.0
Other ................... 30.1 17.7 12.4 70.1 48.4 36.8 11.6 31.5
-------- -------- ------- -------- -------- -------
Total Revenue .... $ 335.9 $ 283.7 $ 52.2 18.4 $ 636.7 $ 546.9 $ 89.8 16.4
======== ======== ======= ======== ======== =======
</TABLE>
Cost of operations was $231.7 million and $441.4 million for the three
and six months ended June 30, 1998, respectively, versus $210.8 million and
$401.1 million for the comparable 1997 periods. The increases in aggregate
dollars are primarily due to acquisitions. Cost of operations as a percentage of
revenue was 69.0% and 69.3% for the three and six months ended June 30, 1998,
respectively, versus 74.3% and 73.3% for the comparable 1997 periods. The
decreases in such costs as percentages of revenue are primarily a result of
improved operating efficiencies.
Selling, general and administrative expenses were $29.8 million and
$58.1 million for the three and six months ended June 30, 1998, respectively,
versus $23.3 million and $53.1 million for the comparable 1997 periods. Selling,
general and administrative expenses as a percentage of revenue were 8.9% and
9.1% for the three and six months ended June 30, 1998, respectively, versus 8.2%
and 9.7% for the comparable 1997 periods. The increases in aggregate dollars are
primarily due to acquisitions.
PARENT OVERHEAD ALLOCATIONS
Parent overhead allocations include allocations of general and
administrative costs not specifically attributable to its operating
subsidiaries. Such allocations are based upon the ratio of the Company's
invested capital to Parent's consolidated invested capital and were $3.7 million
and $7.5 million for the three and six months ended June 30, 1998, respectively,
as compared to $2.5 million and $4.6 million for comparable 1997 periods. These
allocations approximate management's estimate of Parent's corporate overhead
required to support the Company's operations. Management believes that the
amounts allocated to the Company are reasonable and are no less favorable to the
Company than the expenses the Company would incur to obtain such services on its
own or from unaffiliated third parties.
In June 1998, the Company and Parent entered into a services agreement
(the "Services Agreement") pursuant to which Parent will provide certain
services to the Company for a fee of $1.25 million per month. See Note 11,
Related Party Transactions, of notes to unaudited condensed consolidated
financial statements for discussion of the Services Agreement.
16
<PAGE> 17
INTEREST EXPENSE
Interest expense was incurred primarily on amounts due to Parent.
Interest expense was $31.9 million and $37.3 million for three and six months
ended June 30, 1998, respectively, as compared to $6.8 million and $14.4 for the
comparable 1997 periods. The increases in interest expense for the three and six
months ended June 30, 1998 versus the comparable 1997 periods are attributable
to interest on the amounts due to Parent. All amounts due to Parent were repaid
in full in July 1998 through the issuance of shares of Class A Common Stock and
proceeds from the Initial Public Offering.
INCOME TAXES
The provision for income taxes was $14.1 million and $33.7 million for
the three and six months ended June 30, 1998, respectively, as compared to $14.6
million and $27.8 million for the comparable 1997 periods. Income taxes have
been provided based upon the Company's anticipated annual effective tax rate.
Following the Initial Public Offering, the Company will no longer be
included in the Parent's consolidated federal income tax return.
ENVIRONMENTAL AND LANDFILL MATTERS
The Company provides for accrued environmental and landfill costs which
include landfill site closure and post-closure costs. Landfill site closure and
post-closure costs include estimated costs to be incurred for final closure of
the landfills and estimated costs for providing required post-closure monitoring
and maintenance of landfills. These costs are accrued based on consumed
airspace. The Company estimates its future cost requirements for closure and
post-closure monitoring and maintenance for its solid waste facilities based on
its interpretation of the technical standards of the Environmental Protection
Agency's Subtitle D regulations. These estimates do not take into account
discounts for the present value of such total estimated costs. Engineering
reviews of the future cost requirements for closure and post-closure monitoring
and maintenance for the Company's operating landfills are performed on an annual
basis. Such reviews provide the basis upon which the Company estimates future
costs and revises the related accruals. Changes in these estimates primarily
relate to permit modifications, inflation and changes in regulations, all of
which are taken into consideration annually.
The current and long-term portion of accrued closure and post-closure
costs associated with landfills are included in other current liabilities and
accrued environmental and landfill costs, respectively, in the Company's
unaudited condensed consolidated balance sheets. The increase in such accruals
resulted from the normal accrual of closure and post-closure costs based on
airspace consumed plus additional costs associated with new landfills acquired
and internally developed during the period.
Costs related to environmental remediation activities are accrued by
the Company through a charge to income in the period such liabilities become
probable and can be reasonably estimated.
FINANCIAL CONDITION
At June 30, 1998, the Company had $17.1 million of unrestricted cash.
As previously discussed, in July 1998, the Company completed the
Initial Public Offering resulting in net proceeds of approximately $1.4 billion.
In July 1998, the Company repaid in full all remaining amounts due to Parent
through the issuance of shares of Class A Common Stock and through proceeds from
the Initial Public Offering. Following the Initial Public Offering, the Company
had total debt outstanding and shareholders' equity of approximately $73.8
million and $1.2 billion, respectively.
17
<PAGE> 18
Prior to the Initial Public Offering, the Company's needs for working
capital and capital for general corporate purposes, including acquisitions, had
been satisfied pursuant to Parent's corporate-wide cash management policies.
Following the Initial Public Offering, the Company will be financed autonomously
and Parent will no longer provide funds to finance the Company's operations or
acquisitions. The Company's operating cash flow will be retained by the Company
subsequent to the Initial Public Offering to finance its working capital,
acquisition and other requirements. Additionally, in July 1998, the Company
entered into a $1.0 billion unsecured revolving credit facility with a group of
banks. $500.0 million of the facility has a term of 364 days and the remaining
$500.0 million has a term of 5 years. Borrowings under the facility bear
interest at LIBOR based rates. Proceeds from the facility will be used to
satisfy future working capital requirements, capital expenditures and
acquisitions.
The Company believes that it has sufficient financial resources
available to meet its anticipated capital requirements and obligations as they
come due.
CASH FLOWS
Cash and cash equivalents increased by $17.1 million and $24.9 million
during the six months ended June 30, 1998 and 1997, respectively. The major
components of these changes are discussed below.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash provided by operating activities was $140.6 million and $129.7
million during the six months ended June 30, 1998 and 1997, respectively. The
increase is due to expansion of the Company's business.
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows from investing activities consist primarily of cash used for
capital additions. Capital additions were $71.1 million and $68.3 million during
the six months ended June 30, 1998 and 1997, respectively.
The Company believes capital expenditures will increase due to
expansion of the Company's business. In addition, following the Initial Public
Offering, the Company expects to use primarily cash for business acquisitions.
The Company intends to finance capital expenditures and acquisitions through
cash on hand, cash flow from operations, the Company's $1.0 billion revolving
credit facility and other financings.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows from financing activities during the six months ended June
30, 1998 and 1997 included commercial bank and affiliate borrowings and
repayments of debt. Proceeds from bank and affiliate borrowings were used to
fund capital additions, repay debt and expand the Company's business during the
periods.
SEASONALITY
The Company's operations can be adversely affected by periods of
inclement weather which could delay the collection and disposal of waste, reduce
the volume of waste generated or delay the construction or expansion of the
Company's landfill sites and other facilities.
18
<PAGE> 19
YEAR 2000 SYSTEMS COSTS
The Company utilizes software and related technologies that may be
affected by the date change in the year 2000 ("Year 2000"). The Company is in
the process of evaluating the full scope and related costs to ensure that the
Company's systems continue to meet its internal needs and those of its
customers. The majority of the Company's information systems are supported by
third party vendors who are responsible for system modifications to address the
Year 2000 issue. Anticipated costs for system modifications will be expensed as
incurred and are not expected to have a material impact on the Company's
consolidated results of operations. However, the Company cannot measure the
impact that the Year 2000 issue will have on its vendors, suppliers, customers
and other parties with which it conducts business.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
requires computer software costs associated with internal use software to be
expensed as incurred until certain capitalization criteria are met. The Company
will adopt SOP 98-1 beginning January 1, 1999. Adoption of this statement will
not have a material impact on the Company's consolidated financial position or
results of operations.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires all costs
associated with pre-opening, pre-operating and organization activities to be
expensed as incurred. The Company's accounting policies conform with the
requirements of SOP 98-5, therefore adoption of this statement will not impact
the Company's consolidated financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. SFAS 133 cannot be applied retroactively. The Company will adopt SFAS 133
beginning January 1, 2000. Adoption of this statement is not expected to have a
material impact on the Company's consolidated financial position or results of
operations.
FORWARD-LOOKING STATEMENTS
Certain statements and information included herein constitute
"forward-looking statements" within the meaning of the Federal Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance, or achievements of the Company to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, competition in the solid waste industry; dependence on acquisitions for
growth; compliance with environmental regulations; dependence on Parent for
certain services; the ability to obtain financing on acceptable terms to finance
the Company's operations and growth strategy and for the Company to operate
within the limitations imposed by financing arrangements; the Company's
dependence on key personnel; general economic conditions; dependence on large,
long-term collection contracts; and other factors contained in the Company's
filings with the Securities and Exchange Commission.
19
<PAGE> 20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Subsequent to the repayment of all remaining amounts due to Parent in
July 1998, the Company's market sensitive financial instruments consist
primarily of variable rate debt that is not material to the Company's
consolidated financial position. Therefore, management believes the Company does
not have material exposure to market risk.
20
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
SALES OF UNREGISTERED SECURITIES. On July 1, 1998, the Company issued 16,474,416
shares of Class A Common Stock to subsidiaries of Parent in satisfaction of an
aggregate of approximately $395.4 million of intercompany payables and amounts
due to such subsidiaries, which amounts were included in amounts due to Parent
in the Company's unaudited condensed consolidated financial statements. The
issuance of the Class A Common Stock was made pursuant to the exemption from the
registration requirements provided by Section 4(2) of the Securities Act of
1933, as amended.
USE OF PROCEEDS FROM SALES OF REGISTERED SECURITIES. On July 7, 1998, the
Company completed an initial public offering of 63,250,000 shares of its Class A
Common Stock, $0.01 par value per share (the "Offering"). The shares of Class A
Common Stock sold in the Offering were registered under the Securities Act of
1933, as amended, on a Registration Statement on Form S-1 (Commission
Registration No. 333-52505), that was declared effective by the Securities and
Exchange Commission ("SEC") on June 30, 1998. The managing underwriters in the
Offering were Merrill Lynch & Co., Deutsche Bank Securities and Donaldson,
Lufkin & Jenrette Securities Corporation (the "U.S. Underwriters") as to
50,600,000 shares offered and sold in the United States and Canada, and Merrill
Lynch International, Deutsche Bank and Donaldson, Lufkin & Jenrette
International (the "International Underwriters," and together with the U.S.
Underwriters, the "Underwriters") as to 12,650,000 shares offered and sold
outside the United States and Canada. The Offering was completed after all of
the 63,250,000 shares of Class A Common Stock which were registered, including
8,250,000 shares sold pursuant to the exercise by the Underwriters of all of
their options to cover over-allotments, were sold at a price of $24.00 per
share. The aggregate price of the Offering amount registered and sold for the
Company's account was $1,518,000,000, including an aggregate of $75,900,000 in
underwriting discounts to the Underwriters. The following table sets forth an
estimate of all expenses incurred in connection with the Offering, other than
underwriting discounts, all of which amounts are estimated except for the fees
of the SEC, the National Association of Securities Dealers, Inc. ("NASD") and
the New York Stock Exchange:
SEC registration fee................................. $ 457,250
NASD filing fee...................................... 30,500
New York Stock Exchange original listing fee......... 245,600
Accounting fees and expenses......................... 3,000,000
Legal fees and expenses.............................. 2,400,000
Printing and engraving expenses...................... 1,150,000
Miscellaneous fees and expenses...................... 216,650
----------
Total................................................ $7,500,000
==========
After deducting underwriting discounts and estimated offering expenses described
above, on July 7, 1998,
21
<PAGE> 22
the Company received net proceeds from the Offering of approximately
$1,434,600,000. On July 7, 1998, the Company used all of the net proceeds to
prepay $1,434,600,000 of certain notes payable to Parent, as described in the
Registration Statement. None of the net proceeds from the Offering were paid
directly or indirectly to any directors or officers of the Company or their
associates, to persons owning 10 percent or more of any class of equity
securities of the Company, or to affiliates of the Company, except that Parent
owns approximately 63.9% of the total outstanding shares of Class A Common Stock
and Class B Common Stock of the Company and Parent is an affiliate of the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation of Republic
Services, Inc.
3.2 Amended and Restated Bylaws of Republic Services, Inc.
4.1 Long Term Credit Agreement dated as of July 10, 1998
among Republic Services, Inc., Bank of America National Trust
and Savings Association, as Administrative Agent, and the
several financial institutions party thereto.
10.1 Separation and Distribution Agreement dated as of June 30,
1998 by and between Republic Services, Inc. and Republic
Industries, Inc.
22
<PAGE> 23
10.2 Employee Benefits Agreement dated as of June 30, 1998 by and
between Republic Services, Inc. and Republic Industries, Inc.
10.3 Services Agreement dated as of June 30, 1998 by and between
Republic Services, Inc. and Republic Industries, Inc.
10.4 Tax Indemnification and Allocation Agreement dated as of
June 30, 1998 by and between Republic Services, Inc. and
Republic Industries, Inc.
10.5 1998 Stock Incentive Plan (incorporated by reference to
Exhibit 10.5 of the Company's Registration Statement on Form
S-1/A filed on June 29, 1998, Registration No. 333-52505).
27.1 Financial Data Schedule for the Six Months Ended June 30, 1998
(for SEC use only)
27.2 Financial Data Schedule for the Six Months Ended June 30, 1997
(for SEC use only)
(b) REPORTS ON FORM 8-K:
None.
23
<PAGE> 24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant, Republic Services, Inc., has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
REPUBLIC SERVICES, INC.
By: /s/ Tod C. Holmess
----------------------------------
Tod C. Holmes
CHIEF FINANCIAL OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
Date: August 13, 1998
24
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
REPUBLIC SERVICES, INC.
The name of the Corporation (which is hereinafter referred to as the
"Corporation") is "Republic Services, Inc."
The original certificate of incorporation was filed with the Secretary
of State of the State of Delaware on December 20, 1996, under the name "Republic
Waste Companies Holding Co."
This Amended and Restated Certificate of Incorporation (the
"Certificate") has been duly proposed by resolutions adopted and declared
advisable by the Board of Directors of the Corporation, duly adopted by the sole
stockholder of the Corporation and duly executed and acknowledged by the
officers of the Corporation in accordance with Sections 103, 242 and 245 of the
General Corporation Law of the State of Delaware (the "DGCL").
The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated in its entirety to read as follows:
ARTICLE I
NAME
The name of the corporation (which is hereinafter referred to as the
"Corporation") is: "Republic Services, Inc."
ARTICLE II
REGISTERED AGENT
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name of the Corporation's registered agent at such
address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
DGCL.
<PAGE> 2
ARTICLE IV
CAPITAL STOCK
SECTION 1. GENERAL.
(a) The total number of shares of stock which the Corporation
shall have authority to issue will be 800,000,000, consisting of
750,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), and 50,000,000 shares of Preferred Stock, par value
$.01 per share (the "Preferred Stock"). The Common Stock of the
Corporation shall be divided into two series, consisting of Class A
Common Stock and Class B Common Stock, which shall be designated by the
Board as Class A Common Stock or Class B Common Stock at the time of
issuance in accordance with Section 2(b) hereof. The Preferred Stock
may be issued in one or more series having such designations as may be
fixed by the Board of Directors (the "Board").
(b) Immediately upon the effectiveness of this Certificate,
each share of unclassified common stock of the Corporation, par value
$.01 per share, that is issued and outstanding immediately prior to
such effectiveness, shall automatically be changed into and
reclassified as 95,688,083 shares of Class B Common Stock.
SECTION 2. COMMON STOCK.
(a) ISSUANCE AND CONSIDERATION. Any unissued or treasury
shares of the Common Stock may be issued for such consideration as may
be fixed in accordance with applicable law from time to time by the
Board of Directors.
(b) DESIGNATION. Of the 750,000,000 authorized shares of
Common Stock of the Corporation, 250,000,000 shares are initially
designated as shares of Class A Common Stock, 125,000,000 shares are
initially designated as shares of Class B Common Stock and 375,000,000
shares are not yet designated. The number of shares designated as Class
A Common Stock or Class B Common Stock may be increased or decreased
from time to time by a resolution or resolutions adopted by the Board
or any duly authorized committee thereof and in accordance with
provisions herein below without the consent of the holders of any
outstanding shares of Common Stock or Preferred Stock. Except as
otherwise set forth below in this Article IV, the powers, preferences
and relative participating, optional or other special rights and
qualifications, limitations or restrictions of the Class A Common Stock
and Class B Common Stock shall be identical in all respects. Every
reference in this Certificate to a majority or other proportion of
shares of Common Stock, or any series thereof with respect to approval
or voting, shall refer to such majority or other proportion of the
votes to which such shares of Common Stock, or such series thereof as
the case may be, are entitled.
2
<PAGE> 3
(c) CONVERSION PRIOR TO THE DISTRIBUTION. Prior to the
Distribution (as defined below), shares of Class B Common Stock shall
be convertible into shares of Class A Common Stock as follows:
(1) OPTIONAL CONVERSION. The Initial Holder (as
defined below) of shares of Class B Common Stock shall be
entitled, at any time or from time to time, to convert all or
any portion of its shares of Class B Common Stock into shares
of Class A Common Stock on a one-for-one basis. In this
Certificate, the term "Initial Holder" means Republic
Industries, Inc., a Delaware corporation.
(2) AUTOMATIC CONVERSION.
(i) Any shares of Class B Common Stock
transferred by the Initial Holder or any
of its subsidiaries to any person, other
than the Initial Holder or any of its
subsidiaries, shall automatically convert
into shares of Class A Common Stock on a
one-for-one basis, except for the
distribution of Class B Common Stock to
stockholders of the Initial Holder as part
of the Distribution. In this Certificate,
the term "Distribution" means the
distribution of all shares of Common Stock
held by the Initial Holder as a dividend
to the stockholders of the Initial Holder
on a tax-free basis under Section 355 of
the Internal Revenue Code of 1986, as
amended (the "Code"), pursuant to a
private letter ruling from the Internal
Revenue Service satisfactory to the
Initial Holder (the "Letter Ruling").
(ii) All shares of Class B Common Stock then
issued or outstanding shall also
automatically convert into shares of Class
A Common Stock on a one-for-one basis if
the number of outstanding shares of Class
B Common Stock falls below 20% of the
aggregate number of outstanding shares of
Common Stock.
(d) CONVERSION FOLLOWING THE DISTRIBUTION. Following the
Distribution, shares of Class B Common Stock shall be convertible into
shares of Class A Common Stock and shares of Class A Common Stock shall
be convertible into shares of Class B Common Stock as follows:
(1) OPTIONAL CONVERSION. Following the Distribution,
(i) shares of Class A Common Stock will be convertible, at the
option of the holder thereof on a one-for-one basis into
shares of Class B Common Stock on the date on which any person
or group of persons other than the Initial Holder or any of
its subsidiaries (the "Offeror") makes an offer, which the
Board deems to be a bona fide offer, to the
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holders of Class B Common Stock to purchase 20% or more of the
issued and outstanding shares of such Class B Common Stock for
cash or securities or other property without making a similar
offer for shares of the Class A Common Stock, unless prior to
the date of the Distribution (the "Distribution Date"), the
Initial Holder delivers to the Corporation an opinion of
counsel reasonably satisfactory to the Corporation to the
effect that such conversion right would adversely affect the
Initial Holder's ability to obtain the Letter Ruling and (ii)
shares of Class B Common Stock will be convertible, at the
option of the holder thereof on a one-for-one basis into
shares of Class A Common Stock on the date on which any person
or group of persons other than the Initial Holder or any of
its subsidiaries makes an offer, which the Board deems to be a
bona fide offer, to purchase 20% or more of the issued and
outstanding shares of such Class A Common Stock for cash or
securities or other property without making a similar offer
for shares of the Class B Common Stock, unless prior to the
Distribution Date, the Initial Holder delivers to the
Corporation an opinion of counsel reasonably satisfactory to
the Corporation to the effect that such conversion right would
adversely affect the Initial Holder's ability to obtain the
Letter Ruling. The Corporation will provide notice in writing
to all holders of Common Stock of any offer referred to in the
foregoing clauses (i) and (ii). Such notice shall be provided
by mailing notice of such offer, first class postage prepaid,
to each holder of the class of Common Stock then entitled to
be converted, at such holder's address as it appears on the
transfer books of the Corporation. Except as otherwise
provided in this Certificate, the shares of Common Stock of
one series in the same class may only be so converted to the
other series in the same class during the period in which such
bona fide offer is in effect. Any shares of Common Stock so
converted and not acquired by the Offeror prior to the
termination, rescission or completion of the offer will
automatically reconvert to shares of the Class from which it
was converted upon such termination, rescission or completion.
(2) AUTOMATIC CONVERSION.
(i) Subject to the provisions hereof shares of
Class B Common Stock shall automatically
convert into shares of Class A Common
Stock on a one-for-one basis on the fifth
anniversary of the Distribution Date,
unless prior to the Distribution Date, the
Initial Holder delivers to the Corporation
an opinion of counsel reasonably
satisfactory to the Corporation to the
effect that such automatic conversion
would adversely affect the Initial
Holder's ability to obtain the Letter
Ruling. If such opinion is received,
approval of such conversion shall be
submitted to a vote of the holders of the
Common Stock as soon as practicable after
the fifth anniversary of the Distribution
Date, unless the Initial Holder delivers
to the Corporation an opinion of counsel
reasonably satisfactory to the Corporation
prior to such fifth anniversary that such
vote would adversely affect the tax-free
status of the
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Distribution. Approval of such conversion
shall require the affirmative vote of the
holders of a majority of the shares of
both the Class A Common Stock and Class B
Common Stock present in person or by
proxy, voting together as a single class,
with each share entitled to one vote for
such purpose.
(ii) In addition, following the Distribution,
if any person or entity or persons or
entities acting together as a group
acquires 20% or more of the outstanding
shares of Class B Common Stock, all shares
of Class B Common Stock held by such
person, entity or group shall
automatically be converted into shares of
Class A Common Stock on a one-for-one
basis, unless prior to the Distribution
Date, the Initial Holder delivers to the
Corporation an opinion of counsel
reasonably satisfactory to the Corporation
to the effect that such automatic
conversion would adversely affect the
Initial Holder's ability to obtain the
Letter Ruling.
(e) CONVERSION PROCEDURES.
(1) RESERVATION OF SHARES. The Corporation shall at
all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued
Common Stock for the purpose of effecting any conversion of
the Common Stock pursuant to Sections 2(c) and 2(d), such
number of shares of Common Stock deliverable upon any such
conversion.
(2) NOTICE. The Corporation shall provide notice of
any automatic conversion of shares of Common Stock to holders
of record thereof not less than 30 nor more than 60 days prior
to the date fixed for such conversion; PROVIDED, HOWEVER, that
if the timing or nature of the effectiveness of an automatic
conversion makes it impracticable to provide at least 30 days'
notice, the Corporation shall provide such notice as soon as
practicable. Such notice shall be provided by mailing notice
of such conversion first class postage prepaid, to each holder
of record of the Common Stock, at such holder's address as it
appears on the transfer books of the Corporation; provided,
however, that no failure to give such notice nor any defect
therein shall affect the validity of the automatic conversion
of any such shares of Common Stock. Each such notice shall
state, as appropriate, the following:
(i) the automatic conversion date;
(ii) the number and series of outstanding
shares of Common Stock that are to
be converted automatically;
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(iii) the place or places where
certificates for such shares are to
be surrendered for conversion; and
(iv) that upon conversion, no dividends
will be declared on the shares of
Common Stock so converted following
such conversion date.
(3) RIGHTS UPON CONVERSION. Immediately upon
conversion, the rights of the holders of shares of Class A
Common Stock or Class B Common Stock, as the case may be,
shall cease and such holders shall be treated for all purposes
as having become the record owners of such shares of the
series in the same class of Common Stock issuable upon such
conversion; provided, however, that such persons shall be
entitled to receive when paid any dividends declared on the
Class A Common Stock or Class B Common Stock, as the case may
be, as of a record date preceding the time of such conversion
and unpaid as of the time of such conversion.
(4) SURRENDER OF CERTIFICATES FOR CONVERSION. Any
conversion pursuant to Sections 2(c) and 2(d) hereof may be
effected at the office of the Corporation or any transfer
agent for the Common Stock and at such other place or places,
if any, as the Board may designate. Upon conversion pursuant
to Sections 2(c) and 2(d) hereof, the Corporation shall make
no payment or adjustment on account of dividends accrued or in
arrears on Common Stock surrendered for conversion or on
account of any dividends on Common Stock issuable on such
conversion. Before any holder of Common Stock shall be
entitled to convert the same into any other series of the same
class of stock pursuant to Sections 2(c) and 2(d) hereof, such
holder shall surrender the certificate or certificates for
such Common Stock at the office of said transfer agent (or
other place as provided above). Such certificate(s), if the
Corporation shall so request, shall be duly endorsed to the
Corporation or in blank or accompanied by proper instruments
of transfer to the Corporation or in blank (such endorsements
or instruments of transfer to be in form satisfactory to the
Corporation).
In addition, if any holder elects to convert shares
of Common Stock pursuant to Section 2(c)(1) or 2(d)(1) hereof,
the certificates surrendered by such holder shall also be
accompanied by a written notice to the Corporation at said
office stating that such holder elects to convert all or a
specified number of the shares of the Common Stock represented
by such certificate(s) in accordance with such Section and
stating the name(s) in which such holder desires the
certificate(s) representing the stock to be issued. In the
case of an election to convert pursuant to Section 2(d)(1),
such written notice shall also state the name(s) of the
Offeror making the offer entitling such holder to convert such
Common Stock.
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(5) DELIVERY OF CONVERTED STOCK CERTIFICATES. As
promptly as practicable after the time of conversion, upon the
delivery to the Corporation of certificates formerly
representing shares of Class A Common Stock or Class B Common
Stock, as the case may be, the Corporation shall deliver or
cause to be delivered, to or upon the written order of the
record holder of such surrendered certificates, a certificate
or certificates representing the number of fully paid and
nonassessable shares of the series in the same class into
which such shares were converted in accordance with the
provisions of Sections 2(c) and 2(d) hereof.
(6) RECONVERSION LEGEND. Any certificate of Common
Stock issued in connection with a conversion pursuant to
Section 2(d)(1) hereof shall bear a legend substantially to
the effect that any share of Common Stock so converted but not
acquired by the Offeror prior to the termination, rescission
or completion of the offer will automatically reconvert to a
share of the series in the same class from which it was so
converted upon such termination, rescission or completion.
(7) TAXES ON CONVERSION. The Corporation will pay any
and all documentary, stamp or similar issue or transfer taxes
payable in respect of the issue or delivery of shares of one
Class in the same series of Common Stock on the conversion of
shares of the other Class in the same series of Common Stock
pursuant to Sections 2(d)(1) and 2(d)(2); provided, however,
that the Corporation shall not be required to pay any tax
which may be payable in respect of any registration of
transfer involved in the issue or delivery of shares of one
Class in the same series of Common Stock in a name other than
that of the registered holder of the other Class in the same
series of Common Stock converted, and no such issue or
delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such
tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(f) VOTING. Holders of Class A Common Stock shall be entitled
to one vote per share while holders of Class B Common Stock shall be
entitled to five votes per share on all matters submitted to a vote of
the stockholders, including the election of directors; provided,
however, that with respect to any proposed conversion of the shares of
Class B Common Stock into shares of Class A Common Stock that is
submitted to a vote of the holders of the Common Stock pursuant to
Section 2(d)(2)(i), every holder of a share of Common Stock,
irrespective of class, shall have one vote in person or by proxy for
each share of Common Stock standing in his or her name on the transfer
books of the Corporation. Except as otherwise required by law or this
Article IV, Section 2(f) or provided in any resolution adopted by the
Board with respect to any series of Preferred Stock, the holders of
Common Stock will possess all voting power and the holders of Class A
Common Stock and Class B Common Stock shall vote together as a single
class. Except as otherwise provided by law, and subject to any voting
rights granted holders of any Preferred Stock, amendments to the
Certificate must be approved by a majority of the votes entitled to be
cast by all outstanding shares of Class A Common Stock and Class B
Common Stock, voting together as a single
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<PAGE> 8
class, PROVIDED, HOWEVER, amendments to the Certificate that would
alter or change the powers, preferences or special rights of the Class
A Common Stock or Class B Common Stock so as to affect them adversely
must also be approved by a majority of the outstanding shares of the
series in the same class that is adversely affected by such amendment,
voting as a separate class.
(g) DIVIDENDS. Subject to any preferential rights of any
outstanding series of Preferred Stock created by the Board from time to
time, the holders of shares of Class A Common Stock and Class B Common
Stock shall be entitled to such cash dividends as may be declared from
time to time by the Board from funds available therefor, which
dividends are not required to be declared on both such Classes,
PROVIDED that holders of shares of Class A Common Stock shall be
entitled to receive an equal pro rata share of any amounts received by
holders of shares of Class B Common Stock. In addition, in connection
with any stock dividend that may be declared by the Board from time to
time, holders of Class A Common Stock shall be entitled to receive such
dividend only in shares of Class A Common Stock while holders of Class
B Common Stock shall be entitled to receive such dividend either in
shares of Class A Common Stock or in shares of Class B Common Stock as
may be determined by the Board. Neither the shares of Class A Common
Stock nor the shares of Class B Common Stock may be reclassified,
subdivided or combined unless such reclassification, subdivision or
combination occurs simultaneously and in the same proportion for each
class.
(h) LIQUIDATION. Subject to any preferential rights of any
outstanding series of Preferred Stock created from time to time by the
Board, upon liquidation, dissolution or winding up of the Corporation,
the holders of shares of Class A Common Stock and Class B Common Stock
shall be entitled to receive pro rata all assets of the Corporation
available for distribution to such holders.
(i) OTHER RIGHTS. In the event of any merger or consolidation
of the Corporation with or into another company in connection with
which shares of Common Stock are converted into or exchangeable for
shares of stock, other securities or property (including cash), all
holders of Common Stock, regardless of series, will be entitled to
receive the same kind and amount of shares of stock and other
securities and property (including cash).
SECTION 3. PREFERRED STOCK. The Preferred Stock may be issued from time
to time in one or more series. The Board is hereby authorized to provide for the
issuance of shares of Preferred Stock in one or more series and, by filing a
certificate of designations pursuant to the DGCL (hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
privileges, preferences and rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. The authority of the Board
with respect to each series shall include, but not be limited to, determination
of the following:
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<PAGE> 9
(a) the designation of the series, which may be by
distinguishing number, letter or title;
(b) the number of shares of the series, which number the Board
may thereafter (except where otherwise provided in the Preferred Stock
Designation) increase or decrease (but not below the number of shares
thereof then outstanding);
(c) whether dividends, if any, shall be cumulative or
noncumulative, and, in the case of shares of any series having
cumulative dividend rights, the date or dates or method of determining
the date or dates from which dividends on the shares of such series
shall be cumulative;
(d) the rate of any dividends (or method of determining such
dividends) payable to the holders of the shares of such series, any
conditions upon which such dividends shall be paid and the date or
dates or the method for determining the date or dates upon which such
dividends shall be payable;
(e) the price or prices (or method of determining such price
or prices) at which, the form of payment of such price or prices (which
may be cash, property or rights, including securities of the same or
another corporation or other entity) for which, the period or periods
within which and the terms and conditions upon which the shares of such
series may be redeemed, in whole or in part, at the option of the
Corporation or at the option of the holder or holders thereof or upon
the happening of a specified event or events, if any;
(f) the obligation, if any, of the Corporation to purchase or
redeem shares of such series pursuant to a sinking fund or otherwise
and the price or prices at which, the form of payment of such price or
prices (which may be cash, property or rights, including securities of
the same or another corporation or other entity) for which, the period
or periods within which and the terms and conditions upon which the
shares of such series shall be redeemed or purchased, in whole or in
part, pursuant to such obligation;
(g) the amount payable out of the assets of the Corporation to
the holders of shares and preferences, if any, of the series in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation;
(h) provisions, if any, for the conversion or exchange of the
shares of such series, at any time or times at the option of the holder
or holders thereof or at the option of the Corporation or upon the
happening of a specified event or events, into shares of any other
class or classes or any other series of the same or any other class or
classes of stock, or any other security, of the Corporation, or any
other corporation or other entity, and the price or prices or rate or
rates of conversion or exchange and any adjustments applicable thereto,
and all other terms and conditions upon which such conversion or
exchange may be made;
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(i) restrictions on the issuance of shares of the same series
or of any other class or series, if any; and
(j) the voting rights, if any, of the holders of shares of the
series.
ARTICLE V
BOARD OF DIRECTORS
The Board of Directors shall consist of one or more members. The number
of directors shall be fixed by, or in the manner provided in, the Bylaws. At the
first annual meeting of stockholders and at each annual meeting of stockholders
thereafter, the respective terms of all of the directors then serving in office
shall expire at the meeting, and successors to the directors shall be elected to
hold office until the next succeeding annual meeting. Election of directors need
not be by written ballot. Existing directors may be nominated for election each
year for a successive term, in the manner provided in the Bylaws. Each director
shall hold office for the term for which such director is elected and qualified
or until the successor of such director shall have been elected and qualified or
until his earlier resignation, disqualification, removal from office or death.
The Board of Directors shall have all powers and authority which may be granted
to a board of directors of a corporation under the DGCL, including but not
limited to the following:
(a) to adopt, amend or repeal the Bylaws of the Corporation;
(b) to authorize and cause to be executed mortgages and liens
upon the real and personal property of the Corporation;
(c) to set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was created;
(d) to designate one or more committees;
(e) to sell, lease or exchange all or substantially all of the
property and assets of the Corporation, including its goodwill and its
corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money of
property including shares of stock in, and/or other securities of, any
other corporation or corporations, as the Board of Directors shall deem
expedient and for the best interest of the Corporation, when and as
authorized by the shareholders entitled to vote thereon;
(f) to provide indemnification for directors, officers,
employees, and/or agents of the Corporation to the fullest extent
permitted by law, subject however, to the rules against limitation on
liability of directors as set forth in the DGCL, as amended form time
to time; and
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(g) to determine from time to time whether and to what extent,
and at what times and places and under what conditions and regulations,
the accounts and books of the Corporation or any of them, shall be
opened to the inspection of the stockholders, and no stockholder shall
have any right to inspect any account or book or document of the
Corporation, except as conferred by the DGCL or authorized by the Board
of Directors, or by a resolution of the stockholders.
ARTICLE VI
LIMITED LIABILITY; INDEMNIFICATION
SECTION 1. LIMITED LIABILITY OF DIRECTORS. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except, if required by the DGCL, as amended from time to time, 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 DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. Neither the amendment nor repeal of Section 1 of this
Article VI shall eliminate or reduce the effect of Section 1 of this Article VI
in respect of any matter occurring, or any cause of action, suit or claim that,
but for Section 1 of this Article VI would accrue or arise, prior to such
amendment or repeal.
SECTION 2. INDEMNIFICATION AND INSURANCE.
(a) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that
such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding
is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the DGCL, as the
same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against
all expense (including attorney's fees), liability and loss reasonably
incurred or suffered by such person in connection therewith.
(b) PAYMENT OF EXPENSES. The right to indemnification
conferred in this Section shall be a contract right and shall include
the right to have the Corporation pay the expenses incurred in
defending any such proceeding in advance of its final disposition,
PROVIDED, HOWEVER, that to the extent required by law, such payment of
expenses in advance of the final disposition of the proceeding shall be
made only upon receipt of an undertaking by the indemnified person to
repay all amounts advanced if it should be ultimately determined that
he or she is not entitled to the requested indemnification or
advancement of expenses under applicable law; any advance payments
shall be paid by the Corporation within 20 calendar days after the
receipt by the
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Corporation of a statement or statements from the claimant requesting
such advance or advances from time to time. The Corporation may grant
rights to indemnification, and rights to have the Corporation pay the
expenses incurred in defending any proceeding in advance of its final
disposition, to any employee or agent of the Corporation to the fullest
extent of the provisions of this Article with respect to the
indemnification and advancement of expenses of directors and officers
of the Corporation.
(c) NON-EXCLUSIVITY OF RIGHTS. Any right to indemnification
and the payment of expenses incurred in defending a proceeding in
advance of its final disposition conferred in this Section shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of this Certificate, bylaw,
agreement, vote of stockholders or disinterested directors or
otherwise. No repeal or modification of this Article shall in any way
diminish or adversely affect the rights of any director, officer,
employee or agent of the Corporation hereunder in respect of any
occurrence or matter arising prior to any such repeal or modification.
(d) INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any such expense, liability or loss,
whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the DGCL.
(e) SEVERABILITY. If any provision or provisions of this
Article VI shall be held to be invalid, illegal or unenforceable for
any reason whatsoever: (1) the validity, legality and enforceability of
the remaining provisions of this Article VI (including, without
limitation, each portion of any paragraph of this Article VI containing
any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (2) to the fullest
extent possible, the provisions of this Article VI (including, without
limitation, each such portion of any paragraph of this Article VI
containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
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IN WITNESS WHEREOF, said Republic Services, Inc. has caused this
Amended and Restated Certificate of Incorporation to be signed by its Vice
Chairman and attested by its Assistant Secretary this 30th day of June, 1998.
By: /s/ Harris W. Hudson
---------------------------------
Name: Harris W. Hudson
---------------------------
Title: Vice Chairman
--------------------------
ATTEST:
By: /s/ David Barclay
---------------------------------
Name: David Barclay
---------------------------
Title: Assistant Secretary
--------------------------
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EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
REPUBLIC SERVICES, INC.
ARTICLE I
OFFICES
SECTION 1.1 REGISTERED OFFICE. The registered office of Republic
Services, Inc., a Delaware corporation (the "Corporation"), shall be located at
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
SECTION 1.2 OFFICES. The Corporation may establish or discontinue, from
time to time, such other offices and places of business within or without the
State of Delaware as the Board of Directors deems proper for the conduct of the
Corporation's business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING. An annual meeting of stockholders for the
purpose of electing directors and transacting such other business as may come
before it shall be held at such place, within or without the State of Delaware,
on such date and at such time as shall be designated by the Board of Directors
or the President.
SECTION 2.2 SPECIAL MEETINGS. Special meetings of stockholders, unless
otherwise prescribed by statute, may be called by the Board of Directors or by
the President. Business transacted at any special meeting of the stockholders
shall be limited to the purposes stated in the notice.
SECTION 2.3 NOTICE OF MEETINGS. Written notice of each meeting of
stockholders shall be given to each stockholder of record entitled to vote at
the meeting at the stockholder's address as it appears on the stock books of the
Corporation. The notice shall state the time and the place of the
<PAGE> 2
meeting and shall be given not less than ten (10) nor more than sixty (60) days
before the day of the meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. In
the case of a special meeting, the notice shall state the purpose or purposes
for which the meeting is being called. Whenever notice is required to be given
hereunder, a written waiver of notice signed by the stockholder entitled to
notice, whether before or after the time stated in the notice, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting except when a person attends for the express
purpose of objecting, at the beginning of the meeting, to the transaction or any
business because the meeting is not lawfully called or convened.
SECTION 2.4 QUORUM AND ADJOURNMENT. The presence, in person or by
proxy, of the holders of a majority of the voting power of the outstanding
shares of stock entitled to vote on every matter that is to be voted on, without
regard to class or series, shall constitute a quorum at all meetings of the
stockholders. In the absence of a quorum, the holders of a majority of the
voting power of such shares of stock present in person or by proxy may adjourn
such meeting, from time to time, without notice other than announcement at the
meeting (unless otherwise required by law), until a quorum shall attend. At any
meeting reconvened after such adjournment at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called, but only those stockholders entitled to vote at the meeting
as originally called shall be entitled to vote at any reconvened meeting, unless
a new record date for such meeting is fixed.
SECTION 2.5 OFFICERS AT STOCKHOLDERS' MEETINGS. The Chairman of the
Board of Directors shall preside at all meetings of stockholders. In his
absence, the chairman shall be elected as the first order of business by the
holders of a majority of the shares of stock in attendance and entitled to vote
at the meeting.
SECTION 2.6 LIST OF STOCKHOLDERS ENTITLED TO VOTE. At least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder, shall be prepared by or for the Secretary and shall be open to
the examination of any stockholder for any purpose germane to the meeting,
during ordinary business hours, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
Such list shall be available for inspection at the meeting.
SECTION 2.7 FIXING DATE FOR STOCKHOLDERS OF RECORD. In order that the
Corporation may identify the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which
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shall not be less than ten (10) days nor more than sixty (60) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice of the
meeting is given, or if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. The record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is delivered to
the Corporation by delivery to its registered office in the State of Delaware,
its principal place of business or any officer or agent of the Corporation
having custody of the minute books of the Corporation. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 2.8 VOTING AND PROXIES. Subject to the provisions for fixing
the date for stockholders of record:
(a) Except as otherwise specified in the Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation"), each
stockholder shall at every meeting of the stockholders be entitled to one vote
for each share of stock held by that stockholder having voting rights as to the
matter being voted upon.
(b) Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for that
stockholder by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy expressly provides for a longer period.
(c) Each matter properly presented to any meeting of
stockholders shall be decided by the affirmative vote of the holders of a
majority of the voting power of the shares of stock present in person or by
proxy and entitled to vote on the matter.
SECTION 2.9 INSPECTORS OF ELECTION. The Corporation shall, in advance
of any meeting of stockholders, appoint one or more inspectors of election, who
may be employees of the Corporation, to act at the meeting or any adjournment
thereof and to make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. In the event that no inspector so appointed or designated is able to act at
a meeting of stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of his or her duties, shall take and sign an oath to execute
faithfully the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspector or inspectors so appointed or
designated shall (i) ascertain the number of shares of capital stock of the
Corporation outstanding and the voting power of each such share, (ii) determine
the shares of capital stock of the Corporation represented at the meeting
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and the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares of capital stock of the Corporation
represented at the meeting and such inspectors' count of all votes and ballots.
Such certification and report shall specify such other information as may be
required by law. In determining the validity and counting of proxies and ballots
cast at any meeting of stockholders of the Corporation, the inspectors may
consider such information as is permitted by applicable law. No person who is a
candidate for an office at an election may serve as an inspector at such
election.
SECTION 2.10 CONDUCT OF MEETINGS. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors of the Corporation may adopt by resolution 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 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 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 2.11 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action
that may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without a prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the stockholders having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of such action without a
meeting by less than unanimous written consent shall be given to each
stockholder who did not consent thereto in writing.
ARTICLE III
DIRECTORS
SECTION 3.1 NUMBER AND TERM OF OFFICE. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. The number of directors that
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shall constitute the whole Board shall be fixed from time to time by resolution
of the stockholders or the Board of Directors and shall consist of not more than
twelve (12) members. At the first annual meeting of stockholders and at each
annual meeting of stockholders thereafter, the respective terms of all of the
directors then serving in office shall expire at the meeting, and successors to
the directors shall be elected to hold office until the next succeeding annual
meeting. Existing directors may be nominated for election each year for a
successive term, in the manner provided in these Amended and Restated Bylaws
(the "Bylaws"). Each director shall hold office for the term for which he is
elected and qualified or until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death. The
Board of Directors may from time to time establish minimum qualifications for
eligibility to become a director. Those qualifications may include, but shall
not be limited to, a prerequisite stock ownership in the Corporation.
SECTION 3.2 PLACE OF MEETINGS. Meetings of the Board of Directors may
be held at any place, within or without the State of Delaware, from time to time
as designated by the Chairman of the Board or by the body or person calling such
meeting.
SECTION 3.3 ANNUAL MEETINGS. As soon as practicable after each annual
meeting of stockholders and without further notice, the directors elected at
such meeting shall hold the annual meeting of the Board of Directors at the
place at which such meeting of stockholders took place, provided a majority of
the whole Board of Directors is present. If such a majority is not present, such
meeting may be held at any other time or place which may be specified in a
notice given in the manner provided for special meetings of the Board of
Directors or in a waiver of notice thereof.
SECTION 3.4 REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times as may be determined by the Board of
Directors. No notice shall be required for any regular meeting.
SECTION 3.5 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the Chief Executive
Officer or the President. Notice of any special meeting shall be mailed to each
director at that director's residence or usual place of business not later than
three (3) days before the day on which the meeting is to be held, or shall be
given to that director by telegraph, telecopier or other method of electronic
transmission, by overnight express mail service, personally, or by telephone,
not later than twenty-four (24) hours before the time of such meeting. Notice of
any meeting of the Board of Directors need not be given to any director if that
director signs a written waiver thereof either before or after the time stated
therein. Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except when the director attends the meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 3.6 ACTION WITHOUT MEETING. 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 of Directors or of
such committee, as the case may be, consent thereto
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<PAGE> 6
in writing, and the writing or writings are filed with the minutes of the Board
of Directors or of such committee.
SECTION 3.7 PRESIDING OFFICER AND SECRETARY AT MEETINGS. Each meeting
of the Board of Directors shall be presided over by the Chairman of the Board of
Directors, or in his or her absence, by the Vice Chairman of the Board, the
Chief Executive Officer or the President, in that order, and if none is present,
then by such member of the Board of Directors as shall be chosen at the meeting.
SECTION 3.8 QUORUM. A majority of the total authorized number of
directors shall constitute a quorum for the transaction of business. In the
absence of a quorum, a majority of those present (or if only one be present,
then that one) may adjourn the meeting, without notice other than announcement
at the meeting, until such time as a quorum is present. The vote of a majority
of the directors present at a meeting at which a quorum is present shall be the
act of the Board of Directors.
SECTION 3.9 MEETING BY TELEPHONE. Members of the Board of Directors or
of any committee thereof may participate in a meeting of the Board of Directors
or of 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. Such participation shall constitute presence in person at such
meeting.
SECTION 3.10 COMPENSATION. Directors shall receive such compensation
and expense reimbursements for their services as directors or as members of
committees as set by the Board of Directors. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent or otherwise, and receiving compensation therefor.
SECTION 3.11 RESIGNATIONS. Any director, member of a committee or
officer of the Corporation may resign at any time by giving written notice
thereof to the Chairman of the Board or the President. Such resignation shall be
effective at the time of its receipt, unless a date certain is specified for it
to take effect. Acceptance of any resignation shall not be necessary to make it
effective.
SECTION 3.12 REMOVAL OF DIRECTORS. No director may be removed without
cause before the expiration of his or her term of office except by vote of the
stockholders at a meeting called for such a purpose.
SECTION 3.13 FILLING OF VACANCIES. In case of a vacancy created by an
increase in the number of directors or any vacancy created by death, removal, or
resignation, the vacancy or vacancies may be filled either (a) by the Board of
Directors, or (b) by the stockholders. In the case of a director appointed to
fill a vacancy created by an increase in the number of directors, the director
so appointed shall hold office for the term to which his predecessor was elected
or until his successor is elected. In the case of a director appointed to fill a
vacancy created by the death, removal or
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resignation of a director, the newly appointed director shall hold office for
the term to which his predecessor was elected or until his successor is elected.
ARTICLE IV
COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each such committee
to consist of one or more directors of the Corporation. 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 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 in such resolution or
resolutions and to the extent permitted by law, 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; but no such
committee shall have the power or authority in reference to the following
matter: (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by the General Corporation Law of the state
of Delaware to be submitted to stockholders for approval or (ii) adopting,
amending or repealing the Bylaws of the Corporation.
ARTICLE V
THE OFFICERS
SECTION 5.1 DESIGNATION. The Corporation shall have such officers with
such titles and duties as set forth in these Bylaws or in a resolution of the
Board of Directors adopted on or after the effective date of these Bylaws.
SECTION 5.2 ELECTION AND QUALIFICATION. The officers of the Corporation
shall be elected by the Board of Directors and, if specifically determined by
the Board of Directors, may consist of a Chairman of the Board, Vice Chairman of
the Board, Chief Executive Officer, President, Chief Operating Officer, Chief
Financial Officer, one or more Vice Presidents, a Secretary, a Treasurer, one or
more Assistant Secretaries and Assistant Treasurers, and such other officers and
agents as the Board of Directors may deem advisable. None of the officers of the
Corporation need be directors.
SECTION 5.3 TERM OF OFFICE. Officers shall be chosen in such manner and
shall hold their office for such term as determined by the Board of Directors.
Each officer shall hold office from the time of his or her election and
qualification to the time at which his or her successor is elected and
qualified, or until his or her earlier resignation, removal or death.
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<PAGE> 8
SECTION 5.4 RESIGNATION. Any officer of the Corporation may resign at
any time by giving written notice of such resignation to the Chairman of the
Board of Directors or to the President. Any such resignation shall take effect
at the time specified therein or, if no time be specified, upon receipt thereof
by the Chairman of the Board of Directors or the President. The acceptance of
such resignation shall not be necessary to make it effective.
SECTION 5.5 REMOVAL. Any officer may be removed at any time, with or
without cause, by the Board of Directors.
SECTION 5.6 COMPENSATION. The compensation of each officer shall be
determined by the Board of Directors.
SECTION 5.7 THE CHAIRMAN AND THE VICE CHAIRMAN OF THE BOARD OF
DIRECTORS. Unless otherwise specifically determined by resolution by the Board
of Directors, the Chairman of the Board and the Vice Chairman of the Board shall
be officers of the Corporation. The Chairman of the Board shall, subject to the
direction and oversight of the Board, oversee the business plans and policies of
the Corporation, and shall oversee the implementation of those business plans
and policies. The Chairman shall report to the Board, shall preside at meetings
of the Board of Directors and of its Executive Committee, and shall have general
authority to execute bonds, deeds and contracts in the name of and on behalf of
the Corporation. In the absence or disability of the Chairman, the Vice Chairman
shall be vested with and shall perform all powers and duties of the Chairman.
SECTION 5.8 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall,
subject to the direction of the Board, establish and implement the business
plans, policies and procedures of the Corporation. The Chief Executive Officer
shall report to the Chairman of the Board, shall preside over meetings of the
Board in the absence of the Chairman or Vice Chairman of the Board, and shall
have general authority to execute bonds, deeds and contracts in the name of and
on behalf of the Corporation and in general to exercise all the powers generally
appertaining to the Chief Executive Officer of a corporation.
SECTION 5.9 PRESIDENT, CHIEF OPERATING OFFICER AND CHIEF FINANCIAL
OFFICER. The President, the Chief Operating Officer and the Chief Financial
Officer shall have such duties as shall be assigned to each from time to time by
the Chairman of the Board, the Chief Executive Officer and by the Board. During
the absence of the Chairman of the Board or the Vice Chairman of the Board or
during their inability to act, the President shall exercise the powers and shall
perform the duties of the Chairman of the Board, subject to the direction of the
Board of Directors.
SECTION 5.10 VICE PRESIDENT. Each Vice President shall have such powers
and shall perform such duties as shall be assigned to him or her by the Board of
Directors.
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<PAGE> 9
SECTION 5.11 SECRETARY. The Secretary shall attend meetings of the
Board of Directors and stockholders and record votes and minutes of such
proceedings, subject to the direction of the Chairman; assist in issuing calls
for meetings of stockholders and directors; keep the seal of the Corporation and
affix it to such instruments as may be required from time to time; keep the
stock transfer books and other books and records of the Corporation; act as
stock transfer agent for the Corporation; attest the Corporation's execution of
instruments when requested and appropriate; make such reports to the Board of
Directors as are properly requested; and perform such other duties incident to
the office of Secretary and those that may be otherwise assigned to the
Secretary from time to time by the President or the Chairman of the Board of
Directors.
SECTION 5.12 TREASURER. The Treasurer shall have custody of all
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall deposit or disburse all moneys and other property in the name and to the
credit of the Corporation as may be designated by the President or the Board of
Directors. The Treasurer shall render to the President and the Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation. The Treasurer shall perform other
duties incident to the office of Treasurer as the President or the Board of
Directors shall from time to time designate.
SECTION 5.13 OTHER OFFICERS. Each other officer of the Corporation
shall have such powers and shall perform such duties as shall be assigned to him
or her by the Board of Directors.
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER OF STOCK
AND REGISTERED STOCKHOLDERS
SECTION 6.1 STOCK CERTIFICATES. The interest of each holder of stock of
the Corporation shall be evidenced by a certificate or certificates signed by or
in the name of the Corporation by the Chairman of the Board of Directors, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the Corporation certifying the
number of shares owned by the holder thereof in the Corporation. Any of or all
of the signatures on the certificate may be a facsimile. If any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, the certificate may be issued by
the Corporation with the same effect as if he/she were such officer, transfer
agent or registrar at the date of issuance.
SECTION 6.2 CLASSES/SERIES OF STOCK. The Corporation may issue one or
more classes of stock or one or more series of stock within any class thereof,
as stated and expressed in the Certificate of Incorporation or of any amendment
thereto, any or all of which classes may be stock with par value or stock
without par value. The powers, designations, preferences and relative,
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participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, in accordance with the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, 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 and/or rights.
SECTION 6.3 TRANSFER OF STOCK. Subject to the transfer restrictions
permitted by Section 202 of the General Corporation Law of the State of Delaware
and to stop transfer orders directed in good faith by the Corporation to any
transfer agent to prevent possible violations of federal or state securities
laws, rules or regulations, the shares of stock of the Corporation shall be
transferable upon its books by the holders thereof in person or by their duly
authorized attorneys or legal representatives, and upon such transfer the old
certificates shall be surrendered to the Corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers, or to such
other persons as the directors may designate, by whom they shall be cancelled,
and new certificates shall be issued. A record shall be made of each transfer
and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
SECTION 6.4 HOLDERS OF RECORD. Prior to due presentment for
registration of transfer, the Corporation may treat the holder of record of a
share of its stock as the complete owner thereof exclusively entitled to vote,
to receive notifications and otherwise entitled to all the rights and powers of
a complete owner thereof, notwithstanding notice of the contrary.
SECTION 6.5 LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. A new
certificate of stock may be issued to replace a certificate theretofore issued
by the Corporation, alleged to have been lost, stolen, destroyed or mutilated,
and the Board of Directors or the President may require the owner of the lost or
destroyed certificate or his or her legal representatives, to give such sum as
they may direct to indemnify the Corporation against any expense or loss it may
incur on account of the alleged loss of any such certificate.
SECTION 6.6 DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation and applicable law, the directors may, out of funds legally
available therefor at any annual, regular, or special meeting, declare dividends
upon the capital stock of the Corporation as and when they deem expedient.
Dividends may be paid in cash, in property, or in shares of stock of the
Corporation. Before declaring any dividends there may be set apart out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time in their discretion deem proper working capital to
serve as a reserve fund to meet contingencies or as equalizing dividends or for
such other purposes as the directors shall deem in the best interest of the
Corporation.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.1 FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 7.2 CORPORATE SEAL. The corporate seal shall be in such form as
the Board of Directors may from time to time prescribe and the same may be used
by causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
SECTION 7.3 SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall not affect the validity or enforceability of the
remaining provisions hereof.
ARTICLE VIII
AMENDMENT OF BYLAWS
These Bylaws may be made, altered, or repealed, or new bylaws may be
adopted by the stockholders or the Board of Directors.
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<PAGE> 1
EXHIBIT 4.1
================================================================================
LONG TERM CREDIT AGREEMENT
Dated as of July 10, 1998
among
REPUBLIC SERVICES, INC.,
THE CHASE MANHATTAN BANK,
THE FIRST NATIONAL BANK OF CHICAGO,
AND
NATIONSBANK, N.A.,
as Documentation Agents,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged by
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
and
NATIONSBANK MONTGOMERY SECURITIES, INC.
================================================================================
<PAGE> 2
LONG TERM CREDIT AGREEMENT
This LONG TERM CREDIT AGREEMENT is entered into as of July 10, 1998,
among REPUBLIC SERVICES, INC., a Delaware corporation (the "COMPANY"), the
several financial institutions from time to time party to this Agreement
(collectively the "LENDERS"; individually each a "LENDER") and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative agent for the Lenders.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms have the
following meanings:
ABSOLUTE RATE - see SUBSECTION 2.6(c)(ii)(D).
ABSOLUTE RATE AUCTION means a solicitation of Competitive Bids
setting forth Absolute Rates pursuant to SECTION 2.6.
ABSOLUTE RATE BID LOAN means a Bid Loan that bears interest at
a rate determined with reference to the Absolute Rate.
ACQUIRED PLAN means any Plan which was originally established
and maintained by a Person other than the Company or an ERISA Affiliate
and which became, or hereafter becomes, a Plan as a result of an
Acquisition by the Company or any Subsidiary.
ACQUISITION means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of all or substantially all of any business or division of a
Person, (b) the acquisition of in excess of 50% of the capital stock,
partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than
a Person that is a Subsidiary) provided that the Company or the
Subsidiary is the surviving entity.
<PAGE> 3
ADJUSTED PRO RATA SHARE means for any Lender at any time the
proportion (expressed as a decimal, rounded to the ninth decimal place)
which such Lender's Commitment constitutes of the combined Commitments
(or, after the Commitments have terminated, which (i) the principal
amount of such Lender's Loans PLUS (without duplication) the
participation of such Lender in (or in the case of an Issuing Lender or
the Swing Line Lender, its unparticipated portion of) the Effective
Amount of all L/C Obligations and the principal amount of all Swing
Line Loans constitutes of (ii) the aggregate principal amount of all
Loans PLUS (without duplication) the Effective Amount of all L/C
Obligations).
ADMINISTRATIVE AGENT means BofA in its capacity as agent for
the Lenders hereunder, and any successor agent arising under SECTION
10.9.
ADMINISTRATIVE AGENT-RELATED PERSONS means BofA and any
successor agent arising under SECTION 10.9 and any successor letter of
credit issuing bank hereunder, together with their respective
Affiliates (including, in the case of BofA, BRS), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
ADMINISTRATIVE AGENT'S PAYMENT OFFICE means the address for
payments set forth on SCHEDULE 11.2 or such other address as the
Administrative Agent may from time to time specify by notice to the
Company and the Lenders.
AFFILIATE means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities or membership interests, by contract or
otherwise.
AGREEMENT means this Credit Agreement.
APPLICABLE MARGIN - see SCHEDULE 1.1.
ASSIGNEE - see SUBSECTION 11.8(a).
ASSIGNMENT AND ACCEPTANCE - see SUBSECTION 11.8(a).
ATTORNEY COSTS means and includes all reasonable fees and
disbursements of any law firm or other external counsel and, without
duplication, the allocated cost of internal
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<PAGE> 4
legal services and all reasonable disbursements of internal
counsel.
BANKRUPTCY CODE means the Federal Bankruptcy Reform Act
of 1978 (11 U.S.C. Section 101, ET SEQ.).
BASE RATE means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; or (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which
may be priced at, above or below such announced rate.) Any change in
the reference rate announced by BofA shall take effect at the opening
of business on the day specified in the public announcement of such
change.
BASE RATE COMMITTED LOAN means a Committed Loan, or an L/C
Advance, that bears interest based on the Base Rate.
BID BORROWING means a Borrowing hereunder consisting of one or
more Bid Loans made to the Company on the same day by one or more
Lenders.
BID LOAN means a Loan by a Lender to the Company under SECTION
2.6, which may be a LIBOR Bid Loan or an Absolute Rate Bid Loan.
BOFA means Bank of America National Trust and Savings
Association, a national banking association.
BORROWING means a borrowing hereunder consisting of Committed
Loans of the same Type, or Bid Loans, made to the Company on the same
day by one or more Lenders under ARTICLE II and, other than in the case
of Base Rate Committed Loans, having the same Interest Period. A
Borrowing may be a Bid Borrowing or a Committed Borrowing.
BORROWING DATE means any date on which a Borrowing occurs
under SECTION 2.3 or 2.6 or a Swing Line Loan is made under SECTION
2.16.
BRS means BancAmerica Robertson Stephens, a Delaware
corporation.
BUSINESS DAY means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, Chicago or San
Francisco are authorized or required by law to close and, if the
applicable Business Day relates to
3
<PAGE> 5
any Offshore Rate Loan, means such a day on which dealings in Dollars
are carried on in the London interbank market.
CAPITAL ADEQUACY REGULATION means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
CAPITAL LEASE means, with respect to any Person, any lease of
(or other agreement conveying the right to use) any real or personal
property by such Person that, in conformity with GAAP, is accounted for
as a capital lease on the balance sheet of such Person.
CASH COLLATERALIZE means to pledge and deposit with or deliver
to the Administrative Agent, for the benefit of the Administrative
Agent, the Issuing Lenders and the Lenders, as collateral for the L/C
Obligations, cash or deposit account balances pursuant to documentation
in form and substance satisfactory to the Administrative Agent and the
Required Lenders. Derivatives of such term shall have corresponding
meanings. Cash collateral shall be maintained in blocked accounts at
the Administrative Agent or, with the Administrative Agent's consent,
the applicable Issuing Lender.
CHANGE OF CONTROL means (i) if any Person or group of Persons
acting in concert (other than a Specified Person) shall own or control,
directly or indirectly, more than 20% (or, if greater, the percentage
owned by the Specified Person holding the largest percentage) of the
outstanding securities (on a fully diluted basis and taking into
account any securities or contract rights exercisable, exchangeable or
convertible into equity securities) of the Company having voting rights
in the election of directors; or (ii) at any time after the Divestiture
Date, a majority of the members of the Board of Directors of the
Company shall cease to be Continuing Members. For purposes of CLAUSE
(i) above, "Specified Person" means Republic Industries, Inc. or a
Subsidiary thereof or any Person or group of Persons which, as of the
date of this Agreement, owns and controls more than 20% of the
outstanding securities (on a fully diluted basis and taking into
account any securities or contract rights exercisable, exchangeable or
convertible into equity securities) of Republic Industries, Inc. having
voting rights in the election of directors.
CODE means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
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COMMITMENT - see SECTION 2.1. As of the Effective Date, the
amount of the combined Commitments of all Lenders is $500,000,000.
COMMITTED BORROWING means a Borrowing hereunder consisting of
Committed Loans made by the Lenders ratably according to their
respective Pro Rata Shares.
COMMITTED LOAN means a Loan by a Lender to the Company under
SECTION 2.1, which may be a Base Rate Committed Loan or an Offshore
Rate Committed Loan (each a "TYPE" of Committed Loan).
COMPANY - see the PREAMBLE.
COMPETITIVE BID means an offer by a Lender to make a Bid Loan
in accordance with SUBSECTION 2.6(c).
COMPETITIVE BID REQUEST - see SUBSECTION 2.6(a).
COMPLIANCE CERTIFICATE means a certificate substantially in
the form of EXHIBIT F.
COMPUTATION PERIOD means any period of four consecutive fiscal
quarters ending on the last day of a fiscal quarter.
CONSOLIDATED EBITDA means, with respect to the Company and its
Subsidiaries for any period of computation thereof during such period,
the sum of, without duplication, (i) Consolidated Net Income, plus (ii)
Consolidated Interest Expense during such period, plus (iii) taxes on
income during such period, plus (iv) amortization during such period,
plus (v) depreciation during such period, determined, to the extent
applicable as a result of Acquisitions during such period, on a pro
forma basis in accordance with Article 11 of Regulation S-X of the SEC.
CONSOLIDATED INTEREST EXPENSE means, with respect to any
period of computation thereof, the gross interest expense of the
Company and its Subsidiaries, including, without limitation, (i) the
amortization of debt discounts, (ii) the amortization of all fees
payable in connection with the incurrence of Indebtedness to the extent
included in interest expense, (iii) the portion of any liabilities
incurred in connection with Capital Leases allocable to interest
expense and (iv) consolidated yield or discount accrued on the
aggregate outstanding investment or claim held by purchasers, assignees
or other transferees of (or of interests in) receivables of the Company
and its Subsidiaries in connection with any Securitization Transaction
(regardless of the accounting treatment of such Securitization
Transaction).
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<PAGE> 7
CONSOLIDATED NET INCOME means, for any period of computation
thereof, the gross revenues from operations of the Company and its
Subsidiaries, less all operating and non-operating expenses of the
Company and its Subsidiaries, including taxes on income but excluding
all non-cash, non-recurring and all extraordinary gains or losses.
CONSOLIDATED SHAREHOLDERS' EQUITY means consolidated
shareholder's equity as shown on the Company's balance sheet, EXCLUDING
the amount of any foreign currency translation adjustment which is
included in the equity section of such balance sheet (whether positive
or negative) and MINUS all loans and advances by the Company or any
Subsidiary to any Affiliate (other than the Company or a Subsidiary).
CONSOLIDATED TANGIBLE ASSETS means the consolidated total
assets of the Company and its Subsidiaries but excluding goodwill,
franchises, licenses, patents, trademarks, trade names, copyrights and
any other intangible assets.
CONTINGENT OBLIGATION means, as to any Person, any direct or
indirect liability of such Person, whether or not contingent, (a) with
respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of such Person (i) to purchase,
repurchase or otherwise acquire such primary obligations or any
security therefor, (ii) to advance or provide funds for the payment or
discharge of any such primary obligation, or to maintain working
capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet item, level of
income or financial condition of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (iv) otherwise
to assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each a "GUARANTY OBLIGATION"); (b)
with respect to any Surety Instrument issued for the account of such
Person or as to which such Person is otherwise liable for reimbursement
of drawings or payments; or (c) to purchase any materials, supplies or
other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires
that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such
materials, supplies or other property is ever made or tendered, or such
services are ever performed or tendered. The amount of any Contingent
Obligation shall
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<PAGE> 8
(a) in the case of Guaranty Obligations, be deemed equal to the stated
or determinable amount of the primary obligation in respect of which
such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect
thereof, and (b) in the case of other Contingent Obligations, be equal
to the maximum reasonably anticipated liability in respect thereof.
CONTINUING MEMBER means a member of the Board of Directors of
the Company who either (a) was a member of the Company's Board of
Directors on the day before the Divestiture Date and has been such
continuously thereafter or (b) became a member of such Board of
Directors after the day before the Divestiture Date and whose election
or nomination for election was approved by a vote of the majority of
the Continuing Members then members of the Company's Board of
Directors.
CONTRACTUAL OBLIGATION means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other document to which
such Person is a party or by which it or any of its property is bound.
CONVERSION/CONTINUATION DATE means any date on which, under
SECTION 2.4, the Company (a) converts Committed Loans of one Type to
the other Type or (b) continues Offshore Rate Committed Loans for a new
Interest Period.
CREDIT EXTENSION means and includes (a) the making of any Loan
hereunder and (b) the Issuance of any Letter of Credit hereunder.
CUMULATIVE CONSOLIDATED NET INCOME means the total of
Consolidated Net Income for all fiscal quarters ending after March 31,
1998 EXCLUDING any fiscal quarter in which Consolidated Net Income is
negative.
DIVESTITURE DATE means the date on which Republic Industries,
Inc. and/or its Subsidiaries cease to own and control more than 50% of
the outstanding securities (on a fully diluted basis and taking into
account any securities or contract rights exercisable, exchangeable or
convertible into equity securities) of the Company having voting rights
in the election of directors.
DOLLARS, dollars and $ each mean lawful money of the United
States.
EFFECTIVE AMOUNT means, with respect to any outstanding L/C
Obligations on any date, the amount of such L/C Obligations on such
date after giving effect to any
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<PAGE> 9
Issuances of Letters of Credit occurring on such date, any other
changes in the aggregate amount of the L/C Obligations as of such date,
including as a result of any reimbursements of outstanding unpaid
drawings under any Letter of Credit or any reduction in the maximum
amount available for drawing under Letters of Credit taking effect on
such date.
EFFECTIVE DATE - see SECTION 5.1.
ELIGIBLE ASSIGNEE means (a) a commercial bank organized under
the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $500,000,000; (b) 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 a combined
capital and surplus of at least $500,000,000, provided that such bank
is acting through a branch or agency located in the United States; and
(c) a Person that is primarily engaged in the business of commercial
lending and that is (i) a Lender, (ii)a Subsidiary of a Lender, (iii) a
Subsidiary of a Person of which a Lender is a Subsidiary, or (iv) a
Person of which a Lender is a Subsidiary.
ENVIRONMENTAL CLAIMS means all written claims, however
asserted, by any Governmental Authority or other Person alleging
potential liability or responsibility for violation of any
Environmental Law, or for release or injury to the environment.
ENVIRONMENTAL LAWS means all federal, state, local or
municipal laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative or judicial
orders, directed duties, requests, licenses, authorizations and permits
of, and agreements with, any Governmental Authorities, in each case
relating to environmental matters.
ERISA means the Employee Retirement Income Security Act of
1974, and the regulations promulgated thereunder.
ERISA AFFILIATE means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
ERISA EVENT means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a
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<PAGE> 10
substantial cessation of operations which is treated as such a
withdrawal; (c) a complete or partial withdrawal by the Company or any
ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of
intent to terminate a Pension Plan under Section 4041(c) of ERISA, the
termination of a Multiemployer Plan under 4041A of ERISA, or the
commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any
liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any ERISA
Affiliate.
EVENT OF DEFAULT means any of the events or circumstances
specified in SECTION 9.1; provided that any requirement of notice or
lapse of time (or both) has been satisfied.
EXISTING LETTERS OF CREDIT means the letters of credit listed
on SCHEDULE 3.3.
FACILITY FEE RATE - see SCHEDULE 1.1.
FEDERAL FUNDS RATE means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York City time) on that day by each of three leading brokers of
Federal funds transactions in New York City selected by the
Administrative Agent.
FRB means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
FURTHER TAXES means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees, withholdings or
similar charges (including net income taxes and franchise taxes), and
all liabilities with respect thereto, imposed by any jurisdiction on
account of amounts payable or paid pursuant to SECTION 4.1.
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<PAGE> 11
GAAP means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
GOVERNMENTAL AUTHORITY means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
GUARANTY OBLIGATION has the meaning specified in the
definition of Contingent Obligation.
HONOR DATE has the meaning specified in SUBSECTION 3.3(b).
INDEBTEDNESS of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money; (b) all obligations
issued, undertaken or assumed by such Person as the deferred purchase
price of property or services (other than trade payables entered into
in the ordinary course of business on ordinary terms); (c) all
reimbursement or payment obligations of such Person with respect to
Surety Instruments; (d) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments; (e) all indebtedness
of such Person created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property);
(f) all obligations of such Person with respect to Capital Leases; (g)
all indebtedness of the types referred to in CLAUSES (a) through (f)
above secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien
upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness, provided that the amount of any
such Indebtedness shall be deemed to be the lesser of the face
principal amount thereof and the fair market value of the property
subject to such Lien; and (h) all Guaranty
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<PAGE> 12
Obligations of such Person in respect of Indebtedness of the types
described above; PROVIDED that Indebtedness shall not include
obligations arising out of the endorsement of instruments for deposit
or collection in the ordinary course of business. For all purposes of
this Agreement, the Indebtedness of any Person shall include all
Indebtedness of any partnership or joint venture in which such Person
is a general partner or a joint venturer (other than any such
Indebtedness which is expressly non-recourse to such Person).
INDEMNIFIED LIABILITIES - see SECTION 11.5.
INDEMNIFIED PERSON - see SECTION 11.5.
INDEPENDENT AUDITOR - see SUBSECTION 7.1(a).
INSOLVENCY PROCEEDING means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; in each case undertaken under
any U.S. Federal, state or foreign law, including the Bankruptcy Code.
INTEREST PAYMENT DATE means, as to any Loan other than a Base
Rate Committed Loan or Swing Line Loan, the last day of each Interest
Period applicable to such Loan and, as to any Base Rate Committed Loan
or Swing Line Loan, the last Business Day of each calendar quarter,
PROVIDED that if any Interest Period for an Offshore Rate Committed
Loan exceeds three months, each three-month anniversary of the first
day of such Interest Period also shall be an Interest Payment Date.
INTEREST PERIOD means, (a) as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the date on
which such Loan is converted into or continued as an Offshore Rate
Loan, and ending on the date seven days, one, two, three or six months
thereafter as selected by the Company in its Notice of Committed
Borrowing, Notice of Conversion/Continuation or Competitive Bid
Request, as the case may be; and (b) as to any Absolute Rate Bid Loan,
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<PAGE> 13
a period not less than 7 days and not more than 183 days as selected by
the Company in the applicable Competitive Bid Request; PROVIDED that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, 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 preceding
Business Day;
(ii) any Interest Period for an Offshore Rate
Committed Loan that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Termination Date.
INVITATION FOR COMPETITIVE BIDS means a solicitation for
Competitive Bids, substantially in the form of EXHIBIT D.
IPO means the initial public offering of common stock of the
Company.
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
ISSUANCE DATE has the meaning specified in SUBSECTION 3.1(a).
ISSUE means, with respect to any Letter of Credit, to issue or
to extend the expiry of, or to renew or increase the amount of, such
Letter of Credit; and the terms "ISSUED," "ISSUING" and "ISSUANCE" have
corresponding
meanings.
ISSUING LENDER means each of BofA and The First National Bank
of Chicago in its capacity as issuer of one or more Letters of Credit
hereunder, together with (i) any replacement letter of credit issuer
arising under SUBSECTION 10.1(b) or SECTION 10.9 and (ii) any other
Lender or any Affiliate of a Lender which, with the written consents of
the Administrative Agent (which consent will not be unreasonably
withheld) and the Company, has agreed in writing to become an "Issuing
Lender" hereunder.
L/C ADVANCE means each Lender's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
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<PAGE> 14
L/C AMENDMENT APPLICATION means an application form for
amendment of an outstanding standby letter of credit as shall at any
time be in use by the applicable Issuing Lender, as such Issuing Lender
shall request.
L/C APPLICATION means an application form for issuance of a
standby letter of credit as shall at any time be in use by the
applicable Issuing Lender, as such Issuing Lender shall request.
L/C BORROWING means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Committed Loans
under SUBSECTION 3.3(d).
L/C COMMITMENT means the commitment of the Issuing Lenders to
Issue, and the commitment of the Lenders severally to participate in,
Letters of Credit from time to time Issued or outstanding under ARTICLE
III (including the Existing Letters of Credit) in an aggregate amount
not to exceed on any date the lesser of (a) $250,000,000 or (b) the
combined Commitments; it being understood that the L/C Commitment is a
part of the combined Commitments rather than a separate, independent
commitment.
L/C FEE RATE - see SCHEDULE 1.1.
L/C OBLIGATIONS means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit,
including all outstanding L/C Borrowings.
L/C-RELATED DOCUMENTS means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the applicable
Issuing Lender's standard form documents for letter of credit
issuances.
LENDER - see the PREAMBLE. References to the "Lenders" shall
include BofA in its capacity as Swing Line Lender and each Issuing
Lender in its capacity as such; for purposes of clarification only, to
the extent that the Swing Line Lender or any Issuing Lender may have
any rights or obligations in addition to those of the other Lenders due
to its status as Swing Line Lender or Issuing Lender, its status as
such will be specifically referenced.
LENDING OFFICE means, as to any Lender, the office or offices
of such Lender specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on SCHEDULE
11.2, or such other office or
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<PAGE> 15
offices as such Lender may from time to time notify the Company and the
Administrative Agent.
LETTER OF CREDIT means each Existing Letter of Credit and any
other standby letter of credit Issued by an Issuing Lender pursuant to
ARTICLE III.
LIBOR - see the definition of Offshore Rate.
LIBOR AUCTION means a solicitation of Competitive Bids setting
forth a LIBOR Bid Margin pursuant to SECTION 2.6.
LIBOR BID LOAN means any Bid Loan that bears interest at a
rate based upon the Offshore Rate.
LIBOR BID MARGIN - see SUBSECTION 2.6(c)(ii)(C).
LIEN means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
Capital Lease, or any financing lease having substantially the same
economic effect as any of the foregoing, but not including the interest
of a lessor under an operating lease).
LOAN means an extension of credit by a Lender to the Company
under ARTICLE II or ARTICLE III in the form of a Committed Loan, Bid
Loan, Swing Line Loan or L/C Advance.
LOAN DOCUMENTS means this Agreement, any Notes, the
L/C-Related Documents and all other documents delivered to the
Administrative Agent or any Lender in connection herewith.
MARGIN STOCK means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
MATERIAL ADVERSE EFFECT means a material adverse change in, or
a material adverse effect upon, the operations, business, properties,
assets or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
MATERIAL FINANCIAL OBLIGATIONS means Indebtedness or
Contingent Obligations of the Company or any Subsidiary, or obligations
of the Company or any Subsidiary in respect of any Securitization
Transaction, in an aggregate amount (for all applicable Indebtedness,
Contingent Obligations and
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obligations in respect of Securitization Transactions, but
without duplication) equal to $25,000,000 or more.
MULTIEMPLOYER PLAN means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, with respect to which the
Company or any ERISA Affiliate may have any liability.
NOTE means a promissory note executed by the Company in favor
of a Lender pursuant to SUBSECTION 2.2(b), in substantially the form of
EXHIBIT I.
NOTICE OF COMMITTED BORROWING means a notice in substantially
the form of EXHIBIT A.
NOTICE OF CONVERSION/CONTINUATION means a notice in
substantially the form of EXHIBIT B.
NOTICE OF SWING LINE LOAN means a notice substantially in the
form of EXHIBIT J.
OBLIGATIONS means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing
by the Company to any Lender, the Administrative Agent or any other
Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due,
or now existing or hereafter arising.
OFFSHORE RATE means, for any Interest Period, with respect to
Offshore Rate Committed Loans comprising part of the same Borrowing,
the rate of interest per annum (rounded upward to the next 1/32nd of
1%) determined by the Administrative Agent as follows:
Offshore Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"EURODOLLAR RESERVE PERCENTAGE" means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward, if necessary, to an integral
multiple of 1/100th of 1%) in effect on such day (whether or
not applicable to any Lender) under regulations issued from
time to time by the FRB for determining the maximum reserve
requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency liabilities");
and
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"LIBOR" means the rate of interest per annum
determined by the Administrative Agent to be the rate of
interest at which dollar deposits in the approximate amount of
the Loan to be made or continued as, or converted into, an
Offshore Rate Committed Loan by BofA (or, in the case of a
Borrowing of LIBOR Bid Loans in which BofA is not
participating, the largest such LIBOR Bid Loan) and having a
maturity comparable to such Interest Period would be offered
to prime banks in the London interbank market at their request
at approximately 11:00 a.m. (London time) two Business Days
prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Committed Loans then outstanding as of the effective date of any
change in the Eurodollar Reserve Percentage.
OFFSHORE RATE COMMITTED LOAN means a Committed Loan that bears
interest based on the Offshore Rate.
OFFSHORE RATE LOAN means any LIBOR Bid Loan or any Offshore
Rate Committed Loan.
ORGANIZATION DOCUMENTS means (i) for any corporation, the
certificate of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation, (ii) for any partnership or joint
venture, the partnership or joint venture agreement and any other
organizational document of such entity, (iii) for any limited liability
company, the certificate or articles of organization, the operating
agreement and any other organizational document of such limited
liability company, (iv) for any trust, the declaration of trust, the
trust agreement and any other organizational document of such trust and
(v) for any other entity, the document or agreement pursuant to which
such entity was formed and any other organizational document of such
entity.
OTHER CREDIT AGREEMENT means the Short Term Credit Agreement
dated as of July 10, 1998 among the Company, certain financial
institutions as lenders and documentation agents and BofA as
administrative agent, issuing lender and swing line lender.
OTHER TAXES means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance,
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<PAGE> 18
enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Document.
PARTICIPANT - see SUBSECTION 11.8(d).
PAYMENT SHARING NOTICE means a written notice from the Company
or any Lender informing the Administrative Agent that an Event of
Default has occurred and is continuing and directing the Administrative
Agent to allocate payments received from the Company in accordance with
SUBSECTION 2.15(b).
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
PENSION PLAN means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA, other than a Multiemployer
Plan, with respect to which the Company or any ERISA Affiliate may have
any liability.
PERMITTED LIENS - see SECTION 8.2.
PERSON means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
PLAN ACQUISITION DATE means, with respect to any Acquired
Plan, the first date on which the Company or any ERISA Affiliate may
have any liability with respect to such Acquired Plan.
PLAN means an employee benefit plan (as defined in Section
3(3) of ERISA), other than a Multiemployer Plan, with respect to which
the Company or any ERISA Affiliate may have any liability, and includes
any Pension Plan.
PRO RATA SHARE means for any Lender at any time the proportion
(expressed as a decimal, rounded to the ninth decimal place) which such
Lender's Commitment constitutes of the combined Commitments (or, after
the Commitments have terminated, which (i) the principal amount of such
Lender's Committed Loans PLUS (without duplication) the participation
of such Lender in (or in the case of an Issuing Lender or the Swing
Line Lender, the unparticipated portion of) the Effective Amount of all
L/C Obligations and the principal amount of all Swing Line Loans
constitutes of (ii) the aggregate principal amount of all Committed
Loans and Swing Line Loans PLUS (without duplication) the Effective
Amount of all L/C Obligations).
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REPORTABLE EVENT means, any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
REQUIRED LENDERS means Lenders holding Adjusted Pro Rata
Shares aggregating more than 50%; PROVIDED that if and so long as any
Lender fails to fund any Committed Loan when required by SECTION 2.18
or SECTION 3.3 or a participation in a Swing Line Loan or an L/C
Borrowing pursuant to SECTION 2.19 or SECTION 3.3, as the case may be,
such Lender's Adjusted Pro Rata Share shall be deemed for purposes of
this definition to be reduced by the percentage which the defaulted
amount constitutes of the combined Commitments (or, if the Commitments
have terminated, the Total Outstandings), and the Adjusted Pro Rata
Share of the applicable Issuing Lender or the Swing Line Lender, as the
case may be, shall be deemed for purposes of this definition to be
increased by such percentage.
REQUIREMENT OF LAW means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to
or binding upon such Person or any of its property or to which such
Person or any of its property is subject.
RESPONSIBLE OFFICER means the chief executive officer, the
president or any vice president of the Company, or any other officer
having substantially the same authority and responsibility; or, with
respect to financial matters, the chief financial officer, the vice
president - finance, the treasurer or any assistant treasurer of the
Company, or any other officer having substantially the same authority
and responsibility.
SEC means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
SECURITIZATION TRANSACTION means any sale, assignment or other
transfer by the Company or any Subsidiary of accounts receivable, lease
receivables or other payment obligations owing to the Company or any
Subsidiary or any interest in any of the foregoing, together in each
case with any collections and other proceeds thereof, any collection or
deposit accounts related thereto, and any collateral, guaranties or
other property or claims in favor of the Company or such Subsidiary
supporting or securing payment by the obligor thereon of, or otherwise
related to, any such receivables.
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SUBSIDIARY of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests is owned or controlled directly or indirectly
by such Person, or one or more of the Subsidiaries of such Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
SURETY INSTRUMENTS means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
SWAP CONTRACT means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity
index swap or option, bond, note or bill option, interest rate option,
forward foreign exchange transaction, cap, collar or floor transaction,
currency swap, cross-currency rate swap, swaption, currency option or
any other, similar transaction (including any option to enter into any
of the foregoing) or any combination of the foregoing, and, unless the
context otherwise clearly requires, any master agreement relating to or
governing any or all of the foregoing.
SWING LINE COMMITMENT means the commitment of the Swing Line
Lender to make Swing Line Loans hereunder.
SWING LINE LENDER means BofA in its capacity as swing line
lender hereunder, together with any replacement swing line lender
arising under SECTION 10.9.
SWING LINE LOAN - see SECTION 2.16.
TAXES means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the
case of each Lender and the Administrative Agent, taxes imposed on or
measured by its net income.
TERMINATION DATE means the earlier to occur of:
(a) July 10, 2003; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
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TOTAL DEBT means, at any time, the sum (determined on a
consolidated basis and without duplication) of all Indebtedness of the
Company and its Subsidiaries, excluding contingent obligations with
respect to Surety Instruments (other than any letter of credit issued
for the account of the Company or any Subsidiary to support
Indebtedness of a Person other than the Company or any Subsidiary).
TOTAL DEBT TO EBITDA RATIO means in respect of any Computation
Period the ratio of (a) Total Debt, as at the end of such Computation
Period, to (b) Consolidated EBITDA for such Computation Period.
TOTAL OUTSTANDINGS means the sum of the aggregate principal
amount of all outstanding Loans (whether Committed Loans, Bid Loans or
Swing Line Loans) plus the Effective Amount of all L/C Obligations.
TYPE has the meaning specified in the definition of
"Committed Loan."
UNFUNDED PENSION LIABILITY means the excess of a Pension
Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of such Plan's assets, determined in accordance with the
assumptions used for funding such Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
UNITED STATES and U.S. each means the United States of
America.
UNMATURED EVENT OF DEFAULT means any event or circumstance
which, with the giving of notice, the lapse of time or both, will (if
not cured or otherwise remedied during such time) constitute an Event
of Default.
UTILIZATION FEE RATE means
(a) when
(i) the sum of (A) the Total
Outstandings plus (B) the "Total
Outstandings" under and as defined in the
Other Credit Agreement,
exceeds
(ii) 50% of the sum of (A) the
aggregate Commitments, plus (B) the
aggregate "Commitments" under and as defined
in the Other Credit Agreement,
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then, 0.05%, and
(b) at all other times, zero.
WHOLLY-OWNED SUBSIDIARY means any Subsidiary in which (other
than directors' qualifying shares required by law) 100% of the capital
stock, membership interests or other equity interests of each class
having ordinary voting power, and 100% of the capital stock, membership
interests or other equity interests of every other class, in each case,
at the time as of which any determination is being made, is owned,
beneficially and of record, by the Company, or by one or more of the
other Wholly-Owned Subsidiaries, or both.
1.2 OTHER INTERPRETIVE PROVISIONS.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
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(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided
herein, any reference to any action of the Administrative Agent, the Lenders or
the Required Lenders by way of consent, approval or waiver shall be deemed
modified by the phrase "in its/their reasonable discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the
Administrative Agent merely because of the Administrative Agent's or Lenders'
involvement in their preparation.
1.3 ACCOUNTING PRINCIPLES.
(a) Unless the context otherwise requires, all accounting
terms not expressly defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in accordance with
GAAP, consistently applied, but without giving effect to any change in GAAP
which would require the Company to "mark-to-market" its obligations under Swap
Contracts (unless the Company and the Required Lenders agree to give effect to
such change); PROVIDED that if the Company notifies the Administrative Agent
that the Company wishes to amend any covenant in ARTICLE VIII to eliminate the
effect of any change in GAAP on the operation of such covenant (or if the
Administrative Agent notifies the Company that the Required Lenders wish to
amend ARTICLE VIII for such purpose), then the Company's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Company
and the Required Lenders.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1 AMOUNTS AND TERMS OF COMMITMENTS. Each Lender severally agrees, on
the terms and conditions set forth herein, to make Committed Loans to the
Company from time to time on any Business Day during the period from the
Effective Date to the
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Termination Date, in an aggregate amount not to exceed at any time outstanding
the amount set forth on SCHEDULE 2.1 (such amount, as reduced pursuant to
SECTION 2.7, or changed by one or more assignments under SECTION 11.8, such
Lender's "COMMITMENT"); PROVIDED, HOWEVER, that, after giving effect to any
Committed Borrowing, the Total Outstandings shall not exceed the combined
Commitments; AND PROVIDED, FURTHER, that the aggregate principal amount of the
Committed Loans of any Lender PLUS the participation of such Lender in the
principal amount of all outstanding Swing Line Loans and in the Effective Amount
of all L/C Obligations shall not at any time exceed such Lender's Commitment.
Within the limits of each Lender's Commitment, and subject to the other terms
and conditions hereof, the Company may borrow under this SECTION 2.1, prepay
under SECTION 2.8 and reborrow under this SECTION 2.1.
2.2 LOAN ACCOUNTS. (a) The Loans made by each Lender and the Letters of
Credit Issued by each Issuing Lender shall be evidenced by one or more accounts
or records maintained by such Lender or Issuing Lender, as the case may be, in
the ordinary course of business. The accounts or records maintained by the
Administrative Agent, each Issuing Lender and each Lender shall be rebuttable
presumptive evidence of the amount of the Loans made by the Lenders to the
Company and the Letters of Credit Issued for the account of the Company, and the
interest and payments thereon. Any failure so to record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the Company
hereunder to pay any amount owing with respect to the Loans or any Letter of
Credit.
(b) Upon the request of any Lender made through the
Administrative Agent, the Loans made by such Lender may be evidenced by one or
more Notes, instead of or in addition to loan accounts. Each such Lender shall
endorse on the schedules annexed to its Note(s) the date, amount and maturity of
each Loan evidenced thereby and the amount of each payment of principal made by
the Company with respect thereto. Each such Lender is irrevocably authorized by
the Company to endorse its Note(s) and each Lender's record shall be rebuttable
presumptive evidence of the amount of the Loans evidenced thereby, and the
interest and payments thereon; PROVIDED, HOWEVER, that the failure of a Lender
to make, or an error in making, a notation thereon with respect to any Loan
shall not limit or otherwise affect the obligations of the Company hereunder or
under any such Note to such Lender.
2.3 PROCEDURE FOR COMMITTED BORROWING. (a) Each Committed Borrowing
shall be made upon the Company's irrevocable written notice delivered to the
Administrative Agent in the form of a Notice of Committed Borrowing, which
notice must be received by the Administrative Agent prior to (i) 10:30 a.m.
(Chicago time) three Business Days prior to the requested Borrowing Date, in the
case of Offshore Rate Committed Loans, and (ii) 10:30 a.m.
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(Chicago time) on the requested Borrowing Date, in the case of Base Rate
Committed Loans, specifying:
(A) the amount of the Committed Borrowing,
which shall be in an aggregate amount of $10,000,000 or a
higher multiple of $1,000,000;
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Loans comprising such
Committed Borrowing; and
(D) in the case of Offshore Rate Committed
Loans, the duration of the initial Interest Period applicable
to such Loans.
(b) The Administrative Agent will promptly notify each Lender
of its receipt of any Notice of Committed Borrowing and of the amount of such
Lender's Pro Rata Share of such Borrowing.
(c) Each Lender will make the amount of its Pro Rata Share of
each Committed Borrowing available to the Administrative Agent for the account
of the Company at the Administrative Agent's Payment Office by 12:00 noon
(Chicago time) on the Borrowing Date requested by the Company in funds
immediately available to the Administrative Agent. The proceeds of all such
Loans will then promptly be made available to the Company by the Administrative
Agent by wire transfer in accordance with written instructions provided to the
Administrative Agent by the Company of like funds as received by the
Administrative Agent.
(d) After giving effect to any Committed Borrowing, unless the
Administrative Agent otherwise consents, (i) the number of Interest Periods in
effect hereunder shall not exceed 10 and (ii) there may not be more than one
seven-day Interest Period in effect for all Committed Borrowings hereunder.
2.4 CONVERSION AND CONTINUATION ELECTIONS FOR COMMITTED BORROWINGS. (a)
The Company may, upon irrevocable written notice to the Administrative Agent in
accordance with SUBSECTION 2.4(b):
(i) elect, as of any Business Day, in the case of
Base Rate Committed Loans, or as of the last day of the applicable
Interest Period, in the case of Offshore Rate Committed Loans, to
convert such Loans (or any part thereof in an aggregate amount of
$10,000,000 or a higher integral multiple of $1,000,000) into Committed
Loans of the other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Offshore Rate Committed
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Loans having Interest Periods expiring on such day (or any part thereof
in an aggregate amount of $10,000,000 or a higher integral multiple of
$1,000,000) for another Interest Period;
PROVIDED that if at any time the aggregate amount of Offshore Rate Committed
Loans in respect of any Borrowing is reduced, by payment, prepayment, or
conversion of any part thereof, to be less than $10,000,000, such Offshore Rate
Committed Loans shall automatically convert into Base Rate Committed Loans.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Administrative Agent not later
than 10:30 a.m. (Chicago time) (i) three Business Days in advance of the
Conversion/Continuation Date, if the Committed Loans are to be converted into or
continued as Offshore Rate Committed Loans; and (ii) on the
Conversion/Continuation Date, if the Committed Loans are to be converted into
Base Rate Committed Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Committed Loans
to be converted or continued;
(C) the Type of Committed Loans resulting
from the proposed conversion or continuation; and
(D) in the case of conversion into or
continuation of Offshore Rate Committed Loans, the duration of
the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Committed Loans, the Company has failed to select timely a new
Interest Period to be applicable to such Offshore Rate Committed Loans (or any
Event of Default or Unmatured Event of Default exists and the Required Lenders
have not given the consent referred to in SUBSECTION (e) below), such Offshore
Rate Committed Loans shall automatically convert into Base Rate Committed Loans
effective as of the expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each Lender
of its receipt of a Notice of Conversion/Continuation, or, if no timely notice
is provided by the Company, the Administrative Agent will promptly notify each
Lender of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Committed Loans with respect to which the notice was
given held by each Lender.
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(e) Unless the Required Lenders otherwise consent, the Company
may not elect to have a Loan converted into or continued as an Offshore Rate
Committed Loan during the existence of an Event of Default or Unmatured Event of
Default.
(f) After giving effect to any conversion or continuation of
Loans, unless the Administrative Agent shall otherwise consent, the number of
Interest Periods in effect hereunder shall not exceed 10 and (ii) there may not
be more than one seven-day Interest Period in effect for all Committed
Borrowings.
2.5 BID BORROWINGS. In addition to Committed Borrowings pursuant to
SECTION 2.3, each Lender severally agrees that the Company may, as set forth in
SECTION 2.6, from time to time request the Lenders prior to the Termination Date
to submit offers to make Bid Loans to the Company; PROVIDED that the Lenders
may, but shall have no obligation to, submit such offers and the Company may,
but shall have no obligation to, accept any such offers; and PROVIDED, FURTHER,
that after giving effect to any Bid Borrowing, (a) the Total Outstandings shall
not exceed the combined Commitments and (b) the number of Interest Periods in
effect hereunder shall not exceed 10.
2.6 PROCEDURE FOR BID BORROWINGS.
(a) When the Company wishes to request the Lenders to submit offers to
make Bid Loans hereunder, it shall transmit to the Administrative Agent by
telephone call followed promptly by facsimile transmission a notice in
substantially the form of EXHIBIT C (a "COMPETITIVE BID REQUEST") so as to be
received no later than 10:30 a.m. Chicago time (x) four Business Days prior to
the date of a proposed Bid Borrowing in the case of a LIBOR Auction or (y) one
Business Day prior to the date of a proposed Bid Borrowing in the case of an
Absolute Rate Auction, specifying:
(i) the date of such Bid Borrowing, which shall
be a Business Day;
(ii) the aggregate amount of such Bid Borrowing,
which shall be $10,000,000 or a higher integral multiple of $1,000,000;
(iii) whether the Competitive Bids requested are to
be for LIBOR Bid Loans or Absolute Rate Bid Loans or both; and
(iv) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of "Interest
Period" herein.
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Subject to SUBSECTION 2.6(c), the Company may not request Competitive Bids for
more than three Interest Periods in a single Competitive Bid Request and may not
request Competitive Bids more than once in any period of five consecutive
Business Days.
(b) Upon receipt of a Competitive Bid Request, the
Administrative Agent will promptly send to the Lenders by facsimile transmission
an Invitation for Competitive Bids, which shall constitute an invitation by the
Company to each Lender to submit Competitive Bids offering to make the Bid Loans
to which such Competitive Bid Request relates in accordance with this SECTION
2.6.
(c) (i) Each Lender may at its discretion submit a Competitive
Bid containing an offer or offers to make Bid Loans in response to any
Invitation for Competitive Bids. Each Competitive Bid must comply with
the requirements of this SUBSECTION 2.6(c) and must be submitted to the
Administrative Agent by facsimile transmission at the Administrative
Agent's office for notices not later than (1) 8:30 a.m. (Chicago time)
three Business Days prior to the proposed date of Borrowing, in the
case of a LIBOR Auction, or (2) 8:30 a.m. (Chicago time) on the
proposed date of Borrowing, in the case of an Absolute Rate Auction;
PROVIDED that Competitive Bids submitted by the Administrative Agent
(or any Affiliate of the Administrative Agent) in the capacity of a
Lender may be submitted, and may only be submitted, if the
Administrative Agent or such Affiliate notifies the Company of the
terms of the offer or offers contained therein not later than (A) 8:15
a.m. (Chicago time) three Business Days prior to the proposed date of
Borrowing, in the case of a LIBOR Auction, or (B) 8:15 a.m. (Chicago
time) on the proposed date of Borrowing, in the case of an Absolute
Rate Auction.
(ii) Each Competitive Bid shall be in substantially
the form of EXHIBIT E, specifying therein:
(A) the proposed date of Borrowing;
(B) the principal amount of each Bid Loan
for which such Competitive Bid is being made, which principal
amount (x) may be equal to, greater than or less than the
Commitment of the quoting Lender, (y) must be $10,000,000 or a
higher integral multiple of $1,000,000 and (z) may not exceed
the principal amount of Bid Loans for which Competitive Bids
were requested;
(C) if the Company elects a LIBOR Auction,
the margin above or below the Offshore Rate (the "LIBOR BID
MARGIN") offered for each such Bid Loan, expressed as a
percentage (rounded to the nearest 1/32nd of 1%)
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to be added to or subtracted from the applicable
Offshore Rate, and the Interest Period applicable
thereto;
(D) if the Company elects an Absolute Rate
Auction, the rate of interest per annum (which shall be an
integral multiple of 1/10,000th of 1%) (the "ABSOLUTE RATE")
offered for each such Bid Loan; and
(E) the identity of the quoting Lender.
A Competitive Bid may contain up to three separate offers by the
quoting Lender with respect to each Interest Period specified in the
related Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
(A) is not substantially in conformity with
EXHIBIT E or does not specify all of the information required
by SUBSECTION (c)(ii) of this Section;
(B) contains qualifying, conditional or
similar language;
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for
Competitive Bids; or
(D) arrives after the time set forth in
SUBSECTION (c)(i) of this Section.
(d) Promptly on receipt and not later than 9:00 a.m. (Chicago
time) three Business Days prior to the proposed date of Borrowing in the case of
a LIBOR Auction, or 9:00 a.m. (Chicago time) on the proposed date of Borrowing,
in the case of an Absolute Rate Auction, the Administrative Agent will notify
the Company of the terms (i) of any Competitive Bid submitted by a Lender that
is in accordance with SUBSECTION 2.6(c) and (ii) of any Competitive Bid that
amends, modifies or is otherwise inconsistent with a previous Competitive Bid
submitted by such Lender with respect to the same Competitive Bid Request. Any
such subsequent Competitive Bid shall be disregarded by the Administrative Agent
unless such subsequent Competitive Bid is submitted solely to correct a manifest
error in such former Competitive Bid and only if received within the times set
forth in SUBSECTION 2.6(c). The Administrative Agent's notice to the Company
shall specify (1) the aggregate principal amount of Bid Loans for which offers
have been received for each Interest Period specified in the related Competitive
Bid request; and (2) the respective principal amounts and LIBOR Bid Margins or
Absolute Rates, as the case may be, so offered. Subject only to
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the provisions of SECTIONS 4.2 and 4.5 and ARTICLE V hereof and the provisions
of this SUBSECTION (d), any Competitive Bid shall be irrevocable except with the
written consent of the Administrative Agent given on the written instructions of
the Company.
(e) Not later than 9:30 a.m. (Chicago time) three Business
Days prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or
9:30 a.m. (Chicago time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction, the Company shall notify the Administrative Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
SUBSECTION 2.6(d). The Company shall be under no obligation to accept any offer
and may choose to reject all offers. In the case of acceptance, such notice
shall specify the aggregate principal amount of offers for each Interest Period
that is accepted. The Company may accept any Competitive Bid in whole or in
part; PROVIDED that:
(i) the aggregate principal amount of each Bid
Borrowing may not exceed the applicable amount set forth in the related
Competitive Bid Request;
(ii) the principal amount of each Bid Borrowing must
be $10,000,000 or a higher integral multiple of $1,000,000;
(iii) acceptance of offers may only be made on the
basis of ascending LIBOR Bid Margins or Absolute Rates, as the case may
be, within each Interest Period; and
(iv) the Company may not accept any offer that is
described in SUBSECTION 2.6(c)(iii) or that otherwise fails to comply
with the requirements of this Agreement.
(f) If offers are made by two or more Lenders with the same
LIBOR Bid Margins or Absolute Rates, as the case may be, for a greater aggregate
principal amount than the amount in respect of which such offers are accepted
for the related Interest Period, the principal amount of Bid Loans in respect of
which such offers are accepted shall be allocated by the Administrative Agent
among such Lenders as nearly as possible (in such multiples, not less than
$1,000,000, as the Administrative Agent may deem appropriate) in proportion to
the aggregate principal amounts of such offers. Determination by the
Administrative Agent of the amount of Bid Loans shall be conclusive in the
absence of manifest error.
(g) (i) The Administrative Agent will promptly notify each
Lender having submitted a Competitive Bid if its offer has been
accepted and, if its offer has been accepted, of
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the amount of the Bid Loan to be made by it on the date of
the applicable Bid Borrowing.
(ii) Each Lender which has received notice pursuant
to SUBSECTION 2.6(g)(i) that its Competitive Bid has been accepted
shall make the amounts of such Bid Loans available to the
Administrative Agent for the account of the Company at the
Administrative Agent's Payment Office by 1:00 p.m. Chicago time on such
date of Bid Borrowing, in immediately available funds.
(iii) Promptly following each Bid Borrowing, the
Administrative Agent shall notify each Lender of the ranges of bids
submitted and the highest and lowest Bids accepted for each Interest
Period requested by the Company and the aggregate amount borrowed
pursuant to such Bid Borrowing.
(iv) From time to time, the Company and the Lenders
shall furnish such information to the Administrative Agent as the
Administrative Agent may request relating to the making of Bid Loans,
including the amounts, interest rates, dates of borrowings and
maturities thereof, for purposes of the allocation of amounts received
from the Company for payment of all amounts owing hereunder.
(h) If, on the proposed date of Borrowing, the Commitments
have not been terminated and all applicable conditions to funding referenced in
SECTIONS 4.2 and 4.5 and ARTICLE V hereof are satisfied, the Lender or Lenders
whose offers the Company has accepted will fund each Bid Loan so accepted.
Nothing in this SECTION 2.6 shall be construed as a right of first offer in
favor of the Lenders or to otherwise limit the ability of the Company to request
and accept credit facilities from any Person (including any of the Lenders),
provided that no Event of Default or Unmatured Event of Default would result
from the Company executing, delivering or performing under such credit
facilities.
2.7 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The Company may,
upon not less than three Business Days' prior notice to the Administrative
Agent, terminate the Commitments, or permanently reduce the Commitments by a
minimum amount of $10,000,000 or a higher integral multiple of $1,000,000;
UNLESS, after giving effect thereto and to any prepayments of Loans made on the
effective date thereof, the Total Outstandings would exceed the amount of the
combined Commitments then in effect. Once reduced in accordance with this
Section, the Commitments may not be increased. Any reduction of the Commitments
shall be applied to reduce the Commitment of each Lender according to its Pro
Rata Share. If the Company terminates the Commitments or reduces the Commitments
to zero, the Company shall pay all
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accrued and unpaid interest, fees and other amounts payable hereunder on the
date of such termination.
2.8 OPTIONAL PREPAYMENTS. (a) Subject to the proviso to SUBSECTION
2.4(a) and to SECTION 4.4, the Company may, from time to time, upon irrevocable
notice to the Administrative Agent, which notice must be received by the
Administrative Agent prior to 10:30 a.m. Chicago time (i) three Business Days
prior to the date of prepayment, in the case of Offshore Rate Committed Loans,
and (ii) on the date of prepayment, in the case of Base Rate Committed Loans,
ratably prepay Committed Loans in whole or in part, in an aggregate amount of
$10,000,000 or a higher integral multiple of $1,000,000 (or, if any Base Rate
Committed Loans have been made pursuant to SUBSECTION 3.3(c), in an aggregate
amount equal to the aggregate amount of such Base Rate Committed Loans). Such
notice of prepayment shall specify the date and amount of such prepayment and
the Committed Loans to be prepaid. The Administrative Agent will promptly notify
each Lender of its receipt of any such notice and of such Lender's Pro Rata
Share of such prepayment. If such notice is given by the Company, the Company
shall make such prepayment and the payment amount specified in such notice shall
be due and payable on the date specified therein, together with, in the case of
Offshore Rate Committed Loans, accrued interest to such date on the amount
prepaid and any amounts required pursuant to SECTION 4.4.
(b) No Bid Loan may be voluntarily prepaid without the written consent
of the applicable Lender.
2.9 REPAYMENT. The Company shall repay each Bid Loan on the last day of
the Interest Period therefor. The Company shall repay all Loans (including any
outstanding Bid Loans and Swing Line Loans) on the Termination Date.
2.10 INTEREST. (a) Each Committed Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to (i) the Offshore Rate plus the Applicable Margin or (ii)
the Base Rate, as the case may be (and subject to the Company's right to convert
to the other Type of Committed Loan under SECTION 2.4). Each Swing Line Loan
shall bear interest on the outstanding principal amount thereof from the
applicable Borrowing Date at a rate per annum equal to the Base Rate or such
other rate as may be agreed to from time to time by the Company and the Swing
Line Lender; provided that after any purchase by the Lenders of a participation
in a Swing Line Loan, the rate of interest on such Swing Line Loan shall not be
less than the Base Rate. Each Bid Loan shall bear interest on the outstanding
principal amount thereof from the relevant Borrowing Date at the applicable
Absolute Rate or at LIBOR for the applicable Interest Period plus or minus the
LIBOR Bid Margin.
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(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest also shall be paid on the date of any conversion
of Offshore Rate Committed Loans under SECTION 2.4 and prepayment of Offshore
Rate Committed Loans under SECTION 2.8, in each case for the portion of the
Loans so converted or prepaid.
(c) Notwithstanding the foregoing provisions of this Section,
upon notice to the Company from the Agent (acting at the request or with the
consent of the Required Lenders) during the existence of any Event of Default,
and for so long as such Event of Default continues, the Company shall pay
interest (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all outstanding Loans and, to the
extent permitted by applicable law, on any other amount payable hereunder or
under any other Loan Document, at a rate per annum which is determined by adding
2% per annum to the rate otherwise applicable thereto pursuant to the terms
hereof or such other Loan Document (or, if no such rate is specified, the Base
Rate). All such interest shall be payable on demand.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Lender hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Lender would be contrary
to the provisions of any law applicable to such Lender limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Lender, and in such event the Company shall pay such Lender interest at the
highest rate permitted by applicable law.
2.11 FEES. In addition to certain fees described in SECTION 3.8:
(a) ARRANGEMENT, AGENCY FEES. The Company agrees to pay to the
Administrative Agent and BRS such fees at such times and in such amounts as are
mutually agreed to from time to time by the Company, the Administrative Agent
and BRS.
(b) FACILITY FEES. The Company shall pay to the Administrative
Agent for the account of each Lender a facility fee computed at the Facility Fee
Rate per annum on the amount of such Lender's Commitment as in effect from time
to time (whether used or unused) or, if the Commitments have terminated, on the
sum (without duplication) of (i) the principal amount of such Lender's Committed
Loans plus (ii) the participation of such Lender in (or in the case of an
Issuing Lender or the Swing Line Lender, its unparticipated portion of) the
Effective Amount of all L/C Obligations and the principal amount of all Swing
Line Loans. Such facility fee shall accrue from the Effective Date to
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the Termination Date, and thereafter until all Committed Loans are paid in full,
and shall be due and payable quarterly in arrears on the last Business Day of
each calendar quarter, with the final payment to be made on the Termination Date
(or, if later, on the date all Committed Loans and L/C Obligations are paid in
full).
(c) UTILIZATION FEES. The Company shall pay to the
Administrative Agent for the account of each Lender a utilization fee for any
period computed at a rate per annum equal to the Utilization Fee Rate on the sum
(without duplication) of (i) the principal amount of such Lender's Committed
Loans and L/C Obligations plus (ii) the participation of such Lender in (or in
the case of an Issuing Lender or the Swing Line Lender, its unparticipated
portion of) the Effective Amount of all L/C Obligations and the principal amount
of all Swing Line Loans. Such utilization fee shall accrue from the Effective
Date to the Termination Date, and thereafter until all Committed Loans are paid
in full, and shall be due and payable quarterly in arrears on the last Business
Day of each calendar quarter, with the final payment to be made on the
Termination Date (or, if later, on the date all Committed Loans and L/C
Obligations are paid in full).
2.12 COMPUTATION OF FEES AND INTEREST. (a) All computations of interest
for Base Rate Committed Loans (and Swing Line Loans bearing interest at the Base
Rate) when the Base Rate is determined by BofA's "reference rate", and all
computations of facility fees and utilization fees, shall be made on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed. All
other computations of interest and fees shall be made on the basis of a 360-day
year and actual days elapsed. Interest and fees shall accrue during each period
during which such interest or such fees are computed from the first day thereof
to the last day thereof.
(b) Each determination of an interest rate by the
Administrative Agent shall be conclusive and binding on the Company and the
Lenders in the absence of manifest error. The Administrative Agent will, at the
request of the Company or any Lender, deliver to the Company or such Lender, as
the case may be, a statement showing the quotations used by the Administrative
Agent in determining any interest rate and the resulting interest rate.
2.13 PAYMENTS BY THE COMPANY. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Administrative Agent for the account of the Lenders at the Administrative
Agent's Payment Office, and shall be made in Dollars and in immediately
available funds, no later than 1:00 p.m. (Chicago time) on the date specified
herein. The Administrative Agent will promptly
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distribute to each Lender its Pro Rata Share (or other applicable share as
expressly provided herein) of such payment in like funds as received. Any
payment received by the Administrative Agent later than 1:00 p.m. (Chicago time)
shall be deemed to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue.
(b) Whenever any payment is due on a day other than a Business
Day, such payment shall be made on the following Business Day (unless, in the
case of a payment with respect to an Offshore Rate Committed Loan, the following
Business Day is in another calendar month, in which case such payment shall be
made on the preceding Business Day), and such extension of time shall in such
case be included in the computation of interest or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from the
Company prior to the date on which any payment is due to the Lenders that the
Company will not make such payment in full as and when required, the
Administrative Agent may assume that the Company has made such payment in full
to the Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent the Company has not made such
payment in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Lender until the date repaid.
2.14 PAYMENTS BY THE LENDERS TO THE ADMINISTRATIVE AGENT. (a) Unless
the Administrative Agent receives notice from a Lender at least one Business Day
prior to the date of a Borrowing of Offshore Rate Committed Loans or by 11:30
a.m. (Chicago time) on the day of any Borrowing of Base Rate Committed Loans,
that such Lender will not make available as and when required hereunder to the
Administrative Agent for the account of the Company the amount of such Lender's
Pro Rata Share of such Committed Borrowing, the Administrative Agent may assume
that such Lender has made such amount available to the Administrative Agent in
immediately available funds on the Borrowing Date and the Administrative Agent
may (but shall not be so required), in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to the
Administrative Agent in immediately available funds and the Administrative Agent
in such circumstances has made available to the Company such amount, such Lender
shall on the Business Day following such Borrowing Date make such amount
available to the Administrative Agent, together with interest at the Federal
Funds
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Rate. A notice of the Administrative Agent submitted to any Lender with respect
to amounts owing under this SUBSECTION (a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Administrative
Agent shall constitute such Lender's Committed Loan on the date of Borrowing for
all purposes of this Agreement. If such amount is not made available to the
Administrative Agent on the Business Day following the Borrowing Date, the
Administrative Agent will notify the Company of such failure to fund and, upon
demand by the Administrative Agent, the Company shall pay such amount to the
Administrative Agent for the Administrative Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the
Committed Loans comprising such Committed Borrowing.
(b) The failure of any Lender to make any Loan on any
Borrowing Date shall not relieve any other Lender of any obligation hereunder to
make a Loan on such Borrowing Date, but no Lender shall be responsible for the
failure of any other Lender to make the Loan to be made by such other Lender on
any Borrowing Date.
2.15 SHARING OF PAYMENTS, ETC. (a) Except as otherwise expressly
provided herein, whenever any payment received by the Administrative Agent to be
distributed to the Lenders is insufficient to pay in full the amounts then due
and payable to the Lenders, and the Administrative Agent has not received a
Payment Sharing Notice, such payment shall be distributed to the Lenders (and
for purposes of this Agreement shall be deemed to have been applied by the
Lenders, notwithstanding the fact that any Lender may have made a different
application in its books and records) in the following order: FIRST, to the
payment of reimbursement obligations of the Company in respect of any Letter of
Credit; SECOND, to the payment of the principal amount of the Loans which is
then due and payable, ratably among the Lenders in accordance with the aggregate
principal amount owed to each Lender; THIRD, to the payment of interest then due
and payable on the Loans and on the reimbursement obligations in respect of
Letters of Credit, ratably among the Lenders in accordance with the aggregate
amount of interest owed to each Lender; FOURTH, to the payment of the facility
fees and utilization fees payable under SUBSECTIONS 2.11(b) and (c) and letter
of credit fees payable under SECTION 3.8, ratably among the Lenders in
accordance with the amount of such fees owed to each Lender; and FIFTH, to the
payment of any other amount payable under this Agreement, ratably among the
Lenders in accordance with the aggregate amount owed to each Lender.
(b) After the Administrative Agent has received a Payment
Sharing Notice, and for so long thereafter as any Event of Default exists, all
payments received by the Administrative
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Agent to be distributed to the Lenders shall be distributed to the Lenders (and
for purposes of this Agreement shall be deemed to have been applied by the
Lenders, notwithstanding the fact that any Lender may have made a different
application in its books and records) in the following order: FIRST, to the
payment of amounts payable under SECTIONS 11.4 and 11.5, ratably among the
Lenders in accordance with the aggregate amount owed to each Lender; SECOND, to
the payment of facility fees and utilization fees payable under SUBSECTIONS
2.11(b) and (c) and letter of credit fees payable under SECTION 3.8, ratably
among the Lenders in accordance with the amount of such fees owed to each
Lender; THIRD, to the payment of the interest accrued on and the principal
amount of all of the Loans and reimbursement obligations (including contingent
reimbursement obligations) regardless of whether any such amount is then due and
payable, ratably among the Lenders in accordance with the aggregate accrued
interest plus the aggregate principal amount owed to each Lender; and FOURTH, to
the payment of any other amount payable under this Agreement, ratably among the
Lenders in accordance with the aggregate amount owed to each Lender.
(c) If, other than as expressly provided elsewhere herein, any
Lender shall obtain any payment or other recovery (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on
account of principal of or interest on any Loan, or any other amount payable
hereunder, in excess of the share of payments and other recoveries such Lender
would have received if such payment or other recovery had been distributed
pursuant to the provisions of SUBSECTION 2.15(a) or (b) (whichever is applicable
at the time of such payment or other recovery), such Lender shall immediately
(i) notify the Administrative Agent of such fact and (ii) purchase from the
other Lenders such participations in the Loans made by (or other Obligations
owed to) them as shall be necessary to cause such purchasing Lender to share the
excess payment or other recovery pro rata with each of them in accordance with
the order of payments set forth in SUBSECTION 2.15(a) or (b), as the case may
be; PROVIDED that if all or any portion of such excess payment or other recovery
is thereafter recovered from the purchasing Lender, such purchase shall to that
extent be rescinded and each other Lender shall repay to the purchasing Lender
the purchase price paid therefor, together with an amount equal to such paying
Lender's ratable share (according to the proportion of (i) the amount of such
paying Lender's required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Company
agrees that any Lender so purchasing a participation from another Lender may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to SECTION 11.10) with respect to
such participation as fully as if such Lender were the direct creditor of the
Company in the amount
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of such participation. The Administrative Agent will keep records (which shall
be conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Lenders following
any such purchases or repayments.
(d) Any amount that would be applied to a contingent
obligation of the Company in respect of a Letter of Credit under CLAUSE THIRD of
SUBSECTION 2.15(b) shall be held by the Administrative Agent as Cash Collateral
hereunder. If such Letter of Credit is thereafter drawn upon, the Administrative
Agent shall pay the applicable Issuing Lender an amount equal to the lesser of
the amount of such drawing and the amount of the funds so held as Cash
Collateral for such Letter of Credit. If and to the extent that such Letter of
Credit expires or terminates (or the maximum amount available for drawing
thereunder is reduced), the funds so held as Cash Collateral for such Letter of
Credit (or the portion thereof in excess of the maximum amount available for
drawing thereunder) shall be applied by the Administrative Agent as set forth in
SUBSECTION 2.15(a) or 2.15(b), as applicable.
2.16 SWING LINE COMMITMENT. Subject to the terms and conditions of this
Agreement, the Swing Line Lender agrees to make loans to the Company on a
revolving basis (each such loan, a "SWING LINE LOAN") from time to time on any
Business Day during the period from the Effective Date to the Termination Date
in an aggregate principal amount at any one time outstanding not to exceed
$50,000,000 MINUS the outstanding principal amount of all "Swing Line Loans"
then outstanding under (and as defined in) the Other Credit Agreement; PROVIDED
that after giving effect to any proposed Swing Line Loan, the Total Outstandings
shall not exceed the combined Commitments.
2.17 BORROWING PROCEDURES FOR SWING LINE LOANS. The Company shall
provide a Notice of Swing Line Loan or telephonic notice (followed by a
confirming Notice of Swing Line Loan) of a proposed Swing Line Loan to the
Administrative Agent and the Swing Line Lender not later than 12:00 noon
(Chicago time) on the proposed Borrowing Date. Each such notice shall be
effective upon receipt by the Administrative Agent and the Swing Line Lender and
shall specify the date and the principal amount of such Swing Line Loan. Unless
the Swing Line Lender has received written notice prior to 12:00 noon (Chicago
time) on the proposed Borrowing Date from the Administrative Agent or any Lender
that one or more of the conditions precedent set forth in ARTICLE V with respect
to such Swing Line Loan is not then satisfied, the Swing Line Lender shall pay
over the requested principal amount to the Company on the requested Borrowing
Date in immediately available funds. Each Swing Line Loan shall be made on a
Business Day and shall be in the amount of $1,000,000 or an integral multiple
thereof. The Swing Line Lender will promptly
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notify the Administrative Agent of the making and amount of each
Swing Line Loan.
2.18 PREPAYMENT OR REFUNDING OF SWING LINE LOANS. (a) The Company may,
at any time and from time to time, prepay any Swing Line Loan in whole or in
part, in an amount equal to $1,000,000 or an integral multiple thereof. The
Company shall deliver a notice of prepayment in accordance with SECTION 11.2 to
be received by the Administrative Agent and the Swing Line Lender not later than
11:00 a.m. (Chicago time) on the Business Day of such prepayment, specifying the
date and amount of such prepayment. If such notice is given by the Company, the
payment amount specified in such notice shall be due and payable on the date
specified therein.
(b) The Swing Line Lender may, at any time in its sole and absolute
discretion, on behalf of the Company (which hereby irrevocably directs the Swing
Line Lender to act on its behalf), request each Lender to make a Committed Loan
in an amount equal to such Lender's Pro Rata Share of the principal amount of
the Swing Line Loans outstanding on the date such notice is given. Unless any of
the events described in SUBSECTION 9.1(f) or (g) shall have occurred (in which
event the procedures of SECTION 2.19 shall apply), and regardless of whether the
conditions precedent set forth in this Agreement to the making of Committed
Loans are then satisfied or the aggregate amount of such Committed Loans is not
in the minimum or integral amount otherwise required hereunder, each Lender
shall make the proceeds of its Committed Loan available to the Administrative
Agent for the account of the Swing Line Lender at the Administrative Agent's
Payment Office prior to 12:00 noon (Chicago time) in immediately available funds
on the Business Day next succeeding the date such notice is given. The proceeds
of such Committed Loans shall be immediately applied to repay the outstanding
Swing Line Loans. All Committed Loans made pursuant to this SECTION 2.18 shall
be Base Rate Committed Loans (but, subject to the other provisions of this
Agreement, may be converted to Offshore Rate Loans).
2.19 PARTICIPATIONS IN SWING LINE LOANS. (a) If an event described in
SUBSECTION 9.1(f) or (g) exists (or for any reason the Lenders may not make
Committed Loans pursuant to SECTION 2.18), each Lender will, upon notice from
the Administrative Agent, purchase from the Swing Line Lender (and the Swing
Line Lender will sell to each Lender) an undivided participation interest in all
outstanding Swing Line Loans in an amount equal to its Pro Rata Share of the
outstanding principal amount of the Swing Line Loans (and each Lender will
immediately transfer to the Administrative Agent, for the account of the Swing
Line Lender, in immediately available funds, the amount of its participation).
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(b) Whenever, at any time after the Swing Line Lender has received
payment for any Lender's participation interest in the Swing Line Loans pursuant
to SUBSECTION 2.19(a), the Swing Line Lender receives any payment on account
thereof, the Swing Line Lender will distribute to the Administrative Agent for
the account of such Lender its participation interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participation interest was outstanding and
funded) in like funds as received; PROVIDED, HOWEVER, that in the event that
such payment received by the Swing Line Lender is required to be returned, such
Lender will return to the Administrative Agent for the account of the Swing Line
Lender any portion thereof previously distributed by the Swing Line Lender to it
in like funds as such payment is required to be returned by the Swing Line
Lender.
2.20 PARTICIPATION OBLIGATIONS UNCONDITIONAL. (a) Each Lender's
obligation to make Committed Loans pursuant to SECTION 2.18 and/or to purchase
participation interests in Swing Line Loans pursuant to SECTION 2.19 shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including (a) any set-off, counterclaim, recoupment, defense or
other right which such Lender may have against the Swing Line Lender, the
Company or any other Person for any reason whatsoever; (b) the occurrence or
continuance of an Event of Default or Unmatured Event of Default; (c) any
adverse change in the condition (financial or otherwise) of the Company or any
other Person; (d) any breach of this Agreement or any other Loan Document by the
Company or any other Person; (e) any inability of the Company to satisfy the
conditions precedent to borrowing set forth in this Agreement on the date upon
which any such Loan is to be made or any participation interest therein is to be
purchased; or (f) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing.
(b) Notwithstanding the provisions of SUBSECTION 2.20(a), no Lender
shall be required to make any Committed Loan to the Company to refund a Swing
Line Loan pursuant to SECTION 2.18 or to purchase a participation interest in a
Swing Line Loan pursuant to SECTION 2.19 if, prior to the making by the Swing
Line Lender of such Swing Line Loan, the Swing Line Lender received written
notice from any Lender specifying that such Lender believed in good faith that
one or more of the conditions precedent to the making of such Swing Line Loan
were not satisfied and, in fact, such conditions precedent were not satisfied at
the time of the making of such Swing Line Loan; PROVIDED that the obligation of
such Lender to make such Committed Loans and to purchase such participation
interests shall be reinstated upon the earlier to occur of (i) the date on which
such Lender notifies the Swing Line Lender that its prior notice has been
withdrawn and (ii) the date on which all
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conditions precedent to the making of such Swing Line Loan have been satisfied
(or waived by the Required Lenders or all Lenders, as applicable).
2.21 CONDITIONS TO SWING LINE LOANS. Notwithstanding any other
provision of this Agreement, the Swing Line Lender shall not be obligated to
make any Swing Line Loan if an Event of Default or Unmatured Event of Default
exists or would result therefrom.
ARTICLE III
THE LETTERS OF CREDIT
3.1 THE LETTER OF CREDIT SUBFACILITY. (a) On the terms and conditions
set forth herein (i) each Issuing Lender agrees, (A) from time to time on any
Business Day during the period from the Effective Date to the date which is
seven Business Days prior to Termination Date to Issue standby Letters of Credit
for the account of the Company, and to amend or renew standby Letters of Credit
previously issued by it, in accordance with SUBSECTIONS 3.2(c) and 3.2(d), and
(B) to honor properly drawn drafts under the Letters of Credit issued by it; and
(ii) the Lenders severally agree to participate in standby Letters of Credit
Issued for the account of the Company; provided that no Issuing Lender shall be
obligated to Issue, and (subject to SECTION 3.2(b)) no Lender shall be obligated
to participate in, any Letter of Credit if as of the date of Issuance of such
Letter of Credit (the "ISSUANCE DATE") (1) the Total Outstandings exceed the
combined Commitments, (2) the Effective Amount of all L/C Obligations would
exceed the L/C Commitment MINUS the "Effective Amount" of all "L/C Obligations"
under (and as defined in) the Other Credit Agreement or (3) the participation of
any Lender in the Effective Amount of all L/C Obligations plus the participation
of such Lender in the principal amount of all outstanding Swing Line Loans plus
the outstanding principal amount of the Committed Loans of such Lender would
exceed such Lender's Commitment. Within the foregoing limits, and subject to the
other terms and conditions hereof, the Company's ability to obtain Letters of
Credit shall be fully revolving, and, accordingly, the Company may, during the
foregoing period, obtain Letters of Credit to replace Letters of Credit which
have expired or which have been drawn upon and reimbursed.
(b) No Issuing Lender shall be under any obligation to Issue
any Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain such Issuing Lender from
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Issuing such Letter of Credit, or any Requirement of Law applicable to
such Issuing Lender or any request or directive (whether or not having
the force of law) from any Governmental Authority with jurisdiction
over such Issuing Lender shall prohibit, or request that such Issuing
Lender refrain from, the Issuance of letters of credit generally or
such Letter of Credit in particular or shall impose upon such Issuing
Lender with respect to such Letter of Credit any restriction, reserve
or capital requirement (for which such Issuing Lender is not otherwise
compensated hereunder) not in effect on the Effective Date, or shall
impose upon such Issuing Lender any unreimbursed loss, cost or expense
which was not applicable on the Effective Date and which such Issuing
Lender in good faith deems material to it (it being understood that the
applicable Issuing Lender shall promptly notify the Company and the
Administrative Agent of any of the foregoing events or circumstances);
(ii) such Issuing Lender has received written notice
from any Lender, the Administrative Agent or the Company, on or prior
to the Business Day immediately preceding the requested date of
Issuance of such Letter of Credit, that one or more of the applicable
conditions contained in ARTICLE V is not then satisfied;
(iii) the expiry date of such requested Letter of
Credit is after the earlier of the seventh Business Day prior to the
Termination Date or the eighteen month anniversary of its issuance
(subject to periodic extensions for periods not to exceed one year),
unless all of the Lenders have approved such expiry date in writing; or
(iv) such Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable to such
Issuing Lender, or the Issuance of a Letter of Credit shall violate any
applicable policies of such Issuing Lender;
(v) such Letter of Credit is denominated in a
currency other than Dollars.
3.2 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT. (a) Each
Letter of Credit shall be issued upon the irrevocable request of the Company
received by the applicable Issuing Lender at least one Business Day (or such
shorter time as the applicable Issuing Lender may agree in a particular instance
in its sole discretion) prior to the proposed date of issuance. Each such
request for issuance of a Letter of Credit shall either (x) be by facsimile,
confirmed immediately (by messenger or overnight courier) in an original
writing, in the form of an L/C Application, or (y) be made electronically
pursuant to procedures agreed upon between the Company and the applicable
Issuing Lender
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and, in each case, shall specify in form and detail satisfactory to such Issuing
Lender: (i) the face amount of the Letter of Credit; (ii) the expiry date of the
Letter of Credit; (iii) the name and address of the beneficiary thereof; (iv)
the documents to be presented by the beneficiary of the Letter of Credit in case
of any drawing thereunder; (v) the full text of any certificate to be presented
by the beneficiary in case of any drawing thereunder; and (vi) such other
matters as such Issuing Lender may require.
(b) Promptly upon receipt of any L/C Application or L/C
Amendment Application, the applicable Issuing Lender will notify the
Administrative Agent of its receipt thereof and of the proposed amount and term
of the requested Letter of Credit. Unless the applicable Issuing Lender has
received on or before the Business Day immediately preceding the date such
Issuing Lender is to issue a requested Letter of Credit, (A) notice from the
Administrative Agent directing such Issuing Lender not to issue such Letter of
Credit because such issuance is not then permitted under SUBSECTION 3.1(a) as a
result of the limitations set forth in CLAUSES (1) through (3) thereof or (B) a
notice described in SUBSECTION 3.1(b)(ii), then, subject to the terms and
conditions hereof, such Issuing Lender shall, on the requested date, issue a
Letter of Credit for the account of the Company in accordance with such Issuing
Lender's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding
and prior to seven Business Days prior to the Termination Date, the applicable
Issuing Lender will, upon the request of the Company received by such Issuing
Lender at least one Business Day (or such shorter time as the applicable Issuing
Lender may agree in a particular instance in its sole discretion) prior to the
proposed date of amendment, amend any Letter of Credit issued by it. Each such
request for amendment of a Letter of Credit shall either (x) be made by
facsimile, confirmed immediately (by messenger or overnight courier) in an
original writing, made in the form of an L/C Amendment Application or (y) be
made electronically pursuant to procedures agreed upon between the Company the
applicable Issuing Lender and, in each case, shall specify in form and detail
satisfactory to such Issuing Lender: (i) the Letter of Credit to be amended;
(ii) the proposed date of amendment of such Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as such Issuing Lender may require. No Issuing Lender shall have any
obligation to amend any Letter of Credit if: (A) such Issuing Lender would have
no obligation at such time to issue such Letter of Credit in its amended form
under the terms of this Agreement; or (B) the beneficiary of such Letter of
Credit does not accept the proposed amendment to such Letter of Credit.
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(d) The Issuing Lenders and the Lenders agree that, while a
Letter of Credit is outstanding and prior to seven Business Days prior to the
Termination Date, at the option of the Company and upon the request of the
Company received by the applicable Issuing Lender at least one Business Day (or
such shorter time as the applicable Issuing Lender may agree in a particular
instance in its sole discretion) prior to the proposed date of notification of
renewal, the applicable Issuing Lender shall be entitled to authorize the
automatic renewal of any Letter of Credit issued by it. Each such request for
renewal of a Letter of Credit shall either (x) be made by facsimile, confirmed
immediately in an original writing, in the form of an L/C Amendment Application,
or (y) be made electronically pursuant to procedures agreed upon between the
Company the applicable Issuing Lender and, in each case, shall specify in form
and detail satisfactory to such Issuing Lender: (i) the Letter of Credit to be
renewed; (ii) the proposed date of notification of renewal of such Letter of
Credit (which shall be a Business Day); (iii) the revised expiry date of such
Letter of Credit (which, unless all Lenders otherwise consent in writing, shall
be at least seven Business Days prior to the Termination Date); and (iv) such
other matters as such Issuing Lender may require. No Issuing Lender shall be
under any obligation to renew any Letter of Credit if: (A) such Issuing Lender
would have no obligation at such time to issue or amend such Letter of Credit in
its renewed form under the terms of this Agreement; or (B) the beneficiary of
such Letter of Credit does not accept the proposed renewal of such Letter of
Credit. If any outstanding Letter of Credit shall provide that it shall be
automatically renewed unless the beneficiary thereof receives notice from the
applicable Issuing Lender that such Letter of Credit shall not be renewed, and
if at the time of renewal such Issuing Lender would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with this SUBSECTION
3.2(d) upon the request of the Company but such Issuing Lender shall not have
received any L/C Amendment Application from the Company with respect to such
renewal or other written direction by the Company with respect thereto, such
Issuing Lender shall nonetheless be permitted to allow such Letter of Credit to
renew, and the Company and the Lenders hereby authorize such renewal, and,
accordingly, such Issuing Lender shall be deemed to have received an L/C
Amendment Application from the Company requesting such renewal.
(e) Each Issuing Lender may, at its election (or as required
by the Administrative Agent at the direction of the Required Lenders), deliver
any notice of termination or other communication to any Letter of Credit
beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such Letter of Credit to be a date not later than seven Business Days
prior to the Termination Date.
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(f) This Agreement shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).
(g) Each Issuing Lender will deliver to the Administrative
Agent, concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of such Letter of Credit or of such
amendment or renewal. Promptly after its receipt thereof, the Administrative
Agent will notify each Lender of the Issuance of such Letter of Credit.
3.3 RISK PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS.
(a) On the Effective Date, the Existing Letters of Credit
shall be deemed to be Letters of Credit outstanding hereunder and on the
Effective Date, the Company shall assume all obligations of an applicant with
respect thereto. Immediately upon the Issuance of each Letter of Credit (or on
the Effective Date in the case of each Existing Letter of Credit), each Lender
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the applicable Issuing Lender a participation in such Letter of
Credit and each drawing thereunder in an amount equal to the product of (i) such
Lender's Pro Rata Share times (ii) the maximum amount available to be drawn
under such Letter of Credit and the amount of such drawing, respectively. For
purposes of SECTION 2.1, each Issuance of a Letter of Credit shall be deemed to
utilize the Commitment of each Lender by an amount equal to the amount of such
participation.
(b) In the event of any request for a drawing under a Letter
of Credit by the beneficiary or transferee thereof, the applicable Issuing
Lender will promptly notify the Company and the Administrative Agent. The
Company shall (subject, if applicable, to its right to obtain Base Rate
Committed Loans as provided below) reimburse the applicable Issuing Lender prior
to 11:00 a.m. (Chicago time) on each date that any amount is paid by such
Issuing Lender under any Letter of Credit (each such date, an "HONOR DATE") in
an amount equal to the amount so paid by such Issuing Lender; provided that, to
the extent that any Issuing Lender accepts a drawing under a Letter of Credit
after 11:00 a.m. (Chicago time), the Company will not be obligated to reimburse
such Issuing Lender until the next Business Day and the "Honor Date" for such
Letter of Credit shall be such next Business Day. If the Company fails to
reimburse an Issuing Lender for the full amount of any drawing under any Letter
of Credit by 11:00 a.m. (Chicago time) on the Honor Date, such Issuing Lender
will promptly notify the Administrative Agent and the Administrative Agent will
promptly notify each Lender thereof, and the Company shall be deemed to have
requested that
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Base Rate Committed Loans be made by the Lenders to be disbursed on the Honor
Date under such Letter of Credit, subject to the amount of the unutilized
portion of the combined Commitments and subject to the conditions set forth in
SECTION 5.2 other than SECTION 5.2(a). Any notice given by an Issuing Lender or
the Administrative Agent pursuant to this SUBSECTION 3.3(b) may be oral if
immediately confirmed in writing (including by facsimile); PROVIDED that the
lack of such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
(c) Each Lender shall upon any notice pursuant to SUBSECTION
3.3(b) make available to the Administrative Agent for the account of the
applicable Issuing Lender an amount in Dollars and in immediately available
funds equal to its Pro Rata Share of the amount of the drawing, whereupon the
Lenders shall (subject to SUBSECTION 3.3(d)) each be deemed to have made a
Committed Loan consisting of a Base Rate Committed Loan to the Company in such
amount (it being understood that the requirements for the minimum aggregate
amount of a Borrowing of Base Rate Committed Loans shall not be applicable to
Loans made pursuant to this SUBSECTION 3.3(c)). If any Lender so notified fails
to make available to the Administrative Agent for the account of the applicable
Issuing Lender the amount of such Lender's Pro Rata Share of the amount of such
drawing by no later than 1:00 p.m. (Chicago time) on the Honor Date, then
interest shall accrue on such Lender's obligation to make such payment, from the
Honor Date to the date such Lender makes such payment, at a rate per annum equal
to the Federal Funds Rate in effect from time to time during such period. The
Administrative Agent will promptly give notice of the occurrence of the Honor
Date, but failure of the Administrative Agent to give any such notice on the
Honor Date or in sufficient time to enable any Lender to effect such payment on
such date shall not relieve such Lender from its obligations under this SECTION
3.3.
(d) With respect to any unreimbursed drawing that is not
converted into Base Rate Committed Loans in whole or in part, because of the
Company's failure to satisfy the conditions set forth in SECTION 5.2 (other than
SUBSECTION 5.2(a) which need not be satisfied) or for any other reason, the
Company shall be deemed to have incurred from the applicable Issuing Lender an
L/C Borrowing in the amount of such drawing, which L/C Borrowing shall be due
and payable on demand and shall bear interest (payable on demand) at a rate per
annum equal to the Base Rate plus 2%, and each Lender's payment to such Issuing
Lender pursuant to SUBSECTION 3.3(c) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Lender in satisfaction of its participation obligation under this SECTION
3.3.
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(e) Each Lender's obligation in accordance with this Agreement
to make the Committed Loans or L/C Advances, as contemplated by this SECTION
3.3, as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to any Issuing Lender and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the
applicable Issuing Lender, the Company or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of an Event of Default, an
Unmatured Event of Default or a Material Adverse Effect; or (iii) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing including the failure of the Issuing Lender to give any notice
required hereunder; PROVIDED that each Lender's obligation to make Committed
Loans under this SECTION 3.3 is subject to the conditions set forth in SECTION
5.2 (other than SUBSECTION 5.2(a)).
3.4 REPAYMENT OF PARTICIPATIONS. (a) Upon (and only upon) receipt by
the Administrative Agent for the account of an Issuing Lender of immediately
available funds from the Company (i) in reimbursement of any payment made by
such Issuing Lender under a Letter of Credit with respect to which any Lender
has paid the Administrative Agent for the account of such Issuing Lender for
such Lender's participation in such Letter of Credit pursuant to SECTION 3.3 or
(ii) in payment of interest thereon, the Administrative Agent will pay to each
Lender, in the same funds as those received by the Administrative Agent for the
account of such Issuing Lender, the amount of such Lender's Pro Rata Share of
such funds, and such Issuing Lender shall receive the amount of the Pro Rata
Share of such funds of any Lender that did not so pay the Administrative Agent
for the account of such Issuing Lender.
(b) If the Administrative Agent or an Issuing Lender is
required at any time to return to the Company, or to a trustee, receiver,
liquidator or custodian, or to any official in any Insolvency Proceeding, any
portion of any payment made by the Company to the Administrative Agent for the
account of an Issuing Lender pursuant to SUBSECTION 3.4(a) in reimbursement of a
payment made under a Letter of Credit or interest or fee thereon, each Lender
shall, on demand of the Administrative Agent, forthwith return to the
Administrative Agent or the applicable Issuing Lender the amount of its Pro Rata
Share of any amount so returned by the Administrative Agent or such Issuing
Lender plus interest thereon from the date such demand is made to the date such
amount is returned by such Lender to the Administrative Agent or such Issuing
Lender, at a rate per annum equal to the Federal Funds Rate in effect from time
to time.
3.5 ROLE OF THE ISSUING LENDERS. (a) Each Lender and the
Company agree that, in paying any drawing under a Letter of
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Credit, the applicable Issuing Lender shall not have any responsibility to
obtain any document (other than any sight draft and certificate expressly
required by such Letter of Credit) or to ascertain or inquire as to the validity
or accuracy of any such document or the authority of the Person executing or
delivering any such document.
(b) No Issuing Lender or Administrative Agent-Related Person,
nor any of their respective correspondents, participants or assignees, shall be
liable to any Lender for: (i) any action taken or omitted in connection herewith
at the request or with the approval of the Lenders (including the Required
Lenders, as applicable); (ii) any action taken or omitted in the absence of
gross negligence or willful misconduct; or (iii) the due execution,
effectiveness, validity or enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; PROVIDED that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No Issuing
Lender or Administrative Agent-Related Person, nor any of their respective
correspondents, participants or assignees, shall be liable or responsible for
any of the matters described in CLAUSES (i) through (vii) of SECTION 3.6;
PROVIDED that, anything in such clauses to the contrary notwithstanding, the
Company may have a claim against an Issuing Lender, and such Issuing Lender may
be liable to the Company, to the extent, but only to the extent, of any direct,
as opposed to consequential or exemplary, damages suffered by the Company which
the Company proves were caused by such Issuing Lender's willful misconduct or
gross negligence or such Issuing Lender's willful failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions of
such Letter of Credit. In furtherance and not in limitation of the foregoing:
(i) an Issuing Lender may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary; and (ii) no Issuing Lender shall be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
3.6 OBLIGATIONS ABSOLUTE. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the applicable Issuing
Lender for a drawing under a Letter of Credit, and to repay any L/C Borrowing
and any drawing under a Letter of Credit converted into Committed Loans, shall
be
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unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of
this Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of
the Company in respect of any Letter of Credit;
(iii) the existence of any breach of contract or
other dispute between the Company and any beneficiary or the existence
of any claim, set-off, defense or other right that the Company may have
at any time against any beneficiary or any transferee of any Letter of
Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the applicable Issuing Lender or any other
Person, whether in connection with this Agreement, the transactions
contemplated hereby or by any L/C-Related Document or any unrelated
transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by an Issuing Lender under any Letter
of Credit against presentation of a draft or certificate that does not
strictly comply with the terms of such Letter of Credit; or any payment
made by an Issuing Lender under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of
any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations
of the Company in respect of any Letter of Credit;
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise
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constitute a defense available to, or a discharge of, the
Company or a guarantor;
(viii) any use which may be made of the Letter of
Credit or any acts or omissions of the users of any Letter of Credit;
(ix) any particular conditions stipulated in the
documents or superimposed thereon;
(x) any failure of any instrument to bear any
reference or adequate reference to any Letter of Credit or the failure
of any negotiating bank to endorse any draft or other instrument in
connection with any Letter of Credit or the failure of any Person to
note the amount of any draft on the reverse of any Letter of Credit or
to surrender or take up any Letter Credit or to send forward documents
apart from drafts as required by the terms of any Letter of Credit
(each of which provisions, if contained in any Letter of Credit itself,
it is agreed may be waived by the Issuing Lender);
(xi) any error, omission, interruption or delay in
transmission or delivery of any message or advise in connection with
any Letter of Credit whether transmitted by courier, mail, cable,
telex, telegraph, wireless, any other telecommunications or otherwise
and despite any cipher or code which may be employed; or
(xii) any non-documentary conditions that may be
stated in this Agreement or any Letter of Credit.
3.7 CASH COLLATERAL PLEDGE. If any Letter of Credit remains outstanding
and partially or wholly undrawn as of the Termination Date, then the Company
shall immediately Cash Collateralize the L/C Obligations in an amount equal to
the maximum amount then available to be drawn under all Letters of Credit.
3.8 LETTER OF CREDIT FEES. (a) The Company shall pay to the
Administrative Agent for the account of each Lender a letter of credit fee with
respect to each Letter of Credit equal to the L/C Fee Rate (plus, upon notice
from the Administrative Agent (acting at the request or with the consent of the
Required Lenders) during the existence of an Event of Default, and for so long
as such Event of Default shall continue, 2%) per annum of the average daily
maximum amount available to be drawn on such Letter of Credit, computed on a
quarterly basis in arrears on the last Business Day of each calendar quarter and
on the Termination Date (or such later date on which such Letter of Credit shall
expire or be fully drawn).
(b) The letter of credit fees payable under SUBSECTION 3.8(a)
shall be due and payable quarterly in arrears on the last
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Business Day of each calendar quarter during which Letters of Credit are
outstanding, commencing on the first such quarterly date to occur after the
Closing Date, through the Termination Date (or such later date upon which all
outstanding Letters of Credit shall expire or be fully drawn), with the final
payment to be made on the Termination Date (or such later date).
(c) The Company shall pay to each Issuing Lender a letter of
credit fronting fee at such times and in such amounts as are mutually agreed to
from time to time by the Company and such Issuing Lender.
(d) The Company shall pay to each Issuing Lender from time to
time on demand the normal issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of such Issuing Lender relating to
letters of credit as from time to time in effect.
3.9 UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce
("UCP") most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in such Letter of Credit) apply to such
Letter of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 TAXES. (a) Any and all payments by the Company to each Lender or
the Administrative Agent under this Agreement and any other Loan Document shall
be made free and clear of, and without deduction or withholding for, any Taxes.
In addition, the Company shall pay all Other Taxes and Further Taxes.
(b) If the Company shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Lender or the Administrative Agent, then:
(i) the sum payable shall be increased as necessary
so that, after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section), such Lender or the Administrative Agent,
as the case may be, receives and retains an amount equal to the sum it
would have received and retained had no such deductions or withholdings
been made;
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(ii) the Company shall make such deductions and
withholdings; and
(iii) the Company shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in
accordance with applicable law.
(c) The Company agrees to indemnify and hold harmless each
Lender and the Administrative Agent for the full amount of Taxes, Other Taxes
and Further Taxes in the amount that such Lender specifies as necessary to
preserve the after-tax yield such Lender would have received if such Taxes,
Other Taxes or Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes, Other Taxes or Further Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within 30 days after the date such Lender or the Administrative Agent makes
written demand therefor.
(d) Within 30 days after the date of any payment by the
Company of any Taxes, Other Taxes or Further Taxes, the Company shall furnish
each applicable Lender and the Administrative Agent the original or a certified
copy of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to such Lender and the Administrative Agent.
(e) Notwithstanding the foregoing provisions of this SECTION
4.1, (i) if any Lender fails to notify the Company of any event or circumstance
which will entitle such Lender to compensation pursuant to this SECTION 4.1
within 60 days after such Lender obtains knowledge of such event or
circumstance, then such Lender shall not be entitled to compensation from the
Company for any amount arising prior to the date which is 60 days before the
date on which such Lender notifies the Company of such event or circumstance;
and (ii) the Company shall not be required to pay an additional amount to, or to
indemnify, any Lender pursuant to this SECTION 4.1 to the extent that (x) the
obligation to withhold or pay such amount existed on the Initial Date (as
defined below) or (y) the obligation to withhold or pay such amount would not
have arisen but for the failure of such Lender to comply with the provisions of
SECTION 10.10 of this Agreement. For purposes of CLAUSE (ii) of the foregoing
sentence "Initial Date" means (A) in the case of any Lender that is a signatory
hereto, the date of this Agreement, (B) in the case of any Person which
subsequently becomes a Lender hereunder, the date of the applicable Assignment
and Acceptance, and (C) in the case of any Participant, the date on which it
becomes a Participant.
4.2 ILLEGALITY. (a) If any Lender reasonably determines
that the introduction of any Requirement of Law, or any change in
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any Requirement of Law, or in the interpretation or administration of any
Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for such Lender or its
applicable Lending Office to make Offshore Rate Committed Loans, then, on notice
thereof by such Lender to the Company through the Administrative Agent, any
obligation of such Lender to make Offshore Rate Committed Loans shall be
suspended until such Lender notifies the Administrative Agent and the Company
that the circumstances giving rise to such determination no longer exist.
(b) If a Lender reasonably determines that it is unlawful to
maintain any Offshore Rate Committed Loan, the Company shall, upon its receipt
of notice of such fact and demand from such Lender (with a copy to the
Administrative Agent), prepay in full such Offshore Rate Committed Loan of such
Lender together with interest accrued thereon and amounts required under SECTION
4.4, either on the last day of the Interest Period thereof, if such Lender may
lawfully continue to maintain such Offshore Rate Committed Loan to such day, or
immediately, if such Lender may not lawfully continue to maintain such Offshore
Rate Committed Loan. If the Company is required to so prepay any Offshore Rate
Committed Loan, then concurrently with such prepayment, the Company shall borrow
from the affected Lender, in the amount of such repayment, a Base Rate Committed
Loan.
(c) If the obligation of any Lender to make or maintain
Offshore Rate Committed Loans has been so terminated or suspended, all Loans
which would otherwise be made by such Lender as Offshore Rate Committed Loans
shall be instead Base Rate Committed Loans.
4.3 INCREASED COSTS AND REDUCTION OF RETURN. (a) If any Lender
reasonably determines that, due to either (i) the introduction of or any change
(other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the Offshore Rate) after the date
hereof in or in the interpretation of any law or regulation or (ii) compliance
by such Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law) adopted, issued
or delivered after the date hereof, there shall be any increase in the cost to
such Lender (excluding any Taxes, Other Taxes, Further Taxes or taxes imposed on
or measured by the net income of such Lender) of agreeing to make or making,
funding or maintaining any Offshore Rate Committed Loan or participating in any
Letter of Credit, or, in the case of an Issuing Lender, any increase in the cost
to such Issuing Lender of agreeing to issue, issuing or maintaining any Letter
of Credit or of agreeing to make or making, funding or maintaining any unpaid
drawing under any Letter of Credit, then the Company shall be liable for, and
shall from time to time, upon demand (with a copy of such demand to be sent to
the Administrative Agent), pay
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to the Administrative Agent for the account of such Lender, additional amounts
as are sufficient to compensate such Lender for such increased cost.
(b) If any Lender shall have reasonably determined that (i)
the introduction after the date hereof of any Capital Adequacy Regulation, (ii)
any change after the date hereof in any Capital Adequacy Regulation, (iii) any
change after the date hereof in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
such Lender (or its Lending Office) or any corporation controlling such Lender
with any Capital Adequacy Regulation (excluding any Capital Adequacy Regulation
as in effect on the date hereof) affects or would affect the amount of capital
required or expected to be maintained by such Lender or any corporation
controlling such Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital) reasonably determines that the amount of such capital
is increased as a consequence of its Commitment, Loans or obligations under this
Agreement, then, upon demand of such Lender to the Company through the
Administrative Agent, the Company shall pay to such Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such
Lender for such increase.
(c) Notwithstanding the foregoing provisions of this SECTION
4.3, if any Lender fails to notify the Company of any event or circumstance
which will entitle such Lender to compensation pursuant to this SECTION 4.3
within 60 days after such Lender obtains knowledge of such event or
circumstance, then such Lender shall not be entitled to compensation from the
Company for any amount arising prior to the date which is 60 days before the
date on which such Lender notifies the Company of such event or circumstance.
4.4 FUNDING LOSSES. The Company shall reimburse each Lender and hold
each Lender harmless from any loss or expense which the Lender may sustain or
incur as a consequence of:
(a) the failure of the Company to borrow, continue or convert
a Loan after the Company has given (or is deemed to have given) a Notice of
Committed Borrowing or a Notice of Conversion/Continuation or has accepted a
Competitive Bid for such Loan;
(b) the failure of the Company to make any prepayment in
accordance with any notice delivered under SECTION 2.8;
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(c) the prepayment (including after acceleration thereof) of
an Offshore Rate Committed Loan or a Bid Loan on a day that is not the last day
of the relevant Interest Period; or
(d) the automatic conversion under SUBSECTION 2.4(a) of any
Offshore Rate Committed Loan to a Base Rate Committed Loan on a day that is not
the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or Bid Loans or from
fees payable to terminate the deposits from which such funds were obtained. For
purposes of calculating amounts payable by the Company to the Lenders under this
Section and under SUBSECTION 4.3(a), each Offshore Rate Committed Loan made by a
Lender (and each related reserve, special deposit or similar requirement) shall
be conclusively deemed to have been funded at the LIBOR used in determining the
Offshore Rate for such Offshore Rate Committed Loan by a matching deposit or
other borrowing in the interbank eurodollar market for a comparable amount and
for a comparable period, whether or not such Offshore Rate Committed Loan is in
fact so funded.
4.5 INABILITY TO DETERMINE RATES. If (a) the Administrative Agent
determines that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Committed Loan, or (b) the Required Lenders determine
that the Offshore Rate applicable pursuant to SUBSECTION 2.10(a) for any
requested Interest Period with respect to a proposed Offshore Rate Committed
Loan does not adequately and fairly reflect the cost to such Lenders of funding
such Loan, the Administrative Agent will promptly so notify the Company and each
Lender. Thereafter, the obligation of the Lenders to make or maintain Offshore
Rate Committed Loans hereunder shall be suspended until the Administrative Agent
(upon the instruction of the Required Lenders in the case of CLAUSE (b)) revokes
such notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Committed Borrowing or Notice of Conversion/Continuation then
submitted by it. If the Company does not revoke such Notice, the Lenders shall
make, convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Committed Loans instead of
Offshore Rate Committed Loan.
4.6 CERTIFICATES OF LENDERS. Any Lender claiming reimbursement or
compensation under this ARTICLE IV shall deliver to the Company (with a copy to
the Administrative Agent) a certificate setting forth in reasonable detail the
amount payable to such Lender hereunder and the manner in which such amount has
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been calculated, and such certificate shall be conclusive and binding on the
Company in the absence of manifest error.
4.7 MITIGATION. Each Lender shall promptly notify the Company and the
Administrative Agent of any event of which it has knowledge which will result
in, and will use reasonable commercial efforts available to it (and not, in such
Lender's good faith judgment, otherwise disadvantageous to such Lender) to
mitigate or avoid, (i) any obligation of the Company to pay any amount pursuant
to SECTION 4.1 or 4.3 or (ii) the occurrence of any circumstance of the nature
described in SECTION 4.2 or 4.5. Without limiting the foregoing, each Lender
will designate a different Lending Office if such designation will avoid (or
reduce the cost to the Company of) any event described in CLAUSE (I) or (II) of
the preceding sentence and such designation will not, in such Lender's good
faith judgment, be otherwise disadvantageous to such Lender.
4.8 SUBSTITUTION OF LENDERS. Upon the receipt by the Company from any
Lender of a claim for compensation under SECTION 4.1 or 4.3 or a notice of the
type described in SECTION 4.2, the Company may: (i) designate a replacement bank
or financial institution satisfactory to the Company (a "REPLACEMENT LENDER") to
acquire and assume all or a ratable part of all of such affected Lender's Loans
and Commitment; and/or (ii) request one or more of the other Lenders to acquire
and assume all or part of such affected Lender's Loans and Commitment. Any
designation of a Replacement Lender under CLAUSE (I) shall be subject to the
prior written consent of the Administrative Agent (which consent shall not be
unreasonably withheld).
4.9 SURVIVAL. The agreements and obligations of the Company in this
ARTICLE IV shall survive the termination of this Agreement and the payment of
all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO EFFECTIVENESS. This Agreement shall become effective
on the date (the "EFFECTIVE DATE") on which the Administrative Agent shall have
received (i) evidence satisfactory to the Lenders that the Company has completed
the IPO, (ii) evidence satisfactory to the Administrative Agent that the Company
has paid all fees and other amounts then payable under SUBSECTION 2.11(a) and
(ii) all of the following, in form and substance satisfactory to the
Administrative Agent and each Lender, and (except for the Notes) in sufficient
copies for each Lender:
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(a) AGREEMENT AND NOTES. This Agreement and the Notes executed
by each party hereto and thereto.
(b) RESOLUTIONS; INCUMBENCY.
(i) Copies of the resolutions of the board of
directors of the Company authorizing the execution and delivery of the
Loan Documents and the consummation of the transactions contemplated
hereby, certified as of the Effective Date by the Secretary or an
Assistant Secretary of such Person; and
(ii) a certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of
the officers, employees or authorized agents of the Company authorized
to execute and deliver the Loan Documents and to deliver Notices of
Borrowing, Notices of Conversion/Continuation, Competitive Bid
Requests, Notices of Swing Line Loans, Compliance Certificates, L/C
Applications, L/C Amendment Applications and similar documents.
(c) ORGANIZATION DOCUMENTS. The articles or certificate of
incorporation and the bylaws of the Company as in effect on the Effective Date,
certified by the Secretary or Assistant Secretary of the Company as of the
Effective Date.
(d) LEGAL OPINIONS. An opinion of Tripp, Scott, P.A., counsel
to the Company, substantially in the form of EXHIBIT G and an opinion of Mayer,
Brown & Platt, counsel to the Administrative Agent, substantially in the form of
EXHIBIT K.
(e) PAYMENT OF FEES. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
hereunder on the Effective Date, together with Attorney Costs of BofA to the
extent invoiced prior to or on the Effective Date, plus such additional amounts
of Attorney Costs as shall constitute BofA's reasonable estimate of Attorney
Costs incurred or to be incurred by it through the closing proceedings (provided
that such estimate shall not thereafter preclude final settling of accounts
between the Company and BofA), including any such costs, fees and expenses
arising under or referenced in SECTIONS 2.11 and 11.4.
(f) CERTIFICATE. A certificate signed by a Responsible
Officer, dated as of the Effective Date, stating that:
(i) the representations and warranties contained in
ARTICLE VI are true and correct on and as of such date, as though made
on and as of such date;
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(ii) no Event of Default or Unmatured Event of
Default exists or would result from the effectiveness of this
Agreement; and
(iii) since March 31, 1998, no event or circumstance
has occurred that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(g) OTHER DOCUMENTS. Such other approvals, opinions,
documents or materials as the Administrative Agent or any Lender
may reasonably request.
5.2 CONDITIONS TO ALL CREDIT EXTENSIONS. The obligation of each Lender
to make any Loan to be made by it (including the obligation of the Swing Line
Lender to make any Swing Line Loan) and the obligation of any Issuing Lender to
Issue any Letter of Credit is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Issuance Date:
(a) NOTICE, APPLICATION. The Administrative Agent shall have
received a Notice of Committed Borrowing or notice of the acceptance by the
Company of one or more Competitive Bids or the Swing Line Lender and the
Administrative Agent shall have received a Notice of Swing Line Loan or, in the
case of the Issuance of any Letter of Credit, the applicable Issuing Lender and
the Administrative Agent shall have received an L/C Application or L/C Amendment
Application, as required under SECTION 3.2.
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in ARTICLE VI (excluding SUBSECTION 6.11(b) shall
be true and correct in all material respects on and of such Borrowing Date or
Issuance Date with the same effect as if made on and as of such Borrowing Date
or Issuance Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date).
(c) NO EXISTING DEFAULT. No Event of Default or Unmatured
Event of Default shall exist or shall result from such Borrowing, Swing Line
Loan or Issuance.
Each Notice of Committed Borrowing, notice of acceptance of a Competitive Bid,
Notice of Swing Line Loan, L/C Application and L/C Amendment Application
submitted by the Company hereunder shall constitute a representation and
warranty by the Company that, as of the date of each such notice and as of the
relevant Borrowing Date or Issuance Date, as applicable, the conditions in this
SECTION 5.2 are satisfied.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative Agent and
each Lender that:
6.1 CORPORATE EXISTENCE AND POWER. The Company and each of its
Subsidiaries:
(a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals (i) to own its assets and to carry on its
business and (ii) to execute, deliver and perform its obligations under the Loan
Documents to which it is a party;
(c) is duly qualified to do business in each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in SUBCLAUSE (b)(i), CLAUSE (c) or CLAUSE (d),
to the extent that the failure to do so could not reasonably be expected to have
a Material Adverse Effect.
6.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution, delivery
and performance by the Company of each Loan Document to which such Person is
party have been duly authorized by all necessary corporate action, and do not
and will not:
(a) contravene the terms of any of such Person's
Organization Documents;
(b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any material
Contractual Obligation to which such Person or any of its Subsidiaries is a
party or any order, injunction, writ or decree of any Governmental Authority to
which such Person or any of its Subsidiaries or any of its or their property is
subject; or
(c) violate any Requirement of Law.
6.3 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority (other than any of the foregoing which has been obtained or made and
is in full force
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and effect) is necessary or required in connection with the execution, delivery
or performance by, or enforcement against, the Company of the Agreement or any
other Loan Document.
6.4 BINDING EFFECT. This Agreement and each other Loan Document
constitute the legal, valid and binding obligations of the Company, to the
extent such Person is a party thereto, enforceable against such Person in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.
6.5 LITIGATION. There are no actions, suits, proceedings, claims or
disputes pending or, to the best knowledge of the Company, threatened, at law,
in equity, in arbitration or before any Governmental Authority, against the
Company or any Subsidiary or any of their respective properties; (a) which
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby or thereby; or (b) as to which there
exists a reasonable likelihood of an adverse determination, which determination
would reasonably be expected to have a material adverse effect on the ability of
the Company to pay and perform the Obligations. No injunction, writ, temporary
restraining order or other order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Loan Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.6 NO DEFAULT. No Event of Default or Unmatured Event of Default
exists or would result from the incurring of any Obligations by the Company. As
of the Effective Date, neither the Company nor any Subsidiary is in default
under or with respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably be expected to
have a Material Adverse Effect.
6.7 ERISA COMPLIANCE. Except as specifically disclosed in SCHEDULE 6.7:
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law (or,
in the case of an Acquired Plan, can be brought into such compliance without any
material fine, penalty or other liability). Except for Acquired Plans with
respect to which the failure to have received a qualification letter would not
result in any material fine, penalty or other liability, each Plan which is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS (or will be submitted for a determination
letter
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within the applicable remedial amendment period), and to the best knowledge of
the Company, nothing has occurred which would cause the loss of such
qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code (except for
contributions to Acquired Plans not made prior to the respective Plan
Acquisition Dates and which do not in the aggregate exceed $1,000,000 for any
Acquired Plan), and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no contribution failure has occurred with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; (iii) no
Pension Plan has any Unfunded Pension Liability; (iv) neither the Company nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (v) neither the Company nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA
with respect to a Multiemployer Plan; and (vi) neither the Company nor any ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
6.8 USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the Loans will
be used solely for the purposes set forth in and permitted by SECTION 7.12 and
SECTION 8.8. Neither the Company nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
6.9 TITLE TO PROPERTIES. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Effective Date, the
property of the Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
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6.10 TAXES. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
6.11 FINANCIAL CONDITION. (a)(1) The audited consolidated financial
statements of the Company and its Subsidiaries dated December 31, 1997, and the
related consolidated statements of income or operations, shareholders' equity
and cash flows for the fiscal year ended on that date, and (2) the unaudited
interim consolidated financial statements of the Company and its Subsidiaries
dated March 31, 1998, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal quarter ended on
that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the periods covered thereby, except as
otherwise expressly noted therein (subject, in the case of the
unaudited interim statements, to the absence of footnotes and to
ordinary, good faith year-end audit adjustments);
(ii) fairly present (subject, in the case of the
unaudited interim statements, to ordinary, good faith year-end audit
adjustments) the financial condition of the Company and its
Subsidiaries as of the dates thereof and the results of operations for
the periods covered thereby; and
(iii) show all material indebtedness and other
liabilities, absolute or contingent, of the Company and its
consolidated Subsidiaries as of the dates thereof, including
liabilities for taxes and material Contingent Obligations.
(b) Since December 31, 1997, there has been no Material
Adverse Effect.
6.12 ENVIRONMENTAL MATTERS. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in SCHEDULE 6.12, such Environmental Laws and Environmental Claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
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6.13 REGULATED ENTITIES. None of the Company, any Person controlling
the Company, or any Subsidiary is an "Investment Company" within the meaning of
the Investment Company Act of 1940. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
6.14 NO BURDENSOME RESTRICTIONS. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
6.15 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the material patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person, except to the extent failure to own,
license or otherwise have the right to use any such item, or any such conflict,
could not reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Company, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Company or any Subsidiary, and which is
material to the business or operations of the Company and its Subsidiaries,
infringes upon any rights held by any other Person (excluding infringements
which could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect).
6.16 SUBSIDIARIES. As of the Effective Date, the Company has no
Subsidiaries other than those specifically disclosed in PART (a) of SCHEDULE
6.16 and has no equity investments in any other corporation or entity other than
those specifically disclosed in PART (b) of SCHEDULE 6.16.
6.17 INSURANCE. The properties of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies (or are
self-insured) in such amounts, with such deductibles and covering such risks as
are customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such Subsidiary operates.
6.18 YEAR 2000 PROBLEM. The Company and its Subsidiaries have reviewed
the areas within their business and operations which could be adversely affected
by, and have developed programs to address on a timely basis, the "Year 2000
Problem" (that is,
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the risk that computer applications used by the Company may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999). Based on such review and
programs, the Company reasonably believes that the "Year 2000 Problem" will not
result in a Material Adverse Effect.
6.19 FULL DISCLOSURE. The representations and warranties made by the
Company and its Subsidiaries in the Loan Documents as of the date such
representations and warranties are made or deemed made, and the statements
contained in any exhibit, report, statement or certificate furnished by or on
behalf of the Company or any Subsidiary in connection with the Loan Documents,
taken as a whole, do not contain any untrue statement of a material fact or omit
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading in any material respect as of the time when made or
delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:
7.1 FINANCIAL STATEMENTS. The Company shall deliver to the
Administrative Agent, in form and detail satisfactory to the Administrative
Agent and the Required Lenders, with sufficient copies for each Lender:
(a) as soon as available, but not later than 120 days after
the end of each fiscal year, a copy of the audited consolidated balance sheet of
the Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Arthur Andersen
LLP or another nationally-recognized independent public accounting firm
("INDEPENDENT AUDITOR"), which opinion (i) shall state that such consolidated
financial statements present fairly the Company's consolidated financial
position for the periods indicated in conformity with GAAP and (ii) shall not be
qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any Subsidiary's
records; and
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(b) as soon as available, but not later than 60 days after the
end of each of the first three fiscal quarters of each fiscal year (commencing
with the fiscal quarter ending September 30, 1998), a copy of the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such quarter and the related consolidated statements of income, shareholders'
equity and cash flows for the period commencing on the first day and ending on
the last day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to the absence of footnotes and to
ordinary, good faith year-end audit adjustments), the financial position and the
results of operations of the Company and its Subsidiaries as of such date and
for such period.
7.2 CERTIFICATES; OTHER INFORMATION. The Company shall furnish to the
Administrative Agent, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial statements
referred to in SUBSECTIONS 7.1(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
(b) promptly after their becoming available, copies of all
financial statements and reports that the Company sends to its shareholders, and
copies of all financial statements and regular, periodic or special reports
(including Forms 10K, 10Q and 8K) that the Company or any Subsidiary may make
to, or file with, the SEC;
(c) promptly after their becoming available, any management
letter or other material communication regarding the "Year 2000" exposure or
programs of the Company and its Subsidiaries; and
(d) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as the
Administrative Agent, at the request of any Lender, may from time to time
reasonably request.
7.3 NOTICES. The Company shall promptly (or, in the case of any event
described in CLAUSE (c)(ii) below, not less than 10 days prior to the occurrence
of such event) notify the Administrative Agent and each Lender:
(a) of the occurrence of any Event of Default or
Unmatured Event of Default known to the Company;
(b) of any of the following matters that has resulted or is
reasonably expected to result in a Material Adverse Effect: (i) breach or
non-performance of, or any default under, a Contractual Obligation of the
Company or any Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension
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between the Company or any Subsidiary and any Governmental Authority; or (iii)
the commencement of, or any material development in, any litigation or
proceeding affecting the Company or any Subsidiary, including pursuant to any
applicable Environmental Laws;
(c) of the occurrence of any of the following events known to
the Company which affect the Company or any ERISA Affiliate, and deliver to the
Administrative Agent and each Lender a copy of any notice with respect to such
event that is filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with respect to
such event:
(i) an ERISA Event;
(ii) a contribution failure with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA;
(iii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iv) the adoption of, or the commencement of
contributions to, any Pension Plan by the Company or any ERISA
Affiliate; or
(v) the adoption of any amendment to a Pension Plan
if such amendment results in a material increase in contributions or
Unfunded Pension Liability; and
(d) of any material change in accounting policies or financial
reporting practices by the Company and its consolidated Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary proposes to take with respect thereto. Each notice under
SUBSECTION 7.3(a) shall describe with particularity any and all clauses or
provisions of this Agreement or any other Loan Document that have been breached
or violated.
7.4 PRESERVATION OF CORPORATE EXISTENCE, ETC. The Company shall, and
shall cause each Subsidiary to (provided that nothing in this SECTION 7.4 shall
prevent the voluntary liquidation, dissolution or winding up, not under any
bankruptcy or insolvency law, of any Subsidiary so long as no Event of Default
exists and no Event of Default or Unmatured Event of Default will result
therefrom):
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(a) preserve and maintain in full force and effect its
existence and good standing under the laws of its jurisdiction of
organization;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business (except
in connection with transactions permitted by SECTION 8.4 and sales of assets
permitted by SECTION 8.3);
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
7.5 MAINTENANCE OF PROPERTY. The Company shall, and shall cause each
Subsidiary to, maintain and preserve all its property which is used or useful in
its business in good working order and condition, ordinary wear and tear
excepted, except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.
7.6 INSURANCE. The Company shall, and shall cause each Subsidiary to,
maintain, with financially sound and reputable independent insurers (or pursuant
to a self-insurance program), insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by
Persons engaged in the same or similar business, of such types and in such
amounts as are customarily carried under similar circumstances by such other
Persons.
7.7 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each
Subsidiary to, pay and discharge, as the same shall become due and payable, all
their respective material obligations and liabilities, including: (a) all
material tax liabilities, assessments and governmental charges or levies upon it
or its properties or assets and (b) all material claims which, if unpaid, would
by law become a Lien upon its property, UNLESS, in each case, the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary.
7.8 COMPLIANCE WITH LAWS. The Company shall, and shall cause each
Subsidiary to, comply with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act) the non-compliance with which might have a Material Adverse
Effect.
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7.9 COMPLIANCE WITH ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code, it being understood that any
non-compliance with CLAUSE (a), (b) or (c) with respect to an Acquired Plan
existing on the Plan Acquisition Date for such Acquired Plan shall not
constitute a violation of this SECTION 7.9 so long as (i) the Company is
diligently proceeding to remedy such non-compliance and (ii) such non-compliance
will not result in any material fine, penalty or other liability.
7.10 INSPECTION OF PROPERTY AND BOOKS AND RECORDS. The Company shall,
and shall cause each Subsidiary to, maintain proper books of record and account,
in which full, true and correct entries (sufficient to permit the preparation of
consolidated financial statements in conformity with GAAP) shall be made of all
financial transactions and matters involving the assets and business of the
Company and such Subsidiary. The Company shall permit, and shall cause each
Subsidiary to permit, the Administrative Agent, any Lender or their respective
representatives (in each case at such Person's own expense unless an Event of
Default exists), upon reasonable notice at any reasonable time during normal
business hours and from time to time at the request of the Administrative Agent
or the relevant Lender, to visit and inspect the properties of the Company or
any Subsidiary (and, if (i) any Unmatured Event of Default exists and has been
continuing for 15 days or (ii) any Event of Default exists to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom), and to discuss the affairs, finances and accounts of
the Company or any Subsidiary with the appropriate officers, employees or
authorized agents of the Company or such Subsidiary.
7.11 ENVIRONMENTAL LAWS. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
material compliance with all material Environmental Laws. Without limiting the
foregoing, the Company shall, and shall cause each Subsidiary to, (i) maintain
all material operating permits for all landfills now owned or hereafter
acquired; and (ii) dispose of hazardous waste only at licensed disposal
facilities operating, to the best of the Company's or the applicable
Subsidiary's knowledge after reasonable inquiry, in material compliance with all
material Environmental Laws.
7.12 USE OF PROCEEDS. The Company shall use the proceeds of the Loans
for working capital and other general corporate purposes (including
Acquisitions) not in contravention of any
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Requirement of Law or of any Loan Document; PROVIDED that the Company shall not
use the proceeds of any Loan to make any Acquisition if the Board of Directors
of the Person to be acquired has not approved such Acquisition.
7.13 EXTINGUISHMENT OF CERTAIN OBLIGATIONS. The Company shall, within
60 days after the consummation of the IPO, repay, or cause to be repaid, all
Indebtedness outstanding on the date of consummation of the IPO that the Company
or any Subsidiary of the Company owes to Republic Industries, Inc. or to any
Subsidiary of Republic Industries, Inc. that is not also a Subsidiary of the
Company.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:
8.1 FINANCIAL CONDITION COVENANTS.
(a) MINIMUM CONSOLIDATED SHAREHOLDER'S EQUITY. The Company
shall not permit its Consolidated Shareholder's Equity as of the last day of any
fiscal quarter to be less than the sum of (i) $850,000,000 plus (ii) 50% of
Cumulative Consolidated Net Income.
(b) MAXIMUM TOTAL DEBT TO EBITDA RATIO. The Company shall not
permit, as of the last day of any fiscal quarter (beginning with the fiscal
quarter ending September 30, 1998), the Total Debt to EBITDA Ratio for the
Computation Period ending on such day to be greater than 3.25 to 1.
8.2 LIMITATION ON LIENS. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("PERMITTED
LIENS"):
(a) any Lien existing on the Effective Date and set forth in
SCHEDULE 8.2, and any extension, renewal or replacement of any such Lien so long
as the principal amount secured thereby is not increased and the scope of the
property subject to such Lien is not extended;
(b) Liens imposed by law for taxes, assessments or
charges of any Governmental Authority for claims not yet due or
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which are being contested in good faith by appropriate proceedings diligently
pursued and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or created
in the ordinary course of business and in existence less than 120 days from the
date of creation thereof for amounts not yet due or which are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance with
GAAP;
(d) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(e) Liens on the property of the Company or any Subsidiary
securing (i) the non-delinquent performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, (ii) surety bonds (excluding
appeal bonds and other bonds posted in connection with court proceedings or
judgments) and (iii) other non-delinquent obligations of a like nature in each
case incurred in the ordinary course of business, provided all such Liens in the
aggregate would not (even if enforced) cause a Material Adverse Effect;
(f) Liens consisting of judgment or judicial attachment liens
and liens securing contingent obligations on appeal bonds and other bonds posted
in connection with court proceedings or judgments, provided that (i) in the case
of judgment and judicial attachment liens, the enforcement of such Liens is
effectively stayed and (ii) all such liens in the aggregate at any time
outstanding for the Company and its Subsidiaries do not exceed $50,000,000;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, individually or
in the aggregate, do not materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
businesses of the Company and its Subsidiaries;
(h) Liens securing obligations in respect of Capital Leases on
assets subject to such leases, provided that such Capital Leases are otherwise
permitted hereunder;
(i) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or
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other funds maintained with a creditor depository institution; PROVIDED that (i)
such deposit account is not a dedicated cash collateral account and is not
subject to restrictions against access by the Company in excess of those set
forth by regulations promulgated by the FRB, and (ii) such deposit account is
not intended by the Company or any Subsidiary to provide collateral to the
depository institution; and
(j) other Liens, in addition to those permitted by CLAUSES (a)
through (h), securing Indebtedness or arising in connection with Securitization
Transactions; PROVIDED that the sum (without duplication) of all such
Indebtedness, plus the aggregate investment or claim held at any time by all
purchasers, assignees or other transferees of (or of interests in) receivables
and other rights to payment in all Securitization Transactions, shall not at any
time exceed in the aggregate 20% of Consolidated Tangible Assets.
8.3 DISPOSITION OF ASSETS. The Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer
or otherwise dispose of (whether in one or a series of transactions) any
property (including accounts and notes receivable, with or without recourse) or
enter into any agreement to do any of the foregoing (including any
sale-leaseback), except:
(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;
(b) the sale, assignment or other transfer of accounts
receivable, lease receivables or other rights to payment pursuant to any
Securitization Transaction; and
(c) dispositions not otherwise permitted hereunder which are
made for fair market value; PROVIDED that (i) at the time of any such
disposition, no Event of Default shall exist or shall result from such
disposition and (ii) the aggregate value of all assets so disposed of by the
Company and its Subsidiaries in any one-year period (calculated as of the date
of any such disposition) shall not exceed 20% of Consolidated Tangible Assets as
of the last day of the most recently ended fiscal quarter.
8.4 CONSOLIDATIONS AND MERGERS. The Company shall not, and shall not
permit any Subsidiary to, merge, consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to or in favor of any other Person, except:
(a) any Subsidiary may merge with the Company, provided that
the Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that
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if any transaction shall be between a Subsidiary and a
Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be the
continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all
of its assets (upon voluntary liquidation or otherwise) to the
Company or another Wholly-Owned Subsidiary; and
(c) any merger, consolidation or disposition in connection
with a transaction permitted by SECTION 8.3 or an Acquisition permitted by
SECTION 8.5.
8.5 LOANS AND INVESTMENTS. The Company shall not, and shall not permit
any Subsidiary to, purchase or acquire, or make any commitment to purchase or
acquire, any capital stock, equity interest or obligations or other securities
of, or any interest in, any Person, or make or commit to make any Acquisition,
or make or commit to make any advance, loan, extension of credit or capital
contribution to or any other investment in any Person (including any Affiliate
of the Company)(any of the foregoing an "INVESTMENT"), except for:
(a) Investments held by the Company or any Subsidiary
in the form of cash equivalents or short term marketable
securities;
(b) 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;
(c) extensions of credit by the Company to any of its
Subsidiaries or by any of its Subsidiaries to the Company or
another Subsidiary;
(d) Investments incurred in order to consummate Acquisitions
not otherwise prohibited herein, PROVIDED that no Event of Default or (except in
the case of an Acquisition where the only consideration given by the Company or
any Subsidiary is stock of the Company) Unmatured Event of Default exists or
will result therefrom;
(e) Investments (other than extensions of credit) in
Subsidiaries;
(f) Investments in Swap Contracts in the ordinary course of
business and not for speculative purposes;
(g) pledges or deposits required in the ordinary course of
business in connection with workmen's compensation, unemployment insurance and
other social security legislation;
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(h) advances, loans or extensions of credit to suppliers in
the ordinary course of business by the Company and its Subsidiaries;
(i) advances, loans or extensions of credit in the
ordinary course of business by the Company and its Subsidiaries
to employees of the Company and its Subsidiaries;
(j) repurchases by the Company of its common stock to
the extent permitted by SECTION 8.9;
(k) loans to an employee stock ownership plan established by
the Company, the proceeds of which are used solely to purchase stock of the
Company; and
(l) other Investments, in addition those permitted by CLAUSES
(a) through (k) above, not at any time exceeding in the aggregate 20% of
Consolidated Tangible Assets.
8.6 LIMITATION ON SUBSIDIARY INDEBTEDNESS. The Company shall not permit
the sum of the aggregate amount of all Indebtedness of Subsidiaries (excluding
the existing Indebtedness listed on SCHEDULE 8.6 and extensions, renewals and
refinancings thereof so long as the principal amount thereof is not increased)
to exceed 20% of Consolidated Tangible Assets.
8.7 TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not
permit any Subsidiary to, enter into any transaction with any Affiliate of the
Company (other than the Company or a Subsidiary), except upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not an Affiliate
of the Company or such Subsidiary.
8.8 USE OF PROCEEDS. The Company shall not, and shall not permit any
Subsidiary to, use any portion of the Loan proceeds or any Letter of Credit,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock or (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock.
8.9 RESTRICTED PAYMENTS. The Company shall not (i) declare or make any
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock or (ii) purchase, redeem or otherwise acquire for value, or permit any
Subsidiary to purchase or otherwise acquire for value, any shares of the
Company's capital stock or any warrants, rights or options to acquire such
shares, now or hereafter outstanding, except that:
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(a) the Company may declare and make dividend payments
or other distributions payable solely in its common stock;
(b) the Company may purchase, redeem or otherwise acquire
shares of its common stock or warrants or options to acquire any such shares
with the proceeds received from the substantially concurrent issue of new shares
of its common stock; and
(c) so long as no Event of Default or Unmatured Event of
Default exists or would result therefrom, the Company may (x) declare and pay
cash dividends to its stockholders; and (y) purchase, redeem or otherwise
acquire shares of its common stock or warrants or options to acquire such
shares, PROVIDED that so long as the Divestiture Date has not occurred, the
aggregate amount of all such purchases, redemptions and other acquisitions on or
after March 31, 1998 shall not exceed 25% of Cumulative Consolidated Net Income.
8.10 ERISA. The Company shall not, and shall not permit any of its
ERISA Affiliates to: (a) engage in a prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in liability of the Company in an
aggregate amount in excess of $15,000,000; or (b) engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
8.11 CHANGE IN BUSINESS. The Company shall not, and shall not permit
any Subsidiary to, engage in any material line of business other than those
lines of business carried on by the Company and its Subsidiaries on the date
hereof and lines of business complementary thereto; PROVIDED that in no event
will the Company permit a material portion of the business of the Company and
its Subsidiaries, taken as a whole, to involve or relate to hazardous waste.
8.12 ACCOUNTING CHANGES. The Company shall not, and shall not permit
any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP.
ARTICLE IX
EVENTS OF DEFAULT
9.1 EVENT OF DEFAULT. Any of the following shall constitute an "Event
of Default":
(a) NON-PAYMENT. The Company fails to pay, (i) when
and as required to be paid herein, any amount of principal of any
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Loan or of the principal amount of any L/C Obligation, or (ii) within five days
after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document.
(b) REPRESENTATION OR WARRANTY. Any representation or warranty
by the Company or any Subsidiary made or deemed made herein or in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary or any Responsible Officer
furnished at any time under this Agreement or under any other Loan Document, is
incorrect in any material respect on or as of the date made or deemed made.
(c) SPECIFIC DEFAULTS. The Company fails to perform
or observe any term, covenant or agreement contained in any of
SUBSECTION 7.3(a) or ARTICLE VIII.
(d) OTHER DEFAULTS. The Company fails to perform or observe
any other term or covenant contained in this Agreement or any other Loan
Document, and such failure shall continue unremedied for a period of 30 days
after the date upon which written notice thereof is given to the Company by the
Administrative Agent or any Lender.
(e) CROSS-DEFAULT. (i) The Company or any Subsidiary (A) fails
to make any payment of Material Financial Obligations when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise, but
after giving effect to any applicable grace or cure period); or (B) fails to
perform or observe any other condition or covenant, or any other event shall
occur or condition shall exist, under one or more agreements or instruments
relating to Material Financial Obligations, if the effect of such failure, event
or condition (after giving effect to any applicable grace or cure period) is to
cause (or require), or to permit the holder or holders of such Material
Financial Obligations or the beneficiary or beneficiaries of such Material
Financial Obligations (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause (or require), such Material Financial
Obligations to become due and payable (or to be purchased, repurchased, defeased
or cash collaterized) prior to the stated maturity thereof.
(f) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Company or any
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; PROVIDED that the
foregoing shall not apply to the
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voluntary liquidation, dissolution or winding up of a Subsidiary
permitted by SECTION 7.4.
(g) INVOLUNTARY PROCEEDINGS. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process is issued or
levied against a substantial part of the Company's or any Subsidiary's
properties, and such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded, within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding with
respect to the Company or such Subsidiary; or (iii) the Company or any
Subsidiary acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its property or business.
(h) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$5,000,000; (ii) a contribution failure shall occur with respect to a Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; or (iii)
the Company or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period (or any period during which (x) the
Company is permitted to contest its obligation to make such payment without
incurring any liability (other than interest) or penalty and (y) the Company is
contesting such obligation in good faith and by appropriate proceedings), any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA or any contribution obligation under Section 4243 of ERISA, in each
case under a Multiemployer Plan in an aggregate amount in excess of $5,000,000.
(i) JUDGMENTS. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by insurance as to which the insurer does not dispute coverage) as
to any single or related series of transactions, incidents or conditions of
$25,000,000 or more, and the same shall remain unvacated and unstayed pending
appeal for a period of 25 days after the entry thereof.
(j) CHANGE OF CONTROL. Any Change of Control occurs.
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9.2 REMEDIES. If any Event of Default occurs, the Administrative Agent
shall, at the request of, or may, with the consent of, the Required Lenders,
(a) declare the commitment of each Lender to make Loans
(including the commitment of the Swing Line Lender to make Swing Line Loans) and
any obligation of each Issuing Lender to Issue Letters of Credit to be
terminated, whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount
that is or at any time thereafter may become available for drawing under all
outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, and declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Lenders all other
rights and remedies available to it and the Lenders under the Loan Documents or
applicable law;
PROVIDED, HOWEVER, that upon the occurrence of any event specified in SUBSECTION
(f) or (g) of SECTION 9.1 (in the case of CLAUSE (i) of SUBSECTION (g), upon the
expiration of the 60-day period mentioned therein), the obligation of each
Lender to make Loans and any obligation of each Issuing Lender to Issue Letters
of Credit shall automatically terminate and the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Administrative
Agent, the Issuing Lender or any other Lender. The Administrative Agent shall
promptly notify the Company of any declaration described in CLAUSE (a) or (b) of
the preceding sentence, but failure to give any such notice shall not impair any
such declaration or result in any liability to the Administrative Agent.
9.3 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
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ARTICLE X
THE ADMINISTRATIVE AGENT
10.1 APPOINTMENT AND AUTHORIZATION; "ADMINISTRATIVE AGENT". (a) Each
Lender hereby irrevocably (subject to SECTION 10.9) appoints, designates and
authorizes the Administrative Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Administrative Agent have or be deemed
to have any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term "agent" in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) Each Issuing Lender shall act on behalf of the Lenders
with respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Administrative Agent may
agree at the request of the Required Lenders to act for such Issuing Lender with
respect thereto; PROVIDED, HOWEVER, that each Issuing Lender shall have all of
the benefits and immunities (i) provided to the Administrative Agent in this
ARTICLE X with respect to any acts taken or omissions suffered by such Issuing
Lender in connection with Letters of Credit Issued by it or proposed to be
Issued by it and the application and agreements for letters of credit pertaining
to the Letters of Credit as fully as if the term "Administrative Agent", as used
in this ARTICLE X, included such Issuing Lender with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with respect to
such Issuing Lender.
(c) The Swing Line Lender shall have all of the benefits and
immunities (i) provided to the Administrative Agent in this ARTICLE X with
respect to any acts taken or omissions suffered by the Swing Line Lender in
connection with Swing Line
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Loans made or proposed to be made by it as fully as if the term "Administrative
Agent", as used in this ARTICLE X, included the Swing Line Lender with respect
to such acts or omissions and (ii) as additionally provided in this Agreement
with respect to the Swing Line Lender.
10.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
10.3 LIABILITY OF ADMINISTRATIVE AGENT. None of the Administrative
Agent-Related Persons shall (i) be liable to any Lender for any action taken or
omitted to be taken by any of them under or in connection with this Agreement or
any other Loan Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Lenders for any recital, statement, representation or
warranty made by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any other Loan Document,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in connection
with, this Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Administrative
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
10.4 RELIANCE BY ADMINISTRATIVE AGENT. (a) The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate and, if it so
requests, it shall first be
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indemnified to its satisfaction by the Lenders 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 Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in SECTION 5.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Lender
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender.
10.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default or Unmatured
Event of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Administrative Agent for the
account of the Lenders, unless the Administrative Agent shall have received
written notice from a Lender or the Company referring to this Agreement,
describing such Event of Default or Unmatured Event of Default and stating that
such notice is a "notice of default". If the Administrative Agent receives such
a notice, the Administrative Agent will notify the Lenders of its receipt of
such notice. The Administrative Agent shall take such action with respect to
such Event of Default or Unmatured Event of Default as may be requested by the
Required Lenders in accordance with this ARTICLE X; PROVIDED, HOWEVER, that
unless and until the Administrative Agent has received any such request, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default or
Unmatured Event of Default as it shall deem advisable or in the best interest of
the Lenders.
10.6 CREDIT DECISION. Each Lender acknowledges that none of the
Administrative Agent-Related Persons has made any representation or warranty to
it, and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of the Company and its Subsidiaries, shall be deemed to
constitute any representation or warranty by any Administrative Agent-Related
Person to any Lender. Each Lender represents to the Administrative Agent that it
has, independently and without reliance upon any Administrative Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other
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condition and creditworthiness of the Company and its Subsidiaries, and all
applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company hereunder. Each Lender also represents that it will,
independently and without reliance upon any Administrative Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by the Administrative
Agent, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any
Administrative Agent-Related Person.
10.7 INDEMNIFICATION OF ADMINISTRATIVE AGENT. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Administrative Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation of
the Company to do so), pro rata, from and against any and all Indemnified
Liabilities; PROVIDED, HOWEVER, that no Lender shall be liable for the payment
to any Administrative Agent-Related Person of any portion of the Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the termination of this Agreement, the
payment of all Obligations and the resignation or replacement of the
Administrative Agent.
10.8 ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY. BofA and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the
Company and its
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Subsidiaries and Affiliates as though BofA were not the Administrative Agent,
the Swing Line Lender or an Issuing Lender hereunder and without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, BofA or its Affiliates may receive information regarding the Company
or its Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Subsidiary) and acknowledge that the
Administrative Agent shall be under no obligation to provide such information to
them. With respect to its Loans, BofA shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though it
were not the Administrative Agent, the Swing Line Lender or an Issuing Lender.
10.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may, and
at the request of the Required Lenders shall, resign as Administrative Agent
upon 30 days' notice to the Lenders. If the Administrative Agent resigns under
this Agreement, the Required Lenders (with, so long as no Event of Default
exists, the consent of the Company, which shall not be unreasonably withheld or
delayed) shall appoint from among the Lenders a successor administrative agent
for the Lenders. If no successor administrative agent is appointed prior to the
effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and the
Company, a successor administrative agent from among the Lenders. Upon the
acceptance of its appointment as successor administrative agent hereunder, such
successor administrative agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent and the term "Administrative Agent"
shall mean such successor administrative agent and the retiring Administrative
Agent's appointment, powers and duties as Administrative Agent shall be
terminated. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this ARTICLE X and SECTIONS 11.4 and
11.5 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
administrative agent has accepted appointment as Administrative Agent by the
date which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Administrative Agent hereunder until such time, if any, as the Required
Lenders appoint a successor administrative agent as provided for above.
Notwithstanding the foregoing, however, BofA may not be removed as the
Administrative Agent at the request of the Required Lenders unless BofA and any
applicable Affiliate thereof shall also simultaneously be replaced as "Swing
Line Lender" and as an "Issuing Lender" hereunder pursuant to documentation in
form and substance reasonably satisfactory to BofA.
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10.10 WITHHOLDING TAX. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Lender agrees with and in favor of the Administrative
Agent and the Company, to deliver to the Administrative Agent (with a copy to
the Company):
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 before the payment of any
interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Lender and in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Each such Lender agrees to promptly notify the Administrative Agent and the
Company of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.
(b) If any Lender claiming exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations owed to such Lender, such Lender agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Lender. To the extent of
such percentage amount, the Administrative Agent will treat such Lender's IRS
Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative Agent grants a
participation in all or part of the Obligations owed to such Lender, such Lender
agrees to undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code.
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(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. If the forms or other documentation required
by SUBSECTION (a) of this Section are not delivered to the Administrative Agent,
then the Administrative Agent may withhold from any interest payment to such
Lender not providing such forms or other documentation an amount equivalent to
the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Administrative
Agent or the Company did not properly withhold tax from amounts paid to or for
the account of any Lender because such Lender failed to notify the
Administrative Agent or the Company of a change in circumstances which rendered
the exemption from, or reduction of, withholding tax ineffective) such Lender
shall indemnify the Administrative Agent and the Company fully for all amounts
paid, directly or indirectly, by the Administrative Agent or the Company as tax
or otherwise, including penalties and interest, and including any taxes imposed
by any jurisdiction on the amounts payable to the Administrative Agent or the
Company under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement of the
Administrative Agent.
10.11 DOCUMENTATION AGENTS. None of the Lenders identified on the
facing page or signature pages of this Agreement or any related document as a
"Documentation Agent" shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, none of the Lenders so
identified as a "Documentation Agent" shall have or be deemed to have any
fiduciary relationship with any Lender. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders so identified in deciding to
enter into this Agreement or in taking or not taking action hereunder.
ARTICLE XI
MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Required Lenders
(or
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by the Administrative Agent at the written request of the Required Lenders) and
the Company and acknowledged by the Administrative Agent, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; PROVIDED that no such waiver, amendment or
consent shall increase or extend the Commitment of any Lender without the
written consent of such Lender; and PROVIDED, FURTHER, that no such waiver,
amendment or consent shall, unless in writing and signed by all Lenders and the
Company and acknowledged by the Administrative Agent, do any of the following:
(a) reinstate any Commitment terminated pursuant to
SECTION 9.2;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on, any Loan, or reduce any fees (other than the fees referred to in
SUBSECTION 2.11(a) or SUBSECTIONS 3.8(c) and (d)) or other amounts payable
hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Lenders
or any of them to take any action hereunder; or
(e) amend this Section, or SECTION 2.15, or any
provision herein providing for consent or other action by all
Lenders;
and PROVIDED, FURTHER, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the applicable Issuing Lender in addition to the Required
Lenders or all Lenders, as the case may be, affect the rights or duties of such
Issuing Lender under this Agreement or any L/C-Related Document relating to any
Letter of Credit Issued or to be Issued by it, (ii) no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Required Lenders or all Lenders, as the case may be, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document and (iii) no amendment, waiver or consent shall, unless in writing
and signed by the Swing Line Lender in addition to the Required Lenders or all
Lenders, as the case may be, affect the rights or duties of the Swing Line
Lender under this Agreement or any other Loan Document.
11.2 NOTICES. (a) All notices, requests, consents,
approvals, waivers and other communications shall be in writing
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(including, unless the context expressly otherwise provides, by facsimile
transmission, provided that any matter transmitted by the Company by facsimile
(i) shall be immediately confirmed by a telephone call to the recipient at the
number specified on SCHEDULE 11.2, and (ii) shall be followed promptly by
delivery of a hard copy original thereof) and mailed, faxed or delivered, to the
address or facsimile number specified for notices on SCHEDULE 11.2 or (x) in the
case of the Company or the Administrative Agent, to such other address as shall
be designated by such party in a written notice to the other parties and (y) in
the case of any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Administrative Agent;
PROVIDED that, if agreed by any Issuing Lender, notices to such Issuing Lender
by the Company pursuant to ARTICLE III may be transmitted electronically to such
Issuing Lender.
(b) All such notices, requests, consents, approvals, waivers
and communications shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day) delivery, or transmitted in
legible form by facsimile machine, respectively, or if mailed, upon the third
Business Day after the date deposited into the U.S. mail, certified or
registered mail, return receipt requested or if delivered, upon delivery; except
that notices pursuant to ARTICLE II, III or X to the Administrative Agent or the
Swing Line Lender, as the case may be, shall not be effective until actually
received by the Administrative Agent or the Swing Line Lender, as the case may
be, and notices pursuant to ARTICLE III to the applicable Issuing Lender shall
not be effective until actually received by such Issuing Lender at the address
specified for such "Issuing Lender" on SCHEDULE 11.2.
(c) Any agreement of the Administrative Agent and the Lenders
herein to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company. The Administrative Agent and the
Lenders shall be entitled to rely on the authority of any Person purporting to
be a Person authorized by the Company to give such notice and the Administrative
Agent and the Lenders shall not have any liability to the Company or any other
Person on account of any action taken or not taken by the Administrative Agent
or the Lenders in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Administrative Agent
and the Lenders to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Administrative Agent and the Lenders of a
confirmation which is at variance with the terms understood by the
Administrative Agent and the Lenders to be contained in the telephonic or
facsimile notice.
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11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
11.4 COSTS AND EXPENSES. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Administrative
Agent, Swing Line Lender and an Issuing Lender) and BRS within five Business
Days after demand (subject to SUBSECTION 5.1(e)) for all reasonable costs and
expenses incurred by BofA (including in its capacity as Administrative Agent,
Swing Line Lender and an Issuing Lender) and BRS in connection with the
negotiation, preparation, delivery, documentation and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any other Loan Document and any other document
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including Attorney Costs incurred
by BofA (including in its capacity as Administrative Agent, Swing Line Lender
and an Issuing Lender) and BRS with respect thereto; and
(b) pay or reimburse the Administrative Agent, BRS and each
Lender within five Business Days after demand for all reasonable costs and
expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document (including in connection with
any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding).
11.5 COMPANY INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Administrative Agent-Related Persons and each Lender and each of their
respective officers, directors, employees, counsel, agents and attorneys-in-fact
(each an "INDEMNIFIED PERSON") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including Attorney Costs) of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of the Administrative Agent or
replacement of any Lender) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or
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referred to herein, or the transactions contemplated hereby, or any action taken
or omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any Insolvency Proceeding or appellate proceeding) related to or arising out of
this Agreement or the Loans or Letters of Credit or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED that the
Company shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive the termination of this Agreement and the payment of all other
Obligations.
11.6 PAYMENTS SET ASIDE. To the extent that the Company makes a payment
to the Administrative Agent or the Lenders, or the Administrative Agent or any
Lender exercises its right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion) to be repaid to a trustee, a receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred and (b) each Lender
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent.
11.7 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and each Lender.
11.8 ASSIGNMENTS, PARTICIPATIONS, ETC. (a) Any Lender may, with the
written consent of the Company (which consent shall not be required during the
existence of an Event of Default), and the Administrative Agent (such consents
not to be unreasonably withheld or delayed), at any time assign and delegate to
one or more Eligible Assignees (provided that no written consent of the Company
or the Administrative Agent shall be required in connection with any assignment
and delegation by a Lender to an Eligible Assignee that is an Affiliate of such
Lender) (each an "ASSIGNEE") all, or any ratable part of all, of the Committed
Loans, the Commitments, the L/C Obligations and the other rights and obligations
of such Lender hereunder, in a minimum amount of
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$10,000,000 (or, if less, the amount of such Lender's Commitment); PROVIDED,
HOWEVER, that the Company and the Administrative Agent may continue to deal
solely and directly with such Lender in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Company and the Administrative Agent by
such Lender and the Assignee; (ii) such Lender and its Assignee shall have
delivered to the Company and the Administrative Agent an Assignment and
Acceptance in the form of EXHIBIT J ("ASSIGNMENT AND ACCEPTANCE") together with
any Note or Notes subject to such assignment and (iii) such Lender or the
Assignee has paid to the Administrative Agent a processing fee in the amount of
$3,500.
(b) From and after the date that the Administrative Agent
notifies the assignor Lender that it has received and provided its consent (and,
to the extent required, received the consent of the Company) with respect to an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Loan Documents.
(c) As soon as practicable after the effectiveness of any
Assignment and Acceptance pursuant to SUBSECTION 11.8(a)), the Company shall,
upon request, execute and deliver to the Administrative Agent a new Note
evidencing the applicable Assignee's assigned Loans and Commitment. Immediately
upon the effectiveness of any Assignment and Acceptance, this Agreement shall be
deemed to be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and/or the resulting adjustment of the Commitments
arising therefrom.
(d) Any Lender may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "PARTICIPANT")
participating interests in any Loans, the Commitment of such Lender and the
other interests of such Lender (the "originating Lender") hereunder and under
the other Loan Documents; PROVIDED, HOWEVER, that (i) the originating Lender's
obligations under this Agreement shall remain unchanged, (ii) the originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) the Company, each Issuing Lender, the Swing Line Lender and the
Administrative Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
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obligations under this Agreement and the other Loan Documents, and (iv) no
Lender shall transfer or grant any participating interest under which a
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Lenders
as described in the FIRST PROVISO to SECTION 11.1. In the case of any such
participation, the Participant shall be entitled to the benefit of SECTIONS 4.1,
4.3, 4.4 and 11.5 as though it were also a Lender hereunder (provided that no
Participant shall be entitled to any greater amount pursuant to such Sections
than the originating Lender would have been entitled to receive if no such
participation had been sold), and if amounts outstanding under this Agreement
are due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall be
deemed to have the right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law.
11.9 CONFIDENTIALITY. Each Lender agrees to take, and to cause its
Affiliates to take, normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Administrative Agent on the Company's or such Subsidiary's behalf, under
this Agreement or any other Loan Document, and neither such Lender nor any of
its Affiliates shall use any such information other than in connection with or
in enforcement of this Agreement and the other Loan Documents or in connection
with other business now or hereafter existing or contemplated with the Company
or any Subsidiary; except to the extent such information (i) was or becomes
generally available to the public other than as a result of disclosure by such
Lender, or (ii) was or becomes available on a non-confidential basis from a
source other than the Company, provided that such source is not bound by a
confidentiality agreement with the Company or any Subsidiary known to such
Lender; PROVIDED, HOWEVER, that any Lender may disclose such information (A) at
the request or pursuant to any requirement of any Governmental Authority to
which such Lender is subject or in connection with an examination of such Lender
by any such authority; (B) pursuant to subpoena or other court
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process; (C) when required to do so in accordance with the provisions of any
applicable Requirement of Law; (D) to the extent reasonably required in
connection with any litigation or proceeding to which the Administrative Agent
or any Lender or any of their respective Affiliates may be party; (E) to the
extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Lender's independent
auditors and other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Lenders hereunder;
(H) as to any Lender or any of its Affiliates, as expressly permitted under the
terms of any other document or agreement regarding confidentiality to which the
Company or any Subsidiary is party or is deemed party with such Lender or such
Affiliate; and (I) to its Affiliates.
11.10 SET-OFF. In addition to any rights and remedies of the Lenders
provided by law, if any Event of Default exists, each Lender is authorized at
any time and from time to time, without prior notice to the Company, any such
notice being expressly waived by the Company to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other indebtedness at any
time owing by, such Lender to or for the credit or the account of the Company
against any and all Obligations owing to such Lender, now or hereafter existing,
irrespective of whether or not the Administrative Agent or such Lender shall
have made demand under this Agreement or any other Loan Document and although
such Obligations may be contingent or unmatured. Each Lender agrees promptly to
notify the Company and the Administrative Agent after any such set-off and
application made by such Lender; PROVIDED, HOWEVER, that the failure to give
such notice shall not affect the validity of such set-off and application.
11.11 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Lender
shall notify the Administrative Agent in writing of any change in the address to
which notices to such Lender should be directed, of addresses of any Lending
Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative
Agent shall reasonably request.
11.12 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall be deemed to constitute but one
and the same instrument.
11.13 SEVERABILITY. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the
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legality or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.
11.14 NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders, the
Administrative Agent and the Administrative Agent-Related Persons and the
Indemnified Persons, and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents.
11.15 GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK; PROVIDED THAT THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN
ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE
ADMINISTRATIVE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY,
THE ADMINISTRATIVE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE COMPANY, THE ADMINISTRATIVE AGENT AND THE LENDERS EACH WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
11.16 WAIVER OF JURY TRIAL. THE COMPANY, THE LENDERS AND THE
ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY ADMINISTRATIVE AGENT-RELATED
PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE COMPANY, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
91
<PAGE> 93
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENT, RENEWAL,
SUPPLEMENT OR MODIFICATION TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.17 ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents (and any agreement relating to fees referred in SUBSECTION 2.11(a)),
embodies the entire agreement and understanding among the Company, the Lenders
and the Administrative Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
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<PAGE> 94
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
REPUBLIC SERVICES, INC.
By: /s/ Kathleen W. Hyle
-----------------------------------------
Kathleen W. Hyle
Vice President and Treasurer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By: /s/ Michelle W. Kacergis
-----------------------------------------
Title: Managing Director
--------------------------------------
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, as Swing Line
Lender, as an Issuing Lender
and as a Lender
By: /s/ Michelle W. Kacergis
-----------------------------------------
Title: Managing Director
--------------------------------------
THE CHASE MANHATTAN BANK,
as Documentation Agent and
as a Lender
By: /s/ Peter M. Hayes
-----------------------------------------
Title: Vice President
--------------------------------------
S-1
<PAGE> 95
THE FIRST NATIONAL BANK OF CHICAGO,
as Documentation Agent, as an
Issuing Lender and as a Lender
By: /s/ Curtis Price
-----------------------------------------
Title: Managing Director
--------------------------------------
NATIONSBANK, N.A.,
as Documentation Agent and as a
Lender
By: /s/ [Illegible]
-----------------------------------------
Title: Senior Vice President
--------------------------------------
ABN-AMRO BANK, NV,
as a Lender
By: /s/ Kathryn C. Toth
-----------------------------------------
Title: Group Vice President
--------------------------------------
BANCA DI ROMA,
as a Lender
By: /s/ Steven Paley
-----------------------------------------
Title: Vice President
--------------------------------------
BANKBOSTON, N.A.,
as a Lender
By: /s/ Arthur Oberheim
-----------------------------------------
Title: Vice President
--------------------------------------
S-2
<PAGE> 96
BANK OF NEW YORK,
as a Lender
By: /s/ David Siegel
-----------------------------------------
Title: Vice President
--------------------------------------
BANKERS TRUST COMPANY,
as a Lender
By: /s/ Gregory P. Shefrin
-----------------------------------------
Title: Vice President
--------------------------------------
CIBC, INC.,
as a Lender
By: /s/ Cyd Petre
-----------------------------------------
Title: Executive Director,
CIBC Oppenheimer Corp, As Agent
--------------------------------------
CITIBANK, N.A.,
as a Lender
By: /s/ Marjorie Futornick
-----------------------------------------
Title: Vice President
--------------------------------------
COMMERZBANK AKTIENGESELLSCHAFT,
as a Lender
By: /s/ Harry P. Yergey
-----------------------------------------
Title: SVP & Manager
--------------------------------------
By: /s/ Brian J. Campbell
-----------------------------------------
Title: Vice President
--------------------------------------
S-3
<PAGE> 97
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCH
as a Lender
By: /s/ Jean M. Hannigan
-----------------------------------------
Title: Vice President
--------------------------------------
By: /s/ Susan L. Pearson
-----------------------------------------
Title: Director
--------------------------------------
FIRST AMERICAN NATIONAL BANK,
as a Lender
By: /s/ H. Hope Stewart
-----------------------------------------
Title: Assistant Vice President
--------------------------------------
FIRST UNION NATIONAL BANK,
as a Lender
By: /s/ Michael J. Carlin
-----------------------------------------
Title: Senior Vice President
--------------------------------------
FLEET BANK, N.A.,
as a Lender
By: /s/ Christopher J. Mayrose
-----------------------------------------
Title: Vice President
--------------------------------------
SUNTRUST BANK, SOUTH,
as a Lender
By: /s/ [Illegible]
-----------------------------------------
Title: Vice President
--------------------------------------
S-4
<PAGE> 98
WELLS FARGO BANK,
as a Lender
By: /s/ Larry Sheidt
-----------------------------------------
Title: Vice President
--------------------------------------
WESTDEUTSCHE LANDESBANK,
GIROZENTRALE, New York Branch
as a Lender
By: /s/ Alan S. Bookspan
-----------------------------------------
Title: Vice President
--------------------------------------
By: /s/ Elisabeth R. Wilds
-----------------------------------------
Title: Associate
--------------------------------------
S-5
<PAGE> 99
SCHEDULE 1.1
PRICING SCHEDULE
The Applicable Margin, the Facility Fee Rate and the L/C Fee Rate,
respectively, shall be determined in accordance with the table below and the
other provisions of this SCHEDULE 1.1.
<TABLE>
<CAPTION>
=====================================================================================
LEVEL I Level II Level III Level IV Level V
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Applicable Margin 0.325% 0.350% 0.375% 0.425% 0.500%
- -------------------------------------------------------------------------------------
Facility Fee Rate 0.125% 0.150% 0.175% 0.200% 0.250%
- -------------------------------------------------------------------------------------
L/C Fee Rate 0.325% 0.350% 0.375% 0.425% 0.500%
=====================================================================================
</TABLE>
LEVEL I applies when the Total Debt to EBITDA Ratio is less than 1.00
to 1.0.
LEVEL II applies when the Total Debt to EBITDA Ratio is equal to or
greater than 1.00 to 1.0 but less than 1.75 to 1.0.
LEVEL III applies when the Total Debt to EBITDA Ratio is equal to or
greater than 1.75 to 1.0 but less than 2.50 to 1.0.
LEVEL IV applies when the Total Debt to EBITDA Ratio is equal to or
greater than 2.50 to 1.0 but less than 3.00 to 1.0.
LEVEL V applies when the Total Debt to EBITDA Ratio is equal to or
greater than 3.00 to 1.0.
The applicable Level shall be adjusted, to the extent applicable, 60
days (or, in the case of the last fiscal quarter of any year, 120 days) after
the end of each fiscal quarter, based on the Total Debt to EBITDA Ratio as of
the last day of such fiscal quarter; PROVIDED that if the Company fails to
deliver the financial statements required by SUBSECTION 7.1(a) or 7.1(b), as
applicable, and the related Compliance Certificate required by SUBSECTION 7.2(a)
by the 60th day (or, if applicable, the 120th day) after any fiscal quarter,
Level V shall apply until such financial statements and Compliance Certificate
are delivered. Notwithstanding the foregoing, Level I shall apply from the
Effective Date until November 30, 1998.
<PAGE> 1
EXHIBIT 10.1
SEPARATION AND DISTRIBUTION AGREEMENT
THIS SEPARATION AND DISTRIBUTION AGREEMENT (this "Agreement"), dated as
of June 30, 1998 is by and among REPUBLIC INDUSTRIES, INC., a Delaware
corporation ("Parent"), and REPUBLIC SERVICES, INC., a Delaware corporation and
wholly owned subsidiary of Parent (the "Company"). Capitalized terms used herein
and not otherwise defined shall have the respective meanings assigned to them in
Article I hereof.
WHEREAS, the Board of Directors of Parent has determined that it is in
the best interests of Parent and its stockholders, pursuant to one overall
integrated plan, (i) to separate the Company, which comprises the Parent's solid
waste services businesses and operations (the "Solid Waste Services Business"),
from Parent's other services and operations (the "Separation"), (ii) to cause
the Company to consummate an initial public offering (the "IPO") of the
Company's common stock, and (iii) in connection with the IPO, to distribute to
Parent's stockholders on a tax-free basis all of the outstanding shares of the
Company's common stock owned by Parent at the time of such distribution (the
"Distribution"); and
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Separation, the IPO and the
Distribution and certain other agreements that will govern certain matters
relating to such transactions and the relationship of Parent and the Company
following the consummation of such transactions.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall have the
following meanings:
1.1 "Action" means any demand, action, suit, countersuit, arbitration,
inquiry, proceeding or investigation by or before any federal, state, local,
foreign or international Governmental Authority or any arbitration or mediation
tribunal.
1.2 "Affiliate" of any Person means a Person that controls, is
controlled by, or is under common control with such Person. As used herein,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such entity, whether
through ownership of voting securities or other interests, by contract or
otherwise.
<PAGE> 2
1.3 "Ancillary Agreements" means the Employee Benefits Agreement, the
Services Agreement, the Tax Indemnification and Allocation Agreement, the Lease
and such additional agreements between Parent and the Company and other related
documents as may be necessary to complete the Separation, the IPO and the
Distribution.
1.4 "Applicable Deadline" has the meaning set forth in Section 11.3(b).
1.5 "Arbitration Act" means the United States Arbitration Act, 9 U.S.C.
Sections 1-14, as the same may be amended from time to time.
1.6 "Arbitration Demand Notice" has the meaning set forth in Section
11.3(a).
1.7 "Assets" means assets, properties and rights (including goodwill),
wherever located (including in the possession of vendors or other third parties
or elsewhere), whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or required to be
recorded or reflected on the books and records or financial statements of any
Person, including the following:
(a) all accounting and other books, records and files whether
in paper, microfilm, microfiche, computer tape or disc, magnetic tape or any
other form;
(b) all apparatus, computers and other electronic data
processing equipment, fixtures, machinery, equipment, furniture, office
equipment, automobiles, trucks, aircraft, rolling stock, vessels, motor vehicles
and other transportation equipment, special and general tools, test devices,
prototypes and models and other tangible personal property;
(c) all inventories of materials, parts, raw materials,
supplies, work-in-process and finished goods and products;
(d) all interests in real property of whatever nature,
including easements, whether as owner, mortgagee or holder of a Security
Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;
(e) all interests in any capital stock or other equity
interests of any Subsidiary or any other Person, all bonds, notes, debentures or
other securities issued by any Subsidiary or any other Person, all loans,
advances or other extensions of credit or capital contributions to any
Subsidiary or any other Person and all other investments in securities of any
Person;
(f) all license agreements, leases of personal property, open
purchase orders for raw materials, supplies, parts or services, unfilled orders
for the manufacture and sale of products and other contracts, agreements or
commitments;
2
<PAGE> 3
(g) all deposits, letters of credit and performance and surety
bonds;
(h) all written technical information, data, specifications,
research and development information, engineering drawings, operating and
maintenance manuals, and materials and analyses prepared by consultants and
other third parties;
(i) all domestic and foreign copyrights, trade names,
trademarks, service marks and registrations and applications for any of the
foregoing, trade secrets, other proprietary information and licenses from third
Persons granting the right to use any of the foregoing;
(j) all computer applications, programs and other software,
including operating software, network software, systems documentation and
instructions;
(k) all cost information, sales and pricing data, customer
prospect lists, supplier records, customer and supplier lists, customer and
vender data, correspondence and lists, product literature, artwork, design,
development and manufacturing files, vendor and customer drawings, formulations
and specifications, quality records and reports and other books, records,
studies, surveys, reports, plans and documents;
(l) all prepaid expenses, trade accounts and other accounts
and notes receivables;
(m) all rights under contracts or agreements, all claims or
rights against any Person arising from the ownership of any Asset, all rights in
connection with any bids or offers and all claims, choses in action or similar
rights, whether accrued or contingent;
(n) all rights under insurance policies and all rights in the
nature of insurance, indemnification or contribution;
(o) all licenses (including radio and similar licenses),
permits, approvals and authorizations which have been issued by any Governmental
Authority;
(p) all cash or cash equivalents, bank accounts, lock boxes
and other deposit arrangements; and
(q) all interest rate, currency, commodity or other swap,
collar, cap or other hedging or similar agreements or arrangements.
1.8 "Class A Common Stock" means the Class A Common Stock of the
Company, $.01 par value per share, entitled to one vote per share.
1.9 "Class B Common Stock" means the Class B Common Stock of the
Company, $.01 par value per share, entitled to five votes per share.
3
<PAGE> 4
1.10 "Code" means the Internal Revenue Code of 1986, as amended,
together with the rules and regulations promulgated thereunder.
1.11 "Commission" means the Securities and Exchange Commission.
1.12 "Consents" means any consents, waivers or approvals from, or
notification requirements to, any third parties.
1.13 "Company Assets" has the meaning set forth in Section 2.3.
1.14 "Company Balance Sheet" means the consolidated balance sheet of
the Company, including the notes thereto, as of March 31, 1998.
1.15 "Company Business" means: (a) the Solid Waste Services Business,
including without limitation, the business and operations of Parent and the
Company or Affiliates consisting principally of the solid waste collection and
disposal service to municipal, residential, commercial and industrial customers,
and the ownership and operation of transfer stations, materials recycling
facilities and solid waste landfills; and (b) any terminated, divested or
discontinued businesses or operations that at the time of termination,
divestiture or discontinuation primarily related to the Solid Waste Service
Business as then conducted.
1.16 "Company Common Stock" means collectively the Class A Common Stock
and Class B Common Stock.
1.17 "Company Contracts" means the following contracts and agreements
relating to the Company Business to which Parent or any of its Affiliates is a
party or by which it or any of its Affiliates or any of their respective Assets
is bound, whether or not in writing, except for any such contract or agreement
that is contemplated to be retained by Parent or any member of the Parent Group
pursuant to any provision of this Agreement or any Ancillary Agreement:
(a) any supply or vendor or customer contracts or agreements
entered into in the name of, or expressly on behalf of, any division, business
unit or member of the Company Group;
(b) any federal, state and local government and other contract
and agreement and any other government contract or agreement entered into in the
name of, or expressly on behalf of, any division, business unit or member of the
Company Group that relates primarily to the Company Business;
(c) any contract or agreement representing capital or
operating equipment lease obligations reflected on the Company Balance Sheet,
including obligations as lessee;
4
<PAGE> 5
(d) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement or any of the Ancillary Agreements to be
assigned to the Company or any member of the Company Group; and
(e) any guarantee, indemnity, representation, warranty or
other Liability of any member of the Company Group or the Parent Group in
respect of any other Company Contract, any Company Liability or the Company
Business (including guarantees of financing incurred by customers or other third
parties in connection with purchases of products or services from the Company
Business).
1.18 "Company Group" means the Company, each Subsidiary of the Company
and each other Person that is controlled directly or indirectly by the Company
immediately after the Offerings Closing Date.
1.19 "Company Indemnitees" has the meaning set forth in Section 6.3.
1.20 "Company Liabilities" has the meaning set forth in Section 2.4.
1.21 "Distribution Agent" means the distribution agent to be appointed
by Parent to effect the Distribution.
1.22 "Distribution Date" means the date determined pursuant to Section
4.1 on which the Distribution occurs.
1.23 "Distribution Time" means 5:00 p.m., Eastern Standard Time or
Eastern Daylight Time (whichever shall be then in effect), on the Distribution
Date.
1.24 "Effective Date" means the date on which the Registration
Statement is declared effective by the Commission.
1.25 "Employee Benefits Agreement" means the Employee Benefits
Agreement, dated as of the date hereof, by and between Parent and the Company.
1.26 "Environmental Law" means any federal, state, local, foreign or
international law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, common law (including tort and environmental
nuisance law), legal doctrine, order, judgment, decree, injunction, requirement
or agreement with any Governmental Authority, now or hereafter in effect
relating to health, safety, pollution or the environment (including ambient air,
surface water, groundwater, land surface or subsurface strata) or to emissions,
discharges, releases or threatened releases of any substance currently or at any
time hereafter listed, defined, designated or classified as hazardous, toxic,
waste, radioactive or dangerous, or otherwise regulated, under any of the
foregoing, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any such substances,
including the Comprehensive Environmental
5
<PAGE> 6
Response, Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act and the Resource Conservation and Recovery Act and
comparable provisions in state, local, foreign or international law.
1.27 "Environmental Liabilities" means all Liabilities relating to,
arising out of or resulting from any Environmental Law or contract or agreement
relating to environmental, health or safety matters (including all removal,
remediation or cleanup costs, investigatory costs, governmental response costs,
natural resources damages, property damages, personal injury damages, costs of
compliance with any settlement, judgment or other determination of Liability and
indemnity, contribution or similar obligations) and all costs and expenses
(including allocated costs of in-house counsel and other personnel), interest,
fines, penalties or other monetary sanctions in connection therewith.
1.28 "Escalation Notice" has the meaning set forth in Section 11.2.
1.29 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
1.30 "Excluded Assets" has the meaning set forth in Section 2.3(b).
1.31 "Excluded Liabilities" has the meaning set forth in Section
2.4(b).
1.32 "Governmental Approvals" means any notices, reports or other
filings to be made, or any consents, registrations, approvals, permits or
authorizations to be obtained from, any Governmental Authority.
1.33 "Governmental Authority" shall mean any federal, state, local,
foreign or international court, government, department, commission, board,
bureau, agency, official or other regulatory, administrative or governmental
authority.
1.34 "Group" means any of the Parent Group or the Company Group, as the
context requires.
1.35 "Indemnifying Party" has the meaning set forth in Section 6.4(a).
1.36 "Indemnitee" has the meaning set forth in Section 6.4(a).
1.37 "Indemnity Payment" has the meaning set forth in Section 6.4(a).
1.38 "Information" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow
6
<PAGE> 7
charts, data, computer data, disks, diskettes, tapes, computer programs or other
software, marketing plans, customer names, communications by or to attorneys
(including attorney-client privileged communications), memos and other materials
prepared by attorneys or under their direction (including attorney work
product), and other technical, financial, employee or business information or
data.
1.39 "Insurance Policies" means the insurance policies written by
insurance carriers unaffiliated with Parent pursuant to which the Company or one
or more of its Subsidiaries (or their respective officers or directors) will be
insured parties after the Offerings Closing Date.
1.40 "Insurance Proceeds" means those monies:
(a) received by an insured from an insurance carrier;
(b) paid by an insurance carrier on behalf of the insured; or
(c) received (including by way of set off) from any third
party in the nature of insurance, contribution or indemnification in respect of
any Liability; in any such case net of any applicable premium adjustments
(including deductibles, reserves and retrospectively rated premium adjustments)
and net of any costs or expenses (including allocated costs of in-house counsel
and other personnel) paid by such insured or incurred by such insured in the
collection thereof.
1.41 "Letter Ruling" means a private letter ruling from the Internal
Revenue Service in form and substance satisfactory to Parent to the effect,
among other things, that the Distribution will qualify as a tax-free
distribution for federal income tax purposes under Section 355 of the Code.
1.42 "Lease" means the lease, dated as of the date hereof, between a
Subsidiary of the Parent and the Company for certain space located at 110 S.E.
6th Street, Ft. Lauderdale, FL.
1.43 "Liabilities" means any and all liabilities, including
Environmental Liabilities, OFLs, losses, claims, charges, debts, demands,
actions, causes of action, suits, damages, obligations, payments, costs and
expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities
and similar obligations, exonerations, covenants, contracts, controversies,
agreements, promises, doings, omissions, variances, guarantees, make whole
agreements and similar obligations, and other liabilities, including all
contractual obligations, whether absolute or contingent, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever
arising, and including those arising under any law, rule, regulation, Action,
threatened or contemplated Action (including the costs and expenses of demands,
assessments, judgments, settlements and compromises relating thereto and
attorneys' fees and any and all costs and expenses (including allocated costs of
in-house counsel and other personnel), whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened or
contemplated Actions), order or consent decree of any Governmental Authority or
any award of any arbitrator or mediator of any kind, and those arising under any
contract, commitment or undertaking, including
7
<PAGE> 8
those arising under this Agreement or any Ancillary Agreement, in each case,
whether or not recorded or reflected or required to be recorded or reflected on
the books and records or financial statements of any Person.
1.44 "Offerings Closing" means the receipt by the Company of the net
proceeds of the IPO in accordance with the terms of the Underwriting Agreement.
1.45 "Offerings Closing Date" means the first time at which any shares
of the Class A Common Stock are sold to the Underwriters pursuant to the IPO, in
accordance with the terms of the Underwriting Agreement.
1.46 "OFLs" mean operating financial liabilities, comprising all
liabilities of any Person of a financial nature with third parties existing on
the date hereof or entered into or established between the date hereof and the
Offerings Closing Date, including any of the following:
(a) foreign exchange contracts;
(b) letters of credit;
(c) guarantees of third party loans to customers;
(d) surety bonds (excluding surety for workers' compensation
self-insurance);
(e) interest support agreements on third party loans to
customers;
(f) performance bonds or guarantees issued by third parties;
(g) swaps or other derivatives contracts; and
(h) recourse arrangements on the sale of receivables or notes.
1.47 "Parent Business" means (a) the business and operations of the
Parent Group, excluding the Company Business; and (b) any terminated, divested
or discontinued businesses or operations that at the time of termination,
divestiture or discontinuation primarily related to the business and operations
set forth in clause (a) above, as then conducted.
1.48 "Parent Common Stock" means the Common Stock, $.01 par value per
share, of Parent.
1.49 "Parent Group" means Parent, each Subsidiary of Parent and each
other Person that is controlled directly or indirectly by Parent immediately
after the Offerings Closing Date, other than any member of the Company Group.
8
<PAGE> 9
1.50 "Parent Indemnitees" has the meaning set forth in Section 6.2.
1.51 "Person" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability entity, any other entity and any Governmental Authority.
1.52 "Prime Rate" means the rate which Bank of America (or any
successor thereto or other major money center commercial bank agreed to by the
parties hereto) announces from time to time as its prime lending rate, as in
effect from time to time.
1.53 "Prospectus" means each preliminary, final or supplemental
prospectus forming a part of the Registration Statement.
1.54 "Record Date" means the close of business on the date to be
determined by the Parent Board of Directors as the record date for determining
stockholders of Parent entitled to receive shares of the Company Common Stock in
the Distribution.
1.55 "Registration Statement" means the registration statement on Form
S-1 filed under the Securities Act, pursuant to which the Class A Common Stock
to be issued in the IPO will be registered, together with all amendments
thereto.
1.56 "Required Distribution Percentage" means in accordance with
Section 368(c) of the Code, the stock of the Company (a) possessing at least 80%
of the total combined voting power of all classes of voting stock of the Company
and (b) equal to at least 80% of the total number of shares of each class of
non-voting stock of the Company.
1.57 "Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
1.58 "Security Interest" means any mortgage, security interest, pledge,
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer, or other encumbrance of any nature whatsoever.
1.59 "Services Agreement" means the Services Agreement, dated as of the
date hereof, by and between Parent and the Company.
1.60 "Subsidiary" of any Person means any corporation or other
organization whether incorporated or unincorporated of which at least a majority
of the securities or interests having by the terms thereof ordinary voting power
to elect at least a majority of the board of directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person or by any one or more
of its Subsidiaries, or by such Person and one or more of its Subsidiaries;
provided, however that no Person that is not directly
9
<PAGE> 10
or indirectly wholly owned by any other Person shall be a Subsidiary of such
other Person unless such other Person controls, or has the right, power or
ability to control, that Person.
1.61 "Tax Indemnification and Allocation Agreement" means the Tax
Indemnification and Allocation Agreement, dated as of the date hereof, by and
between Parent and the Company.
1.62 "Taxes" has the meaning set forth in the Tax Indemnification and
Allocation Agreement.
1.63 "Third Party Claim" has the meaning set forth in Section 6.5(a).
1.64 "Underwriters" means the U.S. Underwriters named in Schedule A to
the U.S. Purchase Agreement and the International Managers named in Schedule A
to the International Purchase Agreement entered into in connection with the IPO.
1.65 "Underwriting Agreements" means the U.S. Purchase Agreement and
the International Purchase Agreement to be entered into among the Company,
Parent and the Underwriters with respect to the IPO.
ARTICLE II
THE SEPARATION
2.1 THE SEPARATION. Upon the terms and subject to the conditions
contained in this Agreement, Parent and Company shall effect the corporate
reorganization transactions set forth on SCHEDULE 2.1 attached hereto as part of
one overall integrated plan, the effect of which is intended to be (a) the
tax-free distribution pursuant to Section 355 of the Code by the Company to
Parent of Republic Resources Company, Inc., a Delaware corporation and indirect
wholly owned subsidiary of the Company ("Resources"), (b) the satisfaction of
the requirement that the Company and Parent each be engaged in the "active
conduct of a trade or business" (as defined in the Code) in order for the
Distribution to qualify as a tax-free distribution pursuant to Section 355 of
the Code, and (c) the tax-free distribution pursuant to Section 355 of the Code
by Parent to Parent's stockholders of all of the Company Common Stock owned by
Parent at the time of such distribution (the "Distribution").
2.2 TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES.
(a) Effective on or before the Offerings Closing Date, Parent
hereby agrees to assign, transfer, convey and deliver to the Company, and agrees
to cause each member of the Parent Group to assign, transfer, convey and deliver
to the Company, and the Company hereby agrees to accept from Parent and each
member of the Parent Group, all of Parent's and Parent Group's respective right,
title and interest in all of the Company Assets.
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(b) Effective on or before the Offerings Closing Date, the
Company hereby agrees to assume and agrees faithfully to perform and fulfill all
of the Company Liabilities, in accordance with their respective terms. The
Company shall thereafter be responsible for all of the Company Liabilities,
regardless of when or where such Liabilities arose or arise, or whether the
facts on which they are based occurred prior to or subsequent to the date
hereof, regardless of where or against whom such Liabilities are asserted or
determined (including any Company Liabilities arising out of claims made by
Parent's directors, officers, employees, agents, Subsidiaries or Affiliates
against any member of the Parent Group or the Company Group) or whether asserted
or determined prior to the date hereof, and regardless of whether arising from
or alleged to arise from negligence, recklessness, violation of law, fraud or
misrepresentation by any member of the Parent Group or the Company Group or any
of their respective directors, officers, employees, agents, Subsidiaries or
Affiliates.
(c) Effective on or before the Offerings Closing Date, Company
hereby agrees to assign, transfer, convey and deliver to the Parent and agrees
to cause each member of the Company Group to assign, transfer, convey and
deliver to the Parent, and the Parent hereby agrees to accept from Company and
each member of the Company Group, all of the Company's and the Company Group's
respective right, title and interest in all of the Excluded Assets.
(d) Effective on or before the Offerings Closing Date, Parent
hereby agrees to assume and agrees faithfully to perform and fulfill all of the
Excluded Liabilities, in accordance with their respective terms. Parent agrees
that it shall thereafter be solely responsible for all of the Excluded
Liabilities, regardless of when or where such Liabilities arose or arise, or
whether the facts on which they are based occurred prior to or subsequent to the
date hereof, regardless of where or against whom such Liabilities are asserted
or determined (including any Excluded Liabilities arising out of claims made by
the Company's directors, officers, employees, agents, Subsidiaries or Affiliates
against any member of the Company Group or the Parent Group) or whether asserted
or determined prior to the date hereof, and regardless of whether arising from
or alleged to arise from negligence, recklessness, violation of law, fraud or
misrepresentation by any member of the Company Group of the Parent Group or any
of their respective directors, officers, employees, agents, Subsidiaries or
Affiliates.
(e) In the event that at any time or from time to time
(whether prior to or after the Offerings Closing Date), any party hereto (or any
member of such party's respective Group), shall receive or otherwise possess any
Asset that is allocated to any other Person pursuant to this Agreement or any
Ancillary Agreement, such party shall promptly transfer, or cause to be
transferred, such Asset to the Person so entitled thereto. Prior to any such
transfer, the Person receiving or possessing such Asset shall hold such Asset in
trust for any such other Person.
2.3 COMPANY ASSETS AND EXCLUDED ASSETS.
(a) For purposes of this Agreement, "Company Assets" shall
mean (without duplication):
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(i) any and all Assets that are expressly
contemplated by this Agreement or any Ancillary Agreement as Assets to be
transferred to the Company or any other member of the Company Group, including
without limitation those Assets set forth on SCHEDULE 2.3(a)(i) hereto;
(ii) except as otherwise expressly provided in this
Agreement or any Ancillary Agreement, all tenant improvements, fixtures,
furniture, office equipment, servers, artwork and other tangible property (other
than equipment subject to capital or operating equipment leases, which will be
transferred or retained based on whether the associated capital or operating
equipment lease is or is not a Company Contract) located as of the date hereof
on any real property that is covered by the Lease referred to in Section 2.7(d);
(iii) any and all Company Contracts;
(iv) all issued and outstanding shares of capital
stock of the Subsidiaries of Parent listed on SCHEDULE 2.3(a)(iv) hereto;
(v) any and all Assets reflected in the Company
Balance Sheet, subject to any dispositions of such Assets subsequent to the date
of the Company Balance Sheet;
(vi) any and all Assets owned or held immediately
prior to the Offerings Closing Date by Parent or any of its Subsidiaries that
are used primarily in the Company Business. The intention of this clause (vi) is
only to rectify any inadvertent omission of transfer or conveyance of any Assets
that, had the parties given specific consideration to such Asset as of the date
hereof, would have otherwise been classified as a Company Asset. No Asset shall
be deemed to be a Company Asset solely as a result of this clause (vi) if such
Asset is within the category or type of Asset expressly covered by the subject
matter of an Ancillary Agreement. In addition, no Asset shall be deemed a
Company Asset solely as a result of this clause (vi) unless a claim with respect
thereto is made by Company on or prior to the first anniversary of the
Offerings Closing Date.
Notwithstanding the foregoing, the Company Assets shall not in any event include
the Excluded Assets referred to in Section 2.3(b) below.
(b) For the purposes of this Agreement, "Excluded Assets"
shall mean any and all Assets that are expressly contemplated by this Agreement
or any Ancillary Agreement as Assets to be retained by Parent or any other
member of the Parent Group, including without limitation all of the capital
stock of Resources owned by the Company and those Assets set forth on SCHEDULE
2.3(b) hereto.
2.4 COMPANY LIABILITIES AND EXCLUDED LIABILITIES.
(a) For the purposes of this Agreement, "Company Liabilities"
shall mean (without duplication):
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(i) any and all Liabilities that are expressly
contemplated by this Agreement or any Ancillary Agreement as Liabilities to be
assumed by the Company or any member of the Company Group, including without
limitation those Liabilities set forth on SCHEDULE 2.4(a)(i) hereto, and all
agreements, obligations and Liabilities of any member of the Company Group under
this Agreement or any of the Ancillary Agreements;
(ii) all Liabilities (other than Taxes dealt with in
the Tax Indemnification and Allocation Agreement), whether arising before, on or
after the Offerings Closing Date, including any employee-related Liabilities and
Environmental Liabilities, primarily relating to, arising out of or resulting
from:
(A) the operation of the Company Business,
as conducted at any time prior to, on or after the Offerings
Closing Date (including any Liability relating to, arising out
of or resulting from any act or failure to act by any
director, officer, employee, agent or representative (whether
or not such act or failure to act is or was within such
Person's authority));
(B) the operation of any business conducted
by any member of the Company Group at any time after the
Offerings Closing Date (including any Liability relating to,
arising out of or resulting from any act or failure to act by
any director, officer, employee, agent or representative
(whether or not such act or failure to act is or was within
such Person's authority)); or
(C) any Company Assets (including any
Company Contracts and any real property and leasehold
interests);
(iii) all Liabilities reflected as liabilities or
obligations of the Company in the Company Balance Sheet, subject to any
discharge of such Liabilities subsequent to the date of the Company Balance
Sheet.
Notwithstanding the foregoing, the Company Liabilities shall not include the
Excluded Liabilities referred to in Section 2.4(b) below.
(b) For the purposes of this Agreement, "Excluded Liabilities"
shall mean (i) any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as
Liabilities to be retained or assumed by Parent or any other member of the
Parent Group, including without limitation those Liabilities set forth on
SCHEDULE 2.4(b) hereto, (ii) all agreements and obligations of any member of the
Parent Group under this Agreement, any of the Ancillary Agreements or the
Underwriting Agreements and (iii) all Liabilities relating to, arising out of or
resulting from the Parent Business.
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2.5 TERMINATION OF AGREEMENTS.
(a) Except as set forth in Section 2.5(b), in furtherance of
the releases and other provisions of Section 5.1 hereof, the Company and each
member of the Company Group, on the one hand, and Parent and each member of the
Parent Group, on the other hand, hereby agrees to terminate, any and all
agreements, arrangements, commitments or understandings, whether or not in
writing, between or among the Company and/or any member of the Company Group, on
the one hand, and Parent and/or any member of the Parent Group, on the other
hand, on or before the Offerings Closing Date; PROVIDED, HOWEVER, that to the
extent any such agreement, arrangement, commitment or understanding is
inconsistent with any Ancillary Agreement, such termination shall be effective
as of the date of effectiveness of the applicable Ancillary Agreement. No such
terminated agreement, arrangement, commitment or understanding (including any
provision thereof which purports to survive termination) shall be of any further
force or effect after the Offerings Closing Date (or, to the extent contemplated
by the proviso to the immediately preceding sentence, after the effective date
of the applicable Ancillary Agreement). Each party shall, at the reasonable
request of any other party, take, or cause to be taken, such other actions as
may be necessary to effect the foregoing.
(b) The provisions of Section 2.5(a) shall not apply to any of
the following agreements, arrangements, commitments or understandings (or to any
of the provisions thereof): (i) this Agreement and the Ancillary Agreements (and
each other agreement or instrument expressly contemplated by this Agreement or
any Ancillary Agreement to be entered into by any of the parties hereto or any
of the members of their respective Groups); (ii) any agreements, arrangements,
commitments or understandings listed or described on SCHEDULE 2.5(b)(ii); (iii)
any agreements, arrangements, commitments or understandings to which any Person
other than the parties hereto and their respective Affiliates is a party (it
being understood that to the extent that the rights and obligations of the
parties and the members of their respective Groups under any such agreements,
arrangements, commitments or understandings constitute Company Assets or Company
Liabilities, they shall be assigned pursuant to Section 2.2); (iv) any
intercompany accounts payable or accounts receivable accrued as of the Offerings
Closing Date that are reflected in the books and records of the parties or
otherwise documented in writing in accordance with past practices; and (v) any
other agreements, arrangements, commitments or understandings that this
Agreement or any Ancillary Agreement expressly contemplates will survive the
Offerings Closing Date.
2.6 DOCUMENTS RELATING TO OTHER TRANSFERS OF ASSETS AND ASSUMPTION OF
LIABILITIES.
(a) COMPANY ASSETS AND COMPANY LIABILITIES. In furtherance of
the assignment, transfer and conveyance of the Company Assets and the assumption
of the Company Liabilities set forth in Section 2.2 (a) and (b), simultaneously
with the execution and delivery hereof or as promptly as practicable thereafter,
(i) Parent shall execute and deliver, and shall cause each member of the Parent
Group to execute and deliver, such bills of sale, stock powers, certificates of
title, assignments of contracts and other instruments of transfer, conveyance
and assignment as and to the extent necessary to evidence the transfer,
conveyance and assignment of all of Parent's, and Parent Group's
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right, title and interest in and to Company Assets to the Company and (ii) the
Company shall execute and deliver, to Parent and Parent Group such bills of
sale, stock powers, certificates of title, assumptions of contracts and other
instruments of assumption as and to the extent necessary to evidence the valid
and effective assumption of Company Liabilities by the Company.
(b) EXCLUDED ASSETS AND EXCLUDED LIABILITIES. In furtherance
of the assignment, transfer and conveyance of the Excluded Assets and the
Excluded Liabilities set forth in Section 2.2 (c) and (d), simultaneously with
the execution and delivery hereof or as promptly as practicable thereafter, (i)
Company shall execute and deliver, and shall cause each member of the Company
Group to execute and deliver, such bills of sale, stock powers, certificates of
title, assignments of contracts and other instruments of transfer, conveyance
and assignment as and to the extent necessary to evidence the transfer,
conveyance and assignment of all of the Company's and the Company Group's right,
title and interest in and to the Excluded Assets to Parent and (ii) Parent shall
execute and deliver, to the Company and the Company Group such bills of sale,
stock powers, certificates of title, assumptions of contracts and other
instruments as and to the extent necessary to evidence the valid and effective
assumption of Excluded Liabilities by Parent.
2.7 OTHER ANCILLARY AGREEMENTS. Effective on or before the Offerings
Closing Date, each of Parent and the Company shall execute and deliver each of
the following Ancillary Agreements:
(a) the Services Agreement;
(b) the Employee Benefits Agreement;
(c) the Tax Indemnification and Allocation Agreement;
and
(d) the Lease.
2.8 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES.
(a) Each of Parent (on behalf of itself and each member of the
Parent Group) and the Company (on behalf of itself and each member of the
Company Group) understands and agrees that, except as expressly set forth herein
or in any Ancillary Agreement, no party to this Agreement, any Ancillary
Agreement or any other agreement or document contemplated by this Agreement, any
Ancillary Agreement or otherwise, is representing or warranting in any way as to
(i) the Assets, businesses or Liabilities transferred or assumed as contemplated
hereby or thereby, (ii) any consents or approvals required in connection
therewith, (iii) the value or freedom from any Security Interests of, or any
other matter concerning, any Assets of such party, or as to the absence of any
defenses or right of setoff or freedom from counterclaim with respect to any
claim or other Asset, including any accounts receivable, of any party, or (iv)
as to the legal sufficiency of any assignment, document or instrument delivered
hereunder to convey title to any Asset or thing of value upon the execution,
delivery and filing hereof or thereof. Except as may expressly be set forth
herein or in any Ancillary
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Agreement, all such Assets are being transferred on an "as is," "where is" basis
(and, in the case of any real property, by means of a quitclaim or similar form
deed or conveyance) and the respective transferees shall bear the economic and
legal risks that any conveyance shall prove to be insufficient to vest in the
transferee good and marketable title, free and clear of any Security Interest.
2.9 GOVERNMENTAL APPROVALS AND CONSENTS.
(a) Each of Parent and the Company shall use their reasonable
best efforts to obtain the Governmental Approvals and Consents as set forth on
SCHEDULE 2.9(a) required to assign, transfer, convey and deliver the Company
Assets to the Company and the Excluded Assets to Parent.
(b) If and to the extent that the valid, complete and
perfected transfer or assignment (or novation of any federal government
contract) to the Company Group of any Company Assets (or from the Company Group
of any Excluded Assets) would be a violation of applicable laws or require any
Consent or Governmental Approval in connection with the Separation, the IPO or
the Distribution, then, unless Parent shall otherwise determine, the transfer or
assignment to or from the Company Group, as the case may be, of such Company
Assets or Excluded Assets, respectively, shall be automatically deemed deferred
and any such purported transfer or assignment shall remain pending until such
time as all legal impediments are removed and/or such Consents or Governmental
Approvals have been obtained. Notwithstanding the foregoing, such Asset shall be
deemed a Company Asset for purposes of determining whether any Liability is a
Company Liability.
(c) If the transfer or assignment of any Assets intended to be
transferred or assigned hereunder, is not consummated prior to or at the
Offerings Closing Date, whether as a result of the provisions of Section 2.9(b)
or for any other reason, then the Person retaining such Asset shall thereafter
hold such Asset for the use and benefit, insofar as reasonably possible, of the
Person entitled thereto (at the expense of the Person entitled thereto). In
addition, the Person retaining such Asset shall take such other actions as may
be reasonably requested by the Person to whom such Asset is to be transferred in
order to place such Person, insofar as reasonably possible, in the same position
as if such Asset had been transferred as contemplated hereby and so that all the
benefits and burdens relating to such Company Assets (or such Excluded Assets,
as the case may be), including possession, use, risk of loss, potential for
gain, and dominion, control and command over such Assets, are to inure from and
after the Offerings Closing Date to the Company Group (or the Parent Group, as
the case may be).
(d) If and when the Consents and/or Governmental Approvals,
the absence of which caused the deferral of transfer of any Asset pursuant to
Section 2.9(b), are obtained, the transfer of the applicable Asset shall be
effected in accordance with the terms of this Agreement and/or the applicable
Ancillary Agreement.
(e) The Person retaining an Asset due to the deferral of the
transfer of such Asset shall not be obligated, in connection with the foregoing,
to expend any money unless the necessary
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funds are advanced by the Person entitled to the Asset, other than reasonable
out-of-pocket expenses, attorneys' fees and recording or similar fees, all of
which shall be promptly reimbursed by the Person entitled to such Asset.
2.10 NOVATION OF ASSUMED COMPANY LIABILITIES.
(a) Each of Parent and the Company, at the request of the
other, shall use its reasonable best efforts to obtain, or to cause to be
obtained, any Consent or Governmental Approval required to novate (including
with respect to any Governmental Authority contract) or assign all Company
Liabilities, or to obtain in writing the unconditional release of all parties to
such Company Liabilities other than any member of the Company Group, so that, in
any such case, the members of the Company Group will be solely responsible for
such Liabilities; PROVIDED, HOWEVER, that none of Parent or the Company shall be
obligated to pay any consideration therefor to any third party from whom such
Consents or Governmental Approvals, are requested other than filing and other
fees required by applicable law.
(b) If Parent and the Company are unable to obtain, or to
cause to be obtained, any such required Consent or Governmental Approval, the
applicable member of the Parent Group, as the case may be, shall continue to be
bound by such Company Liability and, unless not permitted by law or the terms
thereof, the Company shall, as agent or subcontractor for Parent, or such other
Person, as the case may be, pay, perform and discharge fully all the obligations
or other Liabilities of Parent, or such other Person, as the case may be,
thereunder from and after the date hereof, and the Company shall indemnify each
Parent Indemnitee and hold each of them harmless against any Liabilities arising
in connection therewith. Parent shall, without further consideration, pay and
remit, or cause to be paid or remitted, to the Company promptly all money,
rights and other consideration received by it or any member of Parent Group in
respect of such performance (unless any such consideration is an Excluded
Asset). If and when any such Consent or Governmental Approval shall be obtained
or such Liability shall otherwise become assignable or able to be novated,
Parent shall thereafter assign, or cause to be assigned, such Liability or any
rights or obligations of any member of Parent Group to the Company or to another
member of the Company Group specified by the Company without payment of further
consideration and the Company shall assume, or shall cause such other member of
the Company Group to assume, without the payment of any further consideration,
such Liability.
2.11 NOVATION OF ASSUMED LIABILITIES OTHER THAN COMPANY LIABILITIES.
(a) Each of Parent and the Company at the request of the
other, shall use their reasonable best efforts to obtain, or to cause to be
obtained, any Consent or Governmental Approval required to novate (including
with respect to any Governmental Authority Contract) or assign all Liabilities
of any nature whatsoever that do not constitute Company Liabilities, or to
obtain in writing the unconditional release of all parties to such Liabilities
other than any member of the Parent Group, so that, in any such case, the
members of the Parent Group will be solely responsible for such Liabilities;
provided, however, that none of Parent and the Company shall be obligated to
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pay any consideration therefor to any third party from whom such consents,
approvals, substitutions and amendments are requested other than filing fees
required by applicable law.
(b) If Parent and the Company are unable to obtain, or to
cause to be obtained, any such required Consent or Governmental Approval, the
applicable member of the Company Group shall continue to be bound by such
Excluded Liability and, unless not permitted by law or the terms thereof, Parent
shall cause a member of the Parent Group, as agent or subcontractor for such
member of the Company Group, to pay, perform and discharge fully all the
obligations or other Liabilities of such member of the Company Group thereunder
from and after the date hereof, and Parent shall indemnify each Company
Indemnitee and hold each of them harmless against any Liabilities arising in
connection therewith. Company shall cause each member of the Company Group
without further consideration, to pay and remit, or cause to be paid or
remitted, to Parent or to another member of the Parent Group specified by Parent
promptly all money, rights and other consideration received by it or any member
of the Company Group in respect of such performance. If and when any such
Consent or Governmental Approval shall be obtained or such Liability shall
otherwise become assignable or able to be novated, the Company shall promptly
assign, or cause to be assigned, such Liability or any rights or obligations of
any member of the Company Group to Parent or to another member of the Parent
Group specified by Parent without payment of further consideration and Parent,
without the payment of any further consideration shall, or shall cause such
other member of the Parent Group to, assume such Liability.
ARTICLE III
THE IPO AND ACTIONS PENDING THE IPO
3.1 TRANSACTIONS PRIOR TO THE IPO. Subject to the conditions specified
in Section 3.3, Parent and the Company shall use their reasonable best efforts
to consummate the IPO of shares of Class A Common Stock, including without
limitation, taking the following actions:
(a) The Company shall file such amendments or supplements to
the Registration Statement, as may be necessary in order to cause the same to
become and remain effective as required by the Underwriters, the Underwriting
Agreements, the Commission or federal, state or foreign securities laws. Parent
and the Company shall also cooperate in preparing and filing with the Commission
and causing to become effective a registration statement registering the Class A
Common Stock under the Exchange Act, and any registration statements or
amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans necessary or appropriate in
connection with the IPO, the Separation, the Distribution or the other
transactions contemplated by this Agreement and the Ancillary Agreements.
(b) Parent and the Company shall enter into the Underwriting
Agreements, in form and substance reasonably satisfactory to the Company and
shall comply with their obligations thereunder.
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(c) Parent and the Company shall consult with each other and
the Underwriters regarding the timing, pricing and other material matters with
respect to the IPO.
(d) The Company shall use its reasonable best efforts to take
all such action as may be necessary or appropriate under state securities and
blue sky laws of the United States (and any comparable laws under any foreign
jurisdictions) in connection with the IPO.
(e) The Company shall prepare, file and use reasonable best
efforts to seek to make effective, an application for listing of the Class A
Common Stock issued in the IPO on the New York Stock Exchange ("NYSE"), subject
to official notice of issuance.
(f) The Company shall participate in the preparation of
materials and presentations as the Underwriters shall deem necessary or
desirable.
(g) The Company shall pay all third party costs, fees and
expenses relating to the IPO, all of the reimbursable expenses of the
Underwriters pursuant to the Underwriting Agreements, all of the costs of
producing, printing, mailing and otherwise distributing the Prospectus, as well
as the Underwriters' discount as provided in the Underwriting Agreements.
(h) The Company shall repay outstanding amounts owed to
Resources and an Affiliate of Parent by issuing Class A Common Stock as payment
to such parties as set forth on SCHEDULE 2.1 hereto.
3.2 PROCEEDS OF THE IPO. All of the proceeds (net of the underwriting
discount) of the IPO received by the Company will be used to prepay to the
holders of such notes in part certain amounts outstanding under the Company's $2
billion in aggregate principle amount of unsecured promissory notes issued to
Parent in April 1998 (the "Company Notes"). In addition, all of the proceeds
(net of underwriting discount) from the exercise of the over allotment options
set forth in the Underwriting Agreements shall also be used to prepay the
Company Notes. In the event amounts remain outstanding under the Company Notes
after the exercise, if any, of the over-allotment options, the Company shall
prepay all such remaining amounts by issuing to each holder of Company Notes
that number of shares of Class A Common Stock determined by dividing (a) the
remaining amount owed to each such holder of Company Notes, by (b) the initial
public offering price of the Class A Common Stock.
3.3 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. As soon as
practicable after the date of this Agreement, the parties hereto shall use their
reasonable best efforts to satisfy the following conditions to the consummation
of the IPO. The obligations of Parent to consummate the IPO shall be conditioned
on the satisfaction, or waiver by Parent, of the following conditions:
(a) The Registration Statement shall have been filed and
declared effective by the Commission, and there shall be no stop-order in effect
with respect thereto.
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(b) Parent and the Company shall have effected their corporate
reorganization transactions set forth on SCHEDULE 2.1 attached hereto.
(c) The actions and filings with regard to state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) described in Section 3.1(d) shall have been taken and,
where applicable, have become effective or been accepted.
(d) The Class A Common Stock to be issued in the IPO shall
have been accepted for listing on the NYSE, subject to official notice of
issuance.
(e) Parent and the Company shall have executed the
Underwriting Agreements and all conditions to the obligations of Parent, the
Company and the Underwriters thereunder shall have been satisfied or waived by
the Underwriters.
(f) Parent shall be satisfied in its sole discretion that all
conditions to permit the Distribution to qualify as a tax-free distribution to
Parent, the Company and Parent's stockholders shall, to the extent determinable
as of the Offerings Closing Date, be satisfied and there shall be no event or
condition that is likely to cause any of such conditions not to be satisfied as
of the time of the Distribution or thereafter.
(g) No order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Separation, the IPO or the Distribution or
any of the other transactions contemplated by this Agreement or any Ancillary
Agreement shall be in effect.
(h) Such other actions as the parties hereto may, based upon
the advice of counsel, reasonably request to be taken prior to the Separation
and the IPO in order to assure the successful completion of the Separation and
the IPO and the other transactions contemplated by this Agreement shall have
been taken.
(i) This Agreement shall not have been terminated.
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ARTICLE IV
THE DISTRIBUTION
4.1 THE DISTRIBUTION.
(a) Subject to Section 4.3 hereof, Parent and the Company will
take all reasonable steps necessary and appropriate to cause all conditions to
the Distribution to be satisfied and to effect the Distribution. The Board of
Directors of Parent will have the sole discretion to determine the Distribution
Date at any time commencing after the Offerings Closing Date and ending on or
prior to such date as is three months following the receipt of the Letter
Ruling. Parent will consummate the Distribution no later than December 31, 1999,
subject to the satisfaction or waiver by the Parent's Board, in its sole
discretion, of the conditions set forth in Section 4.3.
(b) On or prior to the Distribution Date, Parent will deliver
to the Agent for the benefit of holders of record of Parent Common Stock on the
Record Date, stock certificates, endorsed by Parent in blank, representing all
of the outstanding shares of the Company Common Stock then owned by Parent or
any member of the Parent Group, and shall cause the transfer agent for the
shares of Parent Common Stock to instruct the Distribution Agent to distribute
on the Distribution Date the appropriate number of such shares of the Company
Common Stock to each such holder or designated transferee or transferees of such
holder.
(c) Subject to Section 4.4, each holder of Parent Common Stock
on the Record Date (or such holder's designated transferee or transferees) will
be entitled to receive in the Distribution a number of shares of such Company
Common Stock (rounded down to the nearest whole share) equal to the number of
shares of Parent Common Stock held by such holder on the Record Date multiplied
by a fraction the numerator of which is the number of shares of the Company
Common Stock beneficially owned by Parent or any other member of the Parent
Group on the Record Date and the denominator of which is the number of shares of
Parent Common Stock plus warrants outstanding on the Record Date.
(d) The Company and Parent, as the case may be, will provide
to the Distribution Agent all share certificates and any information required in
order to complete the Distribution on the basis specified above.
4.2 ACTIONS PRIOR TO THE DISTRIBUTION.
(a) The Company and Parent agree that, after the Offerings
Closing Date and prior to the Distribution Date, none of the parties will take,
or permit any of its Affiliates to take, any action which reasonably could be
expected to prevent the Distribution from qualifying as a tax-free distribution
to Parent and Parent's stockholders pursuant to Section 355 of the Code. The
parties will also take any reasonable actions necessary in order for the
Distribution to qualify as a tax-free distribution to Parent and Parent's
stockholders pursuant to Section 355 of the Code. Without limiting the
foregoing, after the Offerings Closing Date and prior to the Distribution Date,
the
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Company will not issue or grant, directly or indirectly, any shares of its
capital stock or any rights, warrants, options or other securities to purchase
or acquire (whether upon conversion, exchange or otherwise) any shares of its
capital stock (whether or not then exercisable, convertible or exchangeable),
without the prior consent of Parent if such issuance or grant would either
reduce Parent's ownership of the Company's capital stock below the Required
Distribution Percentage or otherwise prevent the Distribution from qualifying as
a tax-free distribution to Parent and Parent's stockholders in accordance with
Section 355 of the Code.
(b) Parent and the Company shall prepare and mail, prior to
the Distribution Date, to the holders of Parent Common Stock, such information
concerning the Company, its business, operations and management, the
Distribution and such other matters as Parent shall reasonably determine and as
may be required by law. Parent and Company will prepare, and the Company will,
to the extent required under applicable law, file with the Commission any such
documentation that Parent determines is necessary or desirable to effectuate the
Distribution and Parent and the Company shall each use its reasonable best
efforts to obtain all necessary approvals from the Commission with respect
thereto as soon as practicable.
(c) Parent and the Company shall take all such action as may
be necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(d) Parent and Company will cooperate and prepare and file
with the Internal Revenue Service the request for the Letter Ruling along with
any accompanying statements, financial data or other information deemed
necessary or advisable by Parent and the Company. Neither Parent nor the Company
may file any supplement or amendment to such request or, if such Letter Ruling
is issued, to such Letter Ruling without the consent of the other party, which
consent may not be unreasonably withheld.
(e) Parent and the Company shall take all reasonable steps
necessary and appropriate to cause the conditions set forth in Section 4.3
(subject to Section 4.3(d)) to be satisfied and to effect the Distribution on
the Distribution Date.
(f) The Company shall prepare and file, and shall use its
reasonable best efforts to have approved, an application for the listing of the
Company Common Stock to be distributed in the Distribution on the NYSE, subject
to official notice of distribution.
4.3 CONDITIONS TO DISTRIBUTION. Parent shall be obligated to consummate
the Distribution no later than December 31, 1999, subject to the satisfaction,
or waiver by the Parent's Board in its sole discretion, of the conditions set
forth below.
(a) the Letter Ruling shall have been obtained, and shall
continue in effect, to the effect that, among other things, the Distribution
will qualify as a tax-free distribution for federal income tax purposes under
Section 355 of the Code and the Distribution by Parent of Company
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Common Stock to stockholders of Parent will not result in recognition of any
income, gain or loss for federal income tax purposes to Parent or Parent's
stockholders, and such ruling shall be in form and substance satisfactory to
Parent, in its sole discretion, including but not limited to the effect that the
general acquisition growth strategies of Parent and the Company would not cause
the Distribution to be taxable to Parent or its stockholder and that such growth
strategies would not be impeded by completing the Distribution;
(b) any material Governmental Approvals and Consents necessary
to consummate the Distribution shall have been obtained and be in full force and
effect;
(c) no order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Distribution shall be in effect, and no other
event outside the control of Parent shall have occurred or failed to occur that
prevents the consummation of the Distribution; and
(d) no other events or developments shall have occurred
subsequent to the Offerings Closing Date that, in the judgment of the Parent's
Board, would result in the Distribution having a material adverse effect on
Parent or on the stockholders of Parent.
The foregoing conditions are for the sole benefit of Parent and shall not give
rise to or create any duty on the part of Parent or the Parent's Board of
Directors to waive or not waive any such condition.
4.4 FRACTIONAL SHARES. As soon as practicable after the Distribution
Date, Parent shall direct the Distribution Agent to determine the number of
whole shares and fractional shares of the Company Common Stock allocable to each
holder of record or beneficial owner of Parent Common Stock as of the Record
Date, to aggregate all such fractional shares and sell the whole shares obtained
thereby at the direction of Parent either to Parent, in open market transactions
or otherwise, in each case at then prevailing trading prices, and to cause to be
distributed to each such holder or for the benefit of each such beneficial
owner, in lieu of any fractional share, such holder's or owner's ratable share
of the proceeds of such sale, after making appropriate deductions of the amount
required to be withheld for federal income tax purposes and after deducting an
amount equal to all brokerage charges, commissions and transfer taxes attributed
to such sale. Parent and the Agent shall use their reasonable best efforts to
aggregate the shares of Parent Common Stock that may be held by any beneficial
owner thereof through more than one account in determining the fractional share
allocable to such beneficial owner.
4.5 COMPANY BOARD OF DIRECTORS. Parent and the Company shall each take
all actions which may be required to elect or otherwise appoint as directors of
the Company, on or prior to the Distribution Date, persons to be designated by a
nominating committee of the Company's Board of Directors (which nominating
committee shall be comprised of individuals, if any, who are at such time not
officers of Parent or Company) as additional or substitute members of the Board
of Directors of the Company on the Distribution Date.
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4.6 TERMINATION OF OBLIGATIONS UNDER THIS ARTICLE IV. Except as
provided in Article XIII, the obligations of the Company and Parent under this
Article IV, or under any other provision of this Agreement relating to the
Distribution or the Letter Ruling shall terminate on the earliest to occur of
the following events:
(a) The Distribution Date does not occur on or prior to
December 31, 1999, or such other date as determined by Parent and the Company;
(b) The Parent's ownership of shares of Company Common Stock
is less than the Required Distribution Percentage or otherwise prevents a
distribution of Company Common Stock from qualifying as a tax-free distribution
to Parent and Parent's stockholders under Section 355 of the Code; or
(c) The mutual consent of Parent and the Company.
If this Article IV is terminated in accordance with this Section 4.6, the other
provisions of this Agreement and any Ancillary Agreement not related to the
Distribution or Letter Ruling shall remain in full force and effect, but such
termination shall not affect the parties' obligations under Section 14.9.
ARTICLE V
REGISTRATION RIGHTS
5.1 DEMAND REGISTRATION.
(a) GENERAL. At any time commencing after the Offerings
Closing Date, upon the request of Parent made at any time after such date but
prior to December 31, 2002, the Company shall use its best efforts to file, as
promptly as practicable, a registration statement under the Securities Act (the
"Demand Registration Statement") including such shares of Company Common Stock
then held by Parent or any Subsidiary of Parent, as requested by Parent to be so
registered. Parent shall have the right to request up to three Demand
Registration Statements, provided that the Company shall have no obligation to
file any such Demand Registration Statement on or prior to a sixty (60) day
period following the filing of any other registration statement by the Company
(other than the Registration Statement or any other registration statements on
Form S-4 or Form S-8 or another form available for registration of securities
other than for sale to the public for cash). The Company shall use its best
efforts to cause each Demand Registration Statement to be declared effective by
the Commission as promptly as practicable. If a Demand Registration Statement
shall be withdrawn by the Company before effectiveness, it shall not be counted
against Parent's right to request three such registrations.
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(b) LIMITATIONS OF DEMAND REGISTRATION RIGHTS. The Company
may, by written notice to Parent, for a period of up to forty-five (45) days
from the date of written notice, delay the filing or effectiveness of any of the
Demand Registration Statements in the event that (1) the Company is engaged in
any activity or transaction that the Company desires to keep confidential for
business reasons, (2) the Company's Board of Directors determines in good faith
that the disclosure of such information would be detrimental to the Company, and
(3) the Company's Board of Directors determines in good faith that the public
disclosure requirements imposed on the Company under the Securities Act in
connection with any Demand Registration Statement would require disclosure of
such activity or transaction. If the Company delays a Demand Registration
Statement, the Company shall, as promptly as practicable following the
termination of the circumstances which entitled the Company to do so, provide
notice to Parent of the termination of such circumstances and take such actions
as necessary to file or reinstate the effectiveness of a Demand Registration
Statement. If as a result thereof the prospectus included in a Demand
Registration Statement has been amended to comply with the requirements of the
Securities Act, the Company shall enclose such revised prospectus with the
notice to Parent given pursuant to this paragraph (b), and Parent shall make no
offers or sales of shares pursuant to a Demand Registration Statement other than
by means of such revised prospectus.
(c) DEMAND REGISTRATION PROCEDURES.
(i) In connection with the filing by the Company of a
Demand Registration Statement, the Company shall furnish to Parent as many
copies of the prospectus, including each preliminary prospectus, in conformity
with the requirements of the Securities act as Parent shall reasonably request
for the purpose of effecting the plan of distribution set forth therein.
(ii) The Company shall use its best efforts to
register or qualify the shares of Company Common Stock covered by a Demand
Registration Statement under the securities laws of such state as Parent shall
reasonably request; provided, however, that the Company shall not be required in
connection with this paragraph (c) to qualify as a foreign corporation or
execute a general consent to service of process in any jurisdiction.
(iii) If the Company has delivered preliminary or
final prospectuses to Parent and after having done so the prospectus is amended
to comply with the requirements of the Securities Act, the Company shall
promptly notify Parent and, if requested by the Company, Parent shall
immediately return all prospectuses to the Company. The Company shall promptly
provide Parent with revised prospectuses.
(iv) At the request of Parent, the Company shall sign
an underwriting agreement in customary for with a managing underwriter selected
by Parent and reasonably, satisfactory to the Company, and shall cooperate with
such managing underwriter in all reasonable respects to facilitate the
distribution contemplated by Parent, including without limitation making
available the books, records and personnel of the Company for the purpose of the
underwriter's "due diligence" and providing customary legal opinions and
auditors' comfort letters.
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5.2 INCIDENTAL REGISTRATION. After the IPO, if the Company at any time
(other than on Forms S-4 or S-8 or any successors to such forms, pursuant to
Section 5.1 hereof) proposes to register any Company Common Stock under the
Securities Act for sale to the public (which, for this purpose shall include the
registration generally of securities under a universal shelf registration
statement), each such time it will give written notice to Parent of its
intention so to do. Upon the written request of Parent, received by the Company
within 15 days after the giving of any such notice by the Company, the Company
will use its best efforts to cause shares of Company Common Stock held by Parent
or any Subsidiary of Parent as to which registration shall have been so
requested to be included in the securities to be covered by such registration
statement (the "Incidental Registration Statement") proposed to be filed by the
Company. In the event that any registration pursuant to this Section 5.2 shall
be, in whole or in part, an underwritten public offering, the number of such
shares held by Parent to be included in such an underwriting may be reduced if
and to the extent that the managing underwriter shall be of the opinion that
such inclusion would adversely affect the marketing of those securities to be
sold by the Company therein. In the event other holders of shares of Company
Common Stock also have registration rights as a result of the filing of such
Incidental Registration Statement, any such reduction shall be done pro rata
with such other holders. Notwithstanding the foregoing provisions, the Company
may withdraw any Incidental Registration Statement referred to in this Section
without thereby incurring any liability to the Parent, if the Board of Directors
of the Company determines in good faith that it is in the Company's best
interest to do so.
5.3 REGISTRATION ON FORM S-3. If at any time (i) Parent requests that
the Company file a registration statement pursuant to Section 5.1 hereof on Form
S-3 (the "Form S-3 Registration Statement") or any successor form thereto for a
public offering of all or any portion of the shares of Company Common Stock then
held by Parent or a Subsidiary of Parent, and (ii) the Company is a registrant
entitled to use Form S-3 or any successor form thereto to register such shares,
then the Company shall use its best efforts to register under the Securities Act
on Form S-3 or any successor thereto, for public sale in accordance with the
method of disposition specified in such notice provided by Parent, the number of
shares of Company Common Stock of the Company specified therein. Whenever the
Company is required by this Section 5.3 to use its best efforts to effect a Form
S-3 Registration Statement, each of the limitations and procedures of Section
5.1 shall apply to such Registration, PROVIDED, HOWEVER, that there shall be no
limitation on the number of such registrations on Form S-3 which may be
requested and obtained under this Section 5.3.
5.4 EXPENSES. The offering expenses incurred in complying with Sections
5.1, 5.2 and 5.3 shall be paid as follows:
(a) Offering expenses in connection with a Demand Registration
Statement shall be paid by Parent; provided, that in the event of any other
shares of Company Common Stock are included in a Demand Registration Statement
in addition to the shares of Company Common Stock held by Parent, the Company
shall pay its pro rata portion of the offering expenses equal to the offering
expenses multiplied by a fraction, the numerator of which is the number of any
shares of
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Company Common Stock included in the Demand Registration Statement other than
the shares held by Parent and a denominator of which is the total number of
shares of Company Common Stock included in the Demand Registration Statement;
and
(b) Offering expenses in connection with an Incidental
Registration Statement shall be paid by the Company; provided, that in the event
shares of Company Common Stock held by Parent are included in the Incidental
Registration Statement, Parent shall pay its pro rata portion of the offering
expenses equal to the offering expenses multiplied by a fraction, the numerator
of which is the number of such shares of Company Common Stock held by Parent and
included in the Incidental Registration Statement and the denominator of which
is the total number of shares of Company Common Stock included in such
Incidental Registration Statement.
5.5 REQUIREMENTS OF PARENT. The Company shall not be required to
include any share of Company Common Stock owned by Parent in a Demand
Registration Statement or an Incidental Registration Statement unless:
(a) Parent furnishes to the Company in writing such
information regarding the Parent as the Company may reasonably request in
writing in connection with such Demand Registration Statement or the Incidental
Registration Statement, as the case may be, or as shall be required in
connection therewith under applicable securities laws; and
(b) Parent shall have provided to the Company its written
agreement to report to the Company sales made pursuant to the Demand
Registration Statement or the Incidental Registration Statement, as the case may
be.
ARTICLE VI
MUTUAL RELEASES; INDEMNIFICATION
6.1 RELEASE OF PRE-CLOSING CLAIMS.
(a) Except as provided in Section 6.1(c), effective as of the
Offerings Closing Date, the Company does hereby, for itself and each other
member of the Company Group, their respective Affiliates (other than any member
of the Parent Group), successors and assigns, and all Persons who at any time
prior to the Offerings Closing Date have been stockholders, directors, officers,
agents or employees of any member of the Company Group (in each case, in their
respective capacities as such), remise, release and forever discharge Parent,
the members of the Parent Group its respective Affiliates (other than any member
of the Company Group), successors and assigns, and all Persons who at any time
prior to the Offerings Closing Date have been stockholders, directors, officers,
agents or employees of any member of the Parent Group (in each case, in their
respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Liabilities whatsoever,
whether at law or in equity (including any right of contribution), whether
arising under any contract or agreement, by operation of law or otherwise,
existing or
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arising from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the Offerings Closing Date, including in connection
with the transactions and all other activities to implement any of the
Separation, the IPO and the Distribution.
(b) Except as provided in Section 6.1(c), effective as of the
Offerings Closing Date, Parent does hereby, for itself and each other member of
the Parent Group its respective Affiliates (other than any member of the Company
Group), successors and assigns, and all Persons who at any time prior to the
Offerings Closing Date have been stockholders, directors, officers, agents or
employees of any member of the Parent Group (in each case, in their respective
capacities as such), remise, release and forever discharge the Company, the
respective members of the Company Group, their respective Affiliates (other than
any member of the Parent Group), successors and assigns, and all Persons who at
any time prior to the Offerings Closing Date have been stockholders, directors,
officers, agents or employees of any member of the Company Group (in each case,
in their respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Liabilities whatsoever,
whether at law or in equity (including any right of contribution), whether
arising under any contract or agreement, by operation of law or otherwise,
existing or arising from any acts or events occurring or failing to occur or
alleged to have occurred or to have failed to occur or any conditions existing
or alleged to have existed on or before the Offerings Closing Date, including in
connection with the transactions and all other activities to implement any of
the Separation, the IPO and the Distribution.
(c) Nothing contained in Section 6.1(a) or (b) shall impair
any right of any Person to enforce this Agreement, any Ancillary Agreement or
any agreements, arrangements, commitments or understandings that are specified
in Section 2.5(b), in each case in accordance with its terms. In addition,
nothing contained in Section 6.1(a) or (b) shall release any Person from:
(i) any Liability provided in or resulting from any
agreement among any members of the Parent Group or the Company Group that is
specified in Section 2.5(b) or any other Liability specified in such Section
2.5(b);
(ii) any Liability, contingent or otherwise, assumed,
transferred, assigned or allocated to the Group of which such Person is a member
in accordance with, or any other Liability of any member of any Group under,
this Agreement or any Ancillary Agreement;
(iii) any Liability for the sale, lease, construction
or receipt of goods, property or services purchased, obtained or used in the
ordinary course of business by a member of one Group from a member of any other
Group prior to the Offerings Closing Date;
(iv) any Liability for unpaid amounts for products or
services or refunds owing on products or services due on a value-received basis
for work done by a member of one Group at the request or on behalf of a member
of another Group;
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(v) any Liability that the parties may have with
respect to indemnification or contribution pursuant to this Agreement for claims
brought against the parties by third Persons, which Liability shall be governed
by the provisions of this Article VI and, if applicable, the appropriate
provisions of the Ancillary Agreements; or
(vi) any Liability the release of which would result
in the release of any Person other than a Person released pursuant to this
Section 6.1; provided that the parties agree not to bring suit or permit any of
their Subsidiaries to bring suit against any Person with respect to any
Liability to the extent that such Person would be released with respect to such
Liability by this Section 6.1 but for the provisions of this clause (vi).
(d) The Company shall not make, and shall not permit any
member of the Company Group to make, any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any
indemnification, against Parent, or any member of the Parent Group or any other
Person released pursuant to Section 6.1(a), with respect to any Liabilities
released pursuant to Section 6.1(a). Parent shall not, and shall not permit any
member of the Parent Group, to make any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any
indemnification, against the Company or any member of the Company Group, or any
other Person released pursuant to Section 6.1(b), with respect to any
Liabilities released pursuant to Section 6.1(b).
(e) It is the intent of each of Parent and the Company by
virtue of the provisions of this Section 6.1 to provide for a full and complete
release and discharge of all Liabilities existing or arising from all acts and
events occurring or failing to occur or alleged to have occurred or to have
failed to occur and all conditions existing or alleged to have existed on or
before the Offerings Closing Date, between or among the Company or any member of
the Company Group, on the one hand, and Parent, or any member of the Parent
Group, on the other hand (including any contractual agreements or arrangements
existing or alleged to exist between or among any such members on or before the
Offerings Closing Date), except as expressly set forth in Section 6.1(c). At any
time, at the request of any other party, each party shall cause each member of
its respective Group to execute and deliver releases reflecting the provisions
hereof.
6.2 INDEMNIFICATION BY COMPANY. Except as provided in Section 6.4, the
Company shall indemnify, defend and hold harmless Parent, each member of the
Parent Group and each of their respective directors, officers and employees, and
each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Parent Indemnitees"), from and against any and all
Liabilities of the Parent Indemnitees relating to, arising out of or resulting
from any of the following items (without duplication):
(a) the failure of the Company or any other member of the
Company Group or any other Person to pay, perform or otherwise promptly
discharge any Company Liabilities, or any of the Company Contract in accordance
with their respective terms, whether prior to or after the Offerings Closing
Date or the date hereof;
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(b) the Company Business, any Company Liability, any Exclusive
Contingent Liability of the Company or any Company Contract; and
(c) any breach by the Company or any member of the Company
Group of this Agreement or any of the Ancillary Agreements.
6.3 INDEMNIFICATION BY PARENT. Except as provided in Section 6.4,
Parent shall indemnify, defend and hold harmless the Company, each member of the
Company Group and each of their respective directors, officers and employees,
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Company Indemnitees"), from and against any and all
Liabilities of the Company Indemnitees relating to, arising out of or resulting
from any of the following items (without duplication):
(a) the failure of Parent or any other member of the Parent
Group or any other Person to pay, perform or otherwise promptly discharge any
Excluded Liability or any Liabilities of the Parent Group other than the Company
Liabilities, whether prior to or after the Offerings Closing Date or the date
hereof;
(b) the Parent Business, any Excluded Liability, any Exclusive
Contingent Liability of Parent or any Liability of the Parent Group other than
the Company Liabilities;
(c) any breach by Parent or any member of the Parent Group of
this Agreement or any of the Ancillary Agreements; and
(d) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein no misleading,
with respect to any information in any Registration Statement, any Demand
Registration Statement, Incidental Registration Statement or any prospectus
contained therein, or any amendment or supplement to such Registration
Statement, Demand Registration Statement, Incidental Registration Statement or
prospectus based upon or in conformity with information furnished in writing to
the Company by or on behalf of Parent which related to Parent, Parent's
business, its operations or its relationship with the Company.
6.4 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND
OTHER AMOUNTS.
(a) The parties intend that any Liability subject to
indemnification or reimbursement pursuant to this Article VI or Article VII will
be net of Insurance Proceeds that actually reduce the amount of the Liability.
Accordingly, the amount which any party (an "Indemnifying Party") is required to
pay to any Person entitled to indemnification hereunder (an "Indemnitee") will
be reduced by any Insurance Proceeds theretofore actually recovered by or on
behalf of the Indemnitee in reduction of the related Liability. If an Indemnitee
receives a payment (an "Indemnity Payment") required by this Agreement from an
Indemnifying Party in respect of any
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Liability and subsequently receives Insurance Proceeds, then the Indemnitee will
pay to the Indemnifying Party an amount equal to the excess of the Indemnity
Payment received over the amount of the Indemnity Payment that would have been
due if the Insurance Proceeds had been received, realized or recovered before
the Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any
claim shall not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed that no
insurer or any other third party shall be entitled to a "windfall" (i.e., a
benefit they would not be entitled to receive in the absence of the
indemnification provisions) by virtue of the indemnification provisions hereof.
Nothing contained in this Agreement or any Ancillary Agreement shall obligate
any member of any Group to seek to collect or recover any Insurance Proceeds.
6.5 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS.
(a) If an Indemnitee shall receive notice or otherwise learn
of the assertion by a Person (including any Governmental Authority) who is not a
member of the Parent Group or the Company Group of any claim or of the
commencement by any such Person of any Action (collectively, a "Third Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Section 6.2 or 6.3, or any other
Section of this Agreement or any Ancillary Agreement, such Indemnitee shall give
such Indemnifying Party written notice thereof within 20 days after becoming
aware of such Third Party Claim. Any such notice shall describe the Third Party
Claim in reasonable detail. Notwithstanding the foregoing, the failure of any
Indemnitee to give notice as provided in this Section 6.5(a) shall not relieve
the Indemnifying Party of its obligations under this Article VI, except to the
extent that such Indemnifying Party is actually prejudiced by such failure to
give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 6.5(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee of its election to assume responsibility for
defending such Third Party Claim, which election shall specify any reservations
or exceptions. After notice from an Indemnifying Party to an Indemnitee of its
election to assume the defense of a Third Party Claim, such Indemnitee shall
have the right to employ separate counsel and to participate reasonably in (but
not control) the defense, compromise, or settlement thereof, but the fees and
expenses of such counsel shall be the expense of such Indemnitee. With respect
to any such third party action assumed by the Indemnifying Party, the parties
agree to provide each other with all material information that they request
relating to the handling of such matter.
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(c) If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify an
Indemnitee of its election as provided in Section 6.5(b), such Indemnitee may
defend such Third Party Claim at the cost and expense (including allocated costs
of in-house counsel and other personnel) of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the
defense of the Third Party Claim in accordance with the terms of this Agreement,
no Indemnitee may settle or compromise any Third Party Claim without the consent
of the Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Section
6.5, the Indemnifying Party shall have no right to settle or compromise any
action for which it has assumed the defense of (i) to the extent the settlement
or compromise provides for any injunctive or other equitable relief against the
Indemnified Party or otherwise provides for any continuing obligations of any
nature against the Indemnified Party or loss of rights of the Indemnified Party,
and (ii) unless such settlement or compromise includes an unconditional release
of the Indemnified Party from all liability arising out of such action and does
not include a statement as to an admission of fault, culpability or failure to
act by or on behalf of the Indemnified Party.
(f) The provisions of this Section 6.5 and Section 6.6 shall
not apply to Taxes which are covered by the Tax Indemnification and Allocation
Agreement.
6.6 ADDITIONAL MATTERS.
(a) Any claim on account of a Liability which does not result
from a Third Party Claim shall be asserted by written notice given by an
Indemnitee to an Indemnifying Party. Such Indemnifying Party shall have a period
of 30 days after the receipt of such notice within which to respond thereto. If
such Indemnifying Party does not respond within such 30-day period, such
Indemnifying Party shall be deemed to have refused to accept responsibility to
make payment. If such Indemnifying Party does not respond within such 30-day
period or rejects such claim in whole or in part, such Indemnitee shall be free
to pursue such remedies as may be available to such party as contemplated by
this Agreement and the Ancillary Agreements.
(b) In the event of payment by or on behalf of any
Indemnifying Party to any Indemnitee in connection with any Third Party Claim,
such Indemnifying Party shall be subrogated to and shall stand in the place of
such Indemnitee as to any events or circumstances in respect of which such
Indemnitee may have any right, defense or claim relating to such Third Party
Claim against any claimant or plaintiff asserting such Third Party Claim or
against any other person. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense (including allocated
costs of in-house counsel and other personnel) of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party
is not a named defendant, if either the Indemnified Party or Indemnifying Party
shall so request, the parties shall
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endeavor to substitute the Indemnifying Party for the named defendant. If such
substitution cannot be achieved for any reason or is not requested, the named
defendant shall allow the Indemnifying Party to manage the Action as set forth
in this Section and the Indemnifying Party shall fully indemnify the named
defendant against all costs of defending the Action (including court costs,
sanctions imposed by a court, attorneys' fees, experts' fees and all other
external expenses, and the allocated costs of in-house counsel and other
personnel), the costs of any judgment or settlement, and the cost of any
interest or penalties relating to any judgment or settlement.
6.7 REMEDIES CUMULATIVE. The remedies provided in this Article VI shall
be cumulative and, subject to the provisions of Article XI, shall not preclude
assertion by any Indemnitee of any other rights or the seeking of any and all
other remedies against any Indemnifying Party.
6.8 SURVIVAL OF INDEMNITIES. The rights and obligations of each of
Parent and the Company and their respective Indemnitee under this Article VI
shall survive the sale or other transfer by any party of any Assets or
businesses or the assignment by it of any Liabilities.
ARTICLE VII
CONTINGENT LIABILITIES AND CONTINGENT GAINS
7.1 CONTINGENT CLAIMS COMMITTEE. The Company and Parent shall establish
a Contingent Claims Committee, comprising one representative designated from
time to time by each of Parent and the Company, which Committee shall establish
procedures to resolve disagreements among the parties as to contingent gains and
contingent liabilities.
7.2 SHARED CONTINGENT LIABILITIES. The Company and Parent will have the
exclusive responsibility for any contingent liability that primarily relates to
the Company Business or the Parent Business, respectively, or is expressly
assigned to the Company or Parent, respectively (an "Exclusive Contingent
Liability"). The parties shall share responsibility for the following contingent
liabilities (the "Shared Contingent Liabilities"): (i) any contingent
liabilities that are not Exclusive Contingent Liabilities and (ii) those
liabilities as set forth on SCHEDULE 7.2 hereto. With respect to any Shared
Contingent Liability, the Company and Parent shall allocate responsibility
therefor based upon their respective market capitalizations (reduced in the case
of Parent to reflect Company Common Stock held by Parent) on the Offerings
Closing Date or on such other methodology to be established by the Contingent
Claims Committee. Parent will assume the defense of, and may seek to settle or
compromise, any third party claim that is a Shared Contingent Liability, and the
Company and Parent shall share the costs and expenses thereof.
7.3 CONTINGENT GAINS. The Company and Parent will have the exclusive
right to any benefit received with respect to any contingent gain that primarily
relates to the business of, or that is expressly assigned to, the Company or
Parent, respectively (an "Exclusive Contingent Gain"). Each of the Company and
Parent will have sole and exclusive authority to manage, control and otherwise
determine all matters whatsoever with respect to an Exclusive Contingent Gain
that
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primarily relates to its respective business. The parties will share any benefit
that may be received from any contingent gain other than any Exclusive
Contingent Gain (a "Shared Contingent Gain") based upon their respective market
capitalizations on the Offerings Closing Date (reduced in the case of Parent to
reflect Company Common Stock held by Parent) or on such other methodology to be
established by a Contingent Claims Committee. Parent will have the sole and
exclusive authority to manage, control and otherwise determine all matters
whatsoever with respect to any Shared Contingent Gain. Parent may elect not to
pursue any Shared Contingent Gain for any reason whatsoever (including a
different assessment of the merits of any action, claim or right or any business
reasons that are in the best interest of Parent without regard to the best
interests of the Company) and Parent will have no liability to any Person
(including the Company) as a result of any such determination.
ARTICLE VIII
INSURANCE MATTERS
8.1 PAYMENTS; TRANSITION COVERAGE. The Company agrees that it will pay
to Parent $43,000 per month (prorated on a daily basis for any partial month) in
respect of the period from the date hereof until the Distribution Date, such
amount to be payable in arrears by the 10th day of the next succeeding month, in
respect of Insurance Policies under which the Company will continue to have
coverage following the date hereof. The Company further agrees to pay to Parent
an amount equal to five percent of incurred losses for claims adjustment
services to be rendered by Parent for automobile liability and general liability
claims. Parent and the Company agree to cooperate in good faith to provide for
an orderly transition of insurance coverage from the date hereof through the
Distribution Date and for the treatment of any Insurance Policies that will
remain in effect following the Offerings Closing Date on a mutually agreeable
basis. In no event shall Parent, any other member of the Parent Group or any
Parent Indemnitees have liability or obligation whatsoever to any member of the
Company Group in the event that any Insurance Policy or other contract or policy
of insurance shall be terminated or otherwise cease to be in effect for any
reason, shall be unavailable or inadequate to cover any Liability of any member
of the Company Group for any reason whatsoever or shall not be renewed or
extended beyond the current expiration date.
8.2 SUCCESSORS-IN-INTEREST RIGHTS.
(a) Except as otherwise provided in any Ancillary Agreement,
the parties intend by this Agreement that the Company and each other member of
the Company Group be successors-in-interest to all rights that any member of the
Company Group may have as of the Offerings Closing Date as a subsidiary,
affiliate, division or department of Parent prior to the Offerings Closing Date
under any policy of insurance issued to Parent by any insurance carrier
unaffiliated with Parent or under any agreements related to such policies
executed and delivered prior to the Offerings Closing Date, including any rights
such member of the Company Group may have, as an insured or additional named
insured, subsidiary, affiliate, division or department, to avail itself of any
such policy of insurance or any such agreements related to such policies as in
effect
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prior to the Offerings Closing Date. At the request of the Company, Parent shall
take all reasonable steps, including the execution and delivery of any
instruments, to effect the foregoing; PROVIDED, HOWEVER, that Parent shall not
be required to pay any amounts, waive any rights or incur any Liabilities in
connection therewith.
(b) Except as otherwise contemplated by any Ancillary
Agreement, after the Offerings Closing Date, none of Parent or the Company or
any member of their respective Groups shall, without the consent of the other,
provide any such insurance carrier with a release, or amend, modify or waive any
rights under any such policy or agreement, if such release, amendment,
modification or waiver would adversely affect any rights or potential rights of
any member of the other Group thereunder; PROVIDED, HOWEVER, that the foregoing
shall not (A) preclude any member of any Group from presenting any claim or from
exhausting any policy limit, (B) require any member of any Group to pay any
premium or other amount or to incur any Liability, or (C) require any member of
any Group to renew, extend or continue any policy in force. Each of the Company
and Parent will share such information as is reasonably necessary in order to
permit the other to manage and conduct its insurance matters in an orderly
fashion.
8.3 NO ASSIGNMENT. This Agreement shall not be considered as an
attempted assignment of any policy of insurance or as a contract of insurance
and shall not be construed to waive any right or remedy of any member of the
Parent Group in respect of any Insurance Policy or any other contract or policy
of insurance.
8.4 NO LIABILITY. The Company does hereby, for itself and each other
member of the Company Group, agree that no member of the Parent Group or any
Parent Indemnitees shall have any Liability whatsoever as a result of the
insurance policies and practices of Parent and its Affiliates as in effect at
any time prior to the Offerings Closing Date, including as a result of the level
or scope of any such insurance, the creditworthiness of any insurance carrier,
the terms and conditions of any policy, the adequacy or timeliness of any notice
to any insurance carrier with respect to any claim or potential claim or
otherwise.
8.5 ADDITIONAL INSURANCE. Nothing in this Agreement shall be deemed to
restrict any member of the Company Group from acquiring at its own expense any
other insurance policy in respect of any Liabilities or covering any period.
ARTICLE IX
CERTAIN BUSINESS MATTERS
9.1 NON-COMPETE; BUSINESS OPPORTUNITIES.
(a) The Parent agrees that neither it or any Parent Subsidiary
will, directly or indirectly, compete with the Company in the Company Business
(as presently conducted) anywhere
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in North America from the Distribution Date until five (5) years after the
Distribution Date or, if the Distribution does not occur, until January 1,
2005.
(b) The Company agrees that neither it nor any Company
Subsidiary will compete, directly or indirectly, with Parent in the Parent
Business (as presently conducted) anywhere in North America from the
Distribution Date until five (5) years after the Distribution Date or, if the
Distribution does not occur, until January 1, 2005.
(c) No member of either Group shall have any duty to refrain
from doing business with any potential or actual supplier or customer of any
member of any other Group.
(d) Each of Parent and the Company is aware that from time to
time certain business opportunities may arise which either Group may be
financially able to undertake, and which are, from their nature, in the line of
both Group business and are of practical advantage to both Groups. In connection
therewith, the parties agree that if prior to (but not following) the
Distribution Date, any of Parent or the Company acquires knowledge of an
opportunity that meets the foregoing standard with respect to both Groups, none
of Parent or the Company shall have any duty to communicate or offer such
opportunity to the other and may pursue or acquire such opportunity for itself,
or direct such opportunity to any other Person, unless (i) such opportunity
relates primarily to the Parent Business, or the Company Business, in which case
the party that acquires knowledge of such opportunity shall use its reasonable
best efforts to communicate and offer such opportunity to Parent or the Company,
respectively, or (ii) such opportunity relates both to the Parent Business and
the Company Business but not primarily to either one, in which case such party
shall use its reasonable best efforts to communicate and offer such opportunity
to the Company. Notwithstanding the foregoing, no party shall be required to so
communicate or offer any such opportunity if it would result in the breach of
any contract or agreement or violate any applicable law, rule or regulation of
any Governmental Authority, and no party shall have any obligation to finance
(or provide any other assistance whatsoever) to any other party in connection
with any such opportunity. In the event the foregoing clause (i) or (ii) is
applicable, no party, other than the party to whom the opportunity must be
offered in accordance with such clauses, shall pursue or acquire such
opportunity for itself, or direct such opportunity to any other Person, unless
the party to whom the opportunity is required to be offered does not within a
reasonable period of time begin to pursue, or does not thereafter continue to
pursue, such opportunity diligently and in good faith.
9.2 WARRANTS. Under the terms of certain outstanding warrants to
purchase Parent Common Stock, persons who hold such warrants and do not exercise
them prior to the record date for the Distribution will be entitled to receive
upon exercise of such warrants, in addition to shares of Parent Common Stock, a
number of shares of Company Common Stock, based on the same ratio used to
determine the number of shares of Company Common Stock to be distributed for
each outstanding share of Parent Common Stock on the record date for the
Distribution. If necessary, Parent will reserve shares of Company Common Stock
held by it at the time of the Distribution to be delivered to holders of
warrants upon exercise of such warrants following the record date for the
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Distribution Date. The Company will not be required to issue any additional
shares of Company Common Stock to such warrant holders.
ARTICLE X
EXCHANGE OF INFORMATION; CONFIDENTIALITY
10.1 AGREEMENT FOR EXCHANGE OF INFORMATION; ARCHIVES.
(a) Each of Parent and the Company, on behalf of its
respective Group, agrees to provide, or cause to be provided, to the other
Group, at any time before or after the Distribution Date, as soon as reasonably
practicable after written request therefor, any Information in the possession or
under the control of such respective Group which the requesting party reasonably
needs (i) to comply with reporting, disclosure, filing or other requirements
imposed on the requesting party (including under applicable securities or tax
laws) by a Governmental Authority having jurisdiction over the requesting party,
(ii) for use in any other judicial, regulatory, administrative, tax or other
proceeding or in order to satisfy audit, accounting, claims, regulatory,
litigation, tax or other similar requirements, or (iii) to comply with its
obligations under this Agreement, any Ancillary Agreement or any Liability;
PROVIDED, HOWEVER, that in the event that any party determines that any such
provision of Information could be commercially detrimental, violate any law or
agreement, or waive any attorney-client privilege, the parties shall take all
reasonable measures to permit the compliance with such obligations in a manner
that avoids any such harm or consequence.
(b) After the Offerings Closing Date, the Company shall have
access during regular business hours (as in effect from time to time) to the
documents and objects of historic significance that relate to the Company
Business that are located in the Parent archives. The Company may obtain copies
(but not originals) of documents for bona fide business purposes and may obtain
objects for exhibition purposes for commercially reasonable periods of time if
required for bona fide business purposes, provided that the Company shall cause
any such objects to be returned promptly in the same condition in which they
were delivered to the Company and the Company shall comply with any rules,
procedures or other requirements, and shall be subject to any restrictions
(including prohibitions on removal of specified objects), that are then
applicable to Parent. The Company shall pay $125 per hour for archives research
services (subject to increase from time to time to reflect rates then in effect
for Parent generally). Nothing herein shall be deemed to restrict the access of
any member of the Parent Group to any such documents or objects or to impose any
liability on any member of the Parent Group if any such documents or objects are
not maintained or preserved by Parent.
(c) After the date hereof, (i) the Company shall maintain in
effect at its own cost and expense adequate systems and controls to the extent
necessary to enable the members of the Parent Group to satisfy their respective
reporting, accounting, audit and other obligations, and (ii) the Company shall
provide, or cause to be provided, to Parent in such form as Parent shall
request, at no charge to Parent, all financial and other data and information as
Parent determines necessary
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or advisable in order to prepare Parent financial statements and reports or
filings with any Governmental Authority.
10.2 OWNERSHIP OF INFORMATION. Any Information owned by one Group that
is provided to a requesting party pursuant to Section 10.1 shall be deemed to
remain the property of the providing party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.
10.3 COMPENSATION FOR PROVIDING INFORMATION. The party requesting such
Information agrees to reimburse the other party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting party. Except as may
be otherwise specifically provided elsewhere in this Agreement or in any other
agreement between the parties, such costs shall be computed in accordance with
the providing party's standard methodology and procedures.
10.4 RECORD RETENTION. To facilitate the possible exchange of
Information pursuant to this Article X and other provisions of this Agreement
after the Distribution Date, the parties agree to use their reasonable best
efforts to retain all Information in their respective possession or control on
the Distribution Date in accordance with the policies of Parent as in effect on
the Offerings Closing Date. No party will destroy, or permit any of its
Subsidiaries to destroy, any Information which the other party may have the
right to obtain pursuant to this Agreement prior to the third anniversary of the
date hereof without first using its reasonable best efforts to notify the other
party of the proposed destruction and giving the other party the opportunity to
take possession of such information prior to such destruction; PROVIDED,
HOWEVER, that in the case of any Information relating to Taxes or to
Environmental Liabilities, such period shall be extended to the expiration of
the applicable statute of limitations (giving effect to any extensions thereof).
10.5 LIMITATION OF LIABILITY. No party shall have any liability to any
other party in the event that any Information exchanged or provided pursuant to
this Agreement which is an estimate or forecast, or which is based on an
estimate or forecast, is found to be inaccurate, in the absence of willful
misconduct by the party providing such Information. No party shall have any
liability to any other party if any Information is destroyed after reasonable
best efforts by such party to comply with the provisions of Section 10.4.
10.6 OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The rights
and obligations granted under this Article X are subject to any specific
limitations, qualifications or additional provisions on the sharing, exchange or
confidential treatment of Information set forth in any Ancillary Agreement.
10.7 PRODUCTION OF WITNESSES; RECORDS; COOPERATION.
(a) After the Offerings Closing Date, except in the case of an
adversarial Action by one party against another party (which shall be governed
by such discovery rules as may be
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applicable under Article XI or otherwise), each party hereto shall use its
reasonable best efforts to make available to the other party, upon written
request, the former, current and future directors, officers, employees, other
personnel and agents of the members of its respective Group as witnesses and any
books, records or other documents within its control or which it otherwise has
the ability to make available, to the extent that any such person (giving
consideration to business demands of such directors, officers, employees, other
personnel and agents) or books, records or other documents may reasonably be
required in connection with any Action in which the requesting party may from
time to time be involved, regardless of whether such Action is a matter with
respect to which indemnification may be sought hereunder. The requesting party
shall bear all costs and expenses (including allocated costs of in-house counsel
and other personnel) in connection therewith.
(b) If an Indemnifying Party or Parent chooses to defend or to
seek to compromise or settle any Third Party Claim, or if any party chooses to
prosecute or otherwise evaluate or to pursue any Contingent Gain, the other
parties shall make available to such Indemnifying Party, Parent or such other
party, as the case may be, upon written request, the former, current and future
directors, officers, employees, other personnel and agents of the members of its
respective Group as witnesses and any books, records or other documents within
its control or which it otherwise has the ability to make available, to the
extent that any such person (giving consideration to business demands of such
directors, officers, employees, other personnel and agents) or books, records or
other documents may reasonably be required in connection with such defense,
settlement or compromise, or such prosecution, evaluation or pursuit, as the
case may be, and shall otherwise cooperate in such defense, settlement or
compromise, or such prosecution, evaluation or pursuit, as the case may be.
(c) Without limiting the foregoing, the parties shall
cooperate and consult to the extent reasonably necessary with respect to any
Actions, Contingent Liabilities and Contingent Gains.
(d) Without limiting any provision of this Section, each of
the parties agrees to cooperate, and to cause each member of its respective
Group to cooperate, with each other in the defense of any infringement or
similar claim with respect any intellectual property and shall not claim to
acknowledge, or permit any member of its respective Group to claim to
acknowledge, the validity or infringing use of any intellectual property of a
third Person in a manner that would hamper or undermine the defense of such
infringement or similar claim.
(e) The obligation of the parties to provide witnesses
pursuant to this Section 10.7 is intended to be interpreted in a manner so as to
facilitate cooperation and shall include the obligation to provide as witnesses
inventors and other officers without regard to whether the witness or the
employer of the witness could assert a possible business conflict (subject to
the exception set forth in the first sentence of Section 10.7(a)).
(f) In connection with any matter contemplated by this Section
10.7, the parties will enter into a mutually acceptable joint defense agreement
so as to maintain to the extent
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practicable any applicable attorney-client privilege or work product immunity of
any member of any Group.
10.8 CONFIDENTIALITY.
(a) Subject to Section 10.9, each of Parent and the Company,
on behalf of itself and each member of its respective Group, agrees to hold, and
to cause its respective directors, officers, employees, agents, accountants,
counsel and other advisors and representatives to hold, in strict confidence,
with at least the same degree of care that applies to Parent's confidential and
proprietary information pursuant to policies in effect as of the Offerings
Closing Date, all Information concerning each such other Group that is either in
its possession (including Information in its possession prior to any of the date
hereof, the Offerings Closing Date or the Distribution Date) or furnished by any
such other Group or its respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives at any time pursuant
to this Agreement, any Ancillary Agreement or otherwise, and shall not use any
such Information other than for such purposes as shall be expressly permitted
hereunder or thereunder, except, in each case, to the extent that such
Information has been (i) in the public domain through no fault of such party or
any member of such Group or any of their respective directors, officers,
employees, agents, accountants, counsel and other advisors and representatives,
(ii) later lawfully acquired from other sources by such party (or any member of
such party's Group) which sources are not themselves bound by a confidentiality
obligation), or (iii) independently generated without reference to any
proprietary or confidential Information of the other party.
(b) Each party agrees not to release or disclose, or permit to
be released or disclosed, any such Information to any other Person, except its
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives who need to know such Information (who shall be advised of
their obligations hereunder with respect to such Information), except in
compliance with Section 10.9. Without limiting the foregoing, when any
Information is no longer needed for the purposes contemplated by this Agreement
or any Ancillary Agreement, each party will promptly after request of the other
party either return to the other party all Information in a tangible form
(including all copies thereof and all notes, extracts or summaries based
thereon) or certify to the other party that it has destroyed such Information
(and such copies thereof and such notes, extracts or summaries based thereon).
10.9 PROTECTIVE ARRANGEMENTS. In the event that any party or any member
of its Group either determines on the advice of its counsel that it is required
to disclose any Information pursuant to applicable law or receives any demand
under lawful process or from any Governmental Authority to disclose or provide
Information of any other party (or any member of any other party's Group) that
is subject to the confidentiality provisions hereof, such party shall notify the
other party prior to disclosing or providing such Information and shall
cooperate at the expense of the requesting party in seeking any reasonable
protective arrangements requested by such other party. Subject to the foregoing,
the Person that received such request may thereafter disclose or provide
Information to
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the extent required by such law (as so advised by counsel) or by lawful process
or such Governmental Authority.
ARTICLE XI
ARBITRATION; DISPUTE RESOLUTION
11.1 AGREEMENT TO ARBITRATE; WAIVER OF JURY TRIAL. Except as otherwise
specifically provided in any Ancillary Agreement, the procedures for discussion,
negotiation and arbitration set forth in this Article XI shall apply to all
disputes, controversies or claims (whether sounding in contract, tort or
otherwise) that may arise out of or relate to, or arise under or in connection
with this Agreement or any Ancillary Agreement, or the transactions contemplated
hereby or thereby (including all actions taken in furtherance of the
transactions contemplated hereby or thereby on or prior to the date hereof), or
the commercial or economic relationship of the parties relating hereto or
thereto, between or among any member of the Parent Group and the Company Group.
Each party agrees on behalf of itself and each member of its respective Group
that the procedures set forth in this Article XI shall be the sole and exclusive
remedy in connection with any dispute, controversy or claim relating to any of
the foregoing matters and with respect thereto, hereby irrevocably waives any
right to commence any Action in or before any Governmental Authority as well as
any right to a trial by jury for any action, except as expressly provided in
Sections 11.7(b) and 11.8 and except to the extent provided under the
Arbitration Act in the case of judicial review of arbitration results or awards.
11.2 ESCALATION.
(a) It is the intent of the parties to use their respective
reasonable best efforts to resolve expeditiously any dispute, controversy or
claim between or among them with respect to the matters covered hereby that may
arise from time to time on a mutually acceptable negotiated basis. In
furtherance of the foregoing, any party involved in a dispute, controversy or
claim may deliver a notice (an "Escalation Notice") demanding an in person
meeting involving representatives of the parties at a senior level of management
of the parties (or if the parties agree, of the appropriate strategic business
unit or division within such entity). A copy of any such Escalation Notice shall
be given to the General Counsel, or like officer or official, of each party
involved in the dispute, controversy or claim (which copy shall state that it is
an Escalation Notice pursuant to this Agreement). Any agenda, location or
procedures for such discussions or negotiations between the parties may be
established by the parties from time to time; PROVIDED, HOWEVER, that the
parties shall use their reasonable best efforts to meet within 30 days of the
Escalation Notice.
(b) The parties may, by mutual consent, retain a mediator to
aid the parties in their discussions and negotiations by informally providing
advice to the parties. Any opinion expressed by the mediator shall be strictly
advisory and shall not be binding on the parties, nor shall any opinion
expressed by the mediator be admissible in any arbitration proceedings. The
mediator may be chosen from a list of mediators previously selected by the
parties or by other agreement of the
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parties. Costs of the mediation shall be borne equally by the parties involved
in the matter, except that each party shall be responsible for its own expenses.
Mediation is not a prerequisite to a demand for arbitration under Section 11.3.
11.3 DEMAND FOR ARBITRATION.
(a) At any time after the first to occur of (i) the date of
the meeting actually held pursuant to the applicable Escalation Notice or (ii)
45 days after the delivery of an Escalation Notice, any party involved in the
dispute, controversy or claim (regardless of whether such party delivered the
Escalation Notice) may, unless the Applicable Deadline has occurred, make a
written demand (the "Arbitration Demand Notice") that the dispute be resolved by
binding arbitration, which Arbitration Demand Notice shall be given to the
parties to the dispute, controversy or claim in the manner set forth in Section
14.5. In the event that any party shall deliver an Arbitration Demand Notice to
another party, such other party may itself deliver an Arbitration Demand Notice
to such first party with respect to any related dispute, controversy or claim
with respect to which the Applicable Deadline has not passed without the
requirement of delivering an Escalation Notice. No party may assert that the
failure to resolve any matter during any discussions or negotiations, the course
of conduct during the discussions or negotiations or the failure to agree on a
mutually acceptable time, agenda, location or procedures for the meeting, in
each case, as contemplated by Article XI, is a prerequisite to a demand for
arbitration under this Section 11.3. In the event that any party delivers an
Arbitration Demand Notice with respect to any dispute, controversy or claim that
is the subject of any then pending arbitration proceeding or of a previously
delivered Arbitration Demand Notice, all such disputes, controversies and claims
shall be resolved in the arbitration proceeding for which an Arbitration Demand
Notice was first delivered unless the arbitrator in his or her sole discretion
determines that it is impracticable or otherwise inadvisable to do so.
(b) Except as may be expressly provided in any Ancillary
Agreement, any Arbitration Demand Notice may be given until one year and 45 days
after the later of the occurrence of the act or event giving rise to the
underlying claim or the date on which such act or event was, or should have
been, in the exercise of reasonable due diligence, discovered by the party
asserting the claim (as applicable and as it may in a particular case be
specifically extended by the parties in writing, the "Applicable Deadline"). Any
discussions, negotiations or mediations between the parties pursuant to this
Agreement or otherwise will not toll the Applicable Deadline unless expressly
agreed in writing by the parties. Each of the parties agrees on behalf of itself
and each member of its Group that if an Arbitration Demand Notice with respect
to a dispute, controversy or claim is not given prior to the expiration of the
Applicable Deadline, as between or among the parties and the members of their
Groups, such dispute, controversy or claim will be barred. Subject to Sections
11.7(d) and 11.8, upon delivery of an Arbitration Demand Notice pursuant to
Section 11.3(a) prior to the Applicable Deadline, the dispute, controversy or
claim shall be decided by a sole arbitrator in accordance with the rules set
forth in this Article XI.
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11.4 ARBITRATORS.
(a) Within 15 days after a valid Arbitration Demand Notice is
given, the parties involved in the dispute, controversy or claim referenced
therein shall attempt to select a sole arbitrator satisfactory to all such
parties.
(b) In the event that such parties are not able jointly to
select a sole arbitrator within such 15-day period, such parties shall each
appoint an arbitrator within 30 days after delivery of the Arbitration Demand
Notice. If one party appoints an arbitrator within such time period and the
other party or parties fail to appoint an arbitrator within such time period,
the arbitrator appointed by the one party shall be the sole arbitrator of the
matter.
(c) In the event that a sole arbitrator is not selected
pursuant to paragraph (a) or (b) above and, instead, two arbitrators are
selected pursuant to paragraph (b) above, the two arbitrators will, within 30
days after the appointment of the later of them to be appointed, select an
additional arbitrator who shall act as the sole arbitrator of the dispute. After
selection of such sole arbitrator, the initial arbitrators shall have no further
role with respect to the dispute. In the event that the arbitrators so appointed
do not, within 30 days after the appointment of the later of them to be
appointed, agree on the selection of the sole arbitrator, any party involved in
such dispute may apply to the Center for Public Resources ("CPR") to select the
sole arbitrator, which selection shall be made by such organization within 30
days after such application. Any arbitrator selected pursuant to this paragraph
(c) shall be disinterested with respect to any of the parties and the matter and
shall be reasonably competent in the applicable subject matter.
(d) The sole arbitrator selected pursuant to paragraph (a),
(b) or (c) above will set a time for the hearing of the matter which will
commence no later than 90 days after the date of appointment of the sole
arbitrator pursuant to paragraph (a), (b) or (c) above and which hearing will be
no longer than 30 days (unless in the judgment of the arbitrator the matter is
unusually complex and sophisticated and thereby requires a longer time, in which
event such hearing shall be no longer than 90 days). The final decision of such
arbitrator will be rendered in writing to the parties not later than 60 days
after the last hearing date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be Fort
Lauderdale, Florida, unless otherwise agreed by the parties.
11.5 HEARINGS. Within the time period specified in Section 11.4(d), the
matter shall be presented to the arbitrator at a hearing by means of written
submissions of memoranda and verified witness statements, filed simultaneously,
and responses, if necessary in the judgment of the arbitrator or both the
parties. If the arbitrator deems it to be essential to a fair resolution of the
dispute, live cross-examination or direct examination may be permitted, but is
not generally contemplated to be necessary. The arbitrator shall actively manage
the arbitration with a view to achieving a just, speedy and cost-effective
resolution of the dispute, claim or controversy. The arbitrator may, in his or
her discretion, set time and other limits on the presentation of each party's
case, its memoranda
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or other submissions, and refuse to receive any proffered evidence, which the
arbitrator, in his or her discretion, finds to be cumulative, unnecessary,
irrelevant or of low probative nature. Except as otherwise set forth herein, any
arbitration hereunder will be conducted in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes then prevailing (except that
the fee schedule of CPR will not apply). Except as expressly set forth in
Section 11.8(b), the decision of the arbitrator will be final and binding on the
parties, and judgment thereon may be had and will be enforceable in any court
having jurisdiction over the parties. Arbitration awards will bear interest at
an annual rate of the Prime Rate plus 2% per annum. To the extent that the
provisions of this Agreement and the prevailing rules of the CPR conflict, the
provisions of this Agreement shall govern.
11.6 DISCOVERY AND CERTAIN OTHER MATTERS.
(a) Any party involved in the applicable dispute may request
limited document production from the other party or parties of specific and
expressly relevant documents, with the reasonable expenses of the producing
party incurred in such production paid by the requesting party. Any such
discovery (which rights to documents shall be substantially less than document
discovery rights prevailing under the Federal Rules of Civil Procedure) shall be
conducted expeditiously and shall not cause the hearing provided for in Section
11.5 to be adjourned except upon consent of all parties involved in the
applicable dispute or upon an extraordinary showing of cause demonstrating that
such adjournment is necessary to permit discovery essential to a party to the
proceeding. Depositions, interrogatories or other forms of discovery (other than
the document production set forth above) shall not occur except by consent of
the parties involved in the applicable dispute. Disputes concerning the scope of
document production and enforcement of the document production requests will be
determined by written agreement of the parties involved in the applicable
dispute or, failing such agreement, will be referred to the arbitrator for
resolution. All discovery requests will be subject to the parties' rights to
claim any applicable privilege. The arbitrator will adopt procedures to protect
the proprietary rights of the parties and to maintain the confidential treatment
of the arbitration proceedings (except as may be required by law). Subject to
the foregoing, the arbitrator shall have the power to issue subpoenas to compel
the production of documents relevant to the dispute, controversy or claim.
(b) The arbitrator shall have full power and authority to
determine issues of arbitrability but shall otherwise be limited to interpreting
or construing the applicable provisions of this Agreement or any Ancillary
Agreement, and will have no authority or power to limit, expand, alter, amend,
modify, revoke or suspend any condition or provision of this Agreement or any
Ancillary Agreement; it being understood, however, that the arbitrator will have
full authority to implement the provisions of this Agreement or any Ancillary
Agreement, and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided that the arbitrator
shall not have (i) any authority in excess of the authority a court having
jurisdiction over the parties and the controversy or dispute would have absent
these arbitration provisions or (ii) any right or power to award punitive or
treble damages. It is the intention of the parties that in rendering a decision
the arbitrator give effect to the applicable provisions of this
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Agreement and the Ancillary Agreements and follow applicable law (it being
understood and agreed that this sentence shall not give rise to a right of
judicial review of the arbitrator's award).
(c) If a party fails or refuses to appear at and participate
in an arbitration hearing after due notice, the arbitrator may hear and
determine the controversy upon evidence produced by the appearing party.
(d) Arbitration costs will be borne equally by each party
involved in the matter, except that each party will be responsible for its own
attorney's fees and other costs and expenses, including the costs of witnesses
selected by such party.
11.7 CERTAIN ADDITIONAL MATTERS.
(a) Any arbitration award shall be a bare award limited to a
holding for or against a party and shall be without findings as to facts, issues
or conclusions of law and shall be without a statement of the reasoning on which
the award rests, but must be in adequate form so that a judgment of a court may
be entered thereupon. Judgment upon any arbitration award hereunder may be
entered in any court having jurisdiction thereof.
(b) Prior to the time at which an arbitrator is appointed
pursuant to Section 11.4, any party may seek one or more temporary restraining
orders in a court of competent jurisdiction if necessary in order to preserve
and protect the status quo. Neither the request for, or grant or denial of, any
such temporary restraining order shall be deemed a waiver of the obligation to
arbitrate as set forth herein and the arbitrator may dissolve, continue or
modify any such order. Any such temporary restraining order shall remain in
effect until the first to occur of the expiration of the order in accordance
with its terms or the dissolution thereof by the arbitrator.
(c) Except as required by law, the parties shall hold, and
shall cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation or
arbitration in confidence in accordance with the provisions of Article X, except
as may be required in order to enforce any award. Each of the parties shall
request that any mediator or arbitrator comply with such confidentiality
requirement.
(d) In the event that at any time the sole arbitrator shall
fail to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth herein for the selection of the initial
arbitrator. The extent, if any, to which testimony previously given shall be
repeated or as to which the replacement arbitrator elects to rely on the
stenographic record (if there is one) of such testimony shall be determined by
the replacement arbitrator.
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11.8 LIMITED COURT ACTIONS.
(a) Notwithstanding anything herein to the contrary, in the
event that any party reasonably determines the amount in controversy in any
dispute, controversy or claim (or any series of related disputes, controversies
or claims) under this Agreement or any Ancillary Agreement is, or is reasonably
likely to be, in excess of $25 million and if such party desires to commence an
Action in lieu of complying with the arbitration provisions of this Article,
such party shall so state in its Arbitration Demand Notice or by notice given to
the other parties within 20 days after receipt of an Arbitration Demand Notice
with respect thereto. If the other parties to the arbitration do not agree
that the amount in controversy in such dispute, controversy or claim (or such
series of related disputes, controversies or claims) is, or is reasonably likely
to be, in excess of $25 million, the arbitrator selected pursuant to Section
11.4 hereof shall decide whether the amount in controversy in such dispute,
controversy or claim (or such series of related disputes, controversies or
claims) is, or is reasonably likely to be, in excess of $25 million. The
arbitrator shall set a date that is no later than ten days after the date of his
or her appointment for submissions by the parties with respect to such issue.
There shall not be any discovery in connection with such issue. The arbitrator
shall render his or her decision on such issue within five days of such date so
set by the arbitrator. In the event that the arbitrator determines that the
amount in controversy in such dispute, controversy or claim (or such series of
related disputes, controversies or claims) is or is reasonably likely to be in
excess of $25 million, the provisions of Sections 11.4(d) and (e), 11.5, 11.6,
11.7 and 11.10 hereof shall not apply and on or before (but, except as expressly
set forth in Section 11.8(b), not after) the tenth business day after the date
of such decision, any party to the arbitration may elect, in lieu of
arbitration, to commence an Action with respect to such dispute, controversy or
claim (or such series of related disputes, controversies or claims) in any court
of competent jurisdiction. If the arbitrator does not so determine, the
provisions of this Article (including with respect to time periods) shall apply
as if no determinations were sought or made pursuant to this Section 11.8(a).
(b) In the event that an arbitration award in excess of $25
million is issued in any arbitration proceeding commenced hereunder, any party
may, within 60 days after the date of such award, submit the dispute,
controversy or claim (or series of related disputes, controversies or claims)
giving rise thereto to a court of competent jurisdiction, regardless of whether
such party or any other party sought to commence an Action in lieu of proceeding
with arbitration in accordance with Section 11.8(a). In such event, the
applicable court may elect to rely on the record developed in the arbitration
or, if it determines that it would be advisable in connection with the matter,
allow the parties to seek additional discovery or to present additional
evidence. Each party shall be entitled to present arguments to the court with
respect to whether any such additional discovery or evidence shall be permitted
and with respect to all other matters relating to the applicable dispute,
controversy or claim (or series of related disputes, controversies or claims).
(c) No party shall raise as a defense the statute of
limitations if the applicable Arbitration Demand Notice was delivered on or
prior to the Applicable Deadline and, if applicable, if the matter is submitted
to a court of competent jurisdiction within the 10-day period or 60-day period
specified in Section 11.8(a) or Section 11.8(b), respectively.
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11.9 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article XI with respect
to all matters not subject to such dispute, controversy or claim.
11.10 LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the
provisions of this Article XI, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed as set forth in Section 14.2.
ARTICLE XII
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
12.1 FURTHER ASSURANCES.
(a) In addition to the actions specifically provided for
elsewhere in this Agreement, each of the parties hereto shall use its reasonable
best efforts, prior to, on and after the Offerings Closing Date, to take, or
cause to be taken, all actions, and to do, or cause to be done, all things,
reasonably necessary, proper or advisable under applicable laws, regulations and
agreements to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements.
(b) Without limiting the foregoing, prior to, on and after the
Offerings Closing Date, each party hereto shall cooperate with the other
parties, and without any further consideration, but at the expense of the
requesting party, to execute and deliver, or use its reasonable best efforts to
cause to be executed and delivered, all instruments, including instruments of
conveyance, assignment and transfer, and to make all filings with, and to obtain
all consents, approvals or authorizations of, any Governmental Authority or any
other Person under any permit, license, agreement, indenture or other instrument
(including any Consents or Governmental Approvals), and to take all such other
actions as such party may reasonably be requested to take by any other party
hereto from time to time, consistent with the terms of this Agreement and the
Ancillary Agreements, in order to effectuate the provisions and purposes of this
Agreement and the Ancillary Agreements and the transfers of the Company Assets
and the assignment and assumption of the Company Liabilities, the transfers of
the Excluded Assets and the assignment and assumption of the Excluded
Liabilities, and the other transactions contemplated hereby and thereby. Without
limiting the foregoing, each party will, at the reasonable request, cost and
expense of any other party, take such other actions as may be reasonably
necessary to vest in such other party good and marketable title, free and clear
of any Security Interest, to Company Assets or Excluded Assets, or as the case
may be, if and to the extent it is practicable to do so.
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(c) On or prior to the Offerings Closing Date, Parent and the
Company in their respective capacities as direct and indirect stockholders of
their respective Subsidiaries, shall each ratify any actions which are
reasonably necessary or desirable to be taken by Parent or the Company, or any
other Subsidiary of Parent, as the case may be, to effectuate the transactions
contemplated by this Agreement.
(d) Parent and the Company and each of the members of their
respective Groups, waive (and agree not to assert against any of the others) any
claim or demand that any of them may have against any of the others for any
Liabilities or other claims relating to or arising out of: (i) the failure of
the Company or any member of the Company Group, on the one hand, or of Parent,
or any member of the Parent Group, on the other hand, to provide any
notification or disclosure required under any state Environmental Law in
connection with the Separation or the other transactions contemplated by this
Agreement, including the transfer by any member of any Group to any member of
any other Group of ownership or operational control of any Assets not previously
owned or operated by such transferee; or (ii) any inadequate, incorrect or
incomplete notification or disclosure under any such state Environmental Law by
the applicable transferor. To the extent any Liability to any Governmental
Authority or any third Person arises out of any action or inaction described in
clause (i) or (ii) above, the transferee of the applicable Asset hereby assumes
and agrees to pay any such Liability.
(e) Prior to the Offerings Closing Date, if one or more of the
parties identifies any commercial or other service that is needed to assure a
smooth and orderly transition of the businesses in connection with the
consummation of the transactions contemplated hereby, and that is not otherwise
governed by the provisions of this Agreement or any Ancillary Agreement, the
parties will cooperate in determining whether there is a mutually acceptable
arm's-length basis on which one or more of the other parties will provide such
service.
ARTICLE XIII
TERMINATION
This Agreement may be terminated at any time prior to the Distribution
Date as provided in Section 4.6, or by Parent at any time prior to the Offerings
Closing Date. If this Agreement is terminated prior to the Offerings Closing
Date, no party hereto (or any of its respective directors or officers) will have
any liability or further obligation to any other party. In the event of any
termination of this Agreement on or after the Offerings Closing Date in
accordance with Section 4.6, only the provisions of this Agreement that obligate
the parties to pursue the Distribution, or take, or refrain from taking, actions
which would or might prevent the Distribution from qualifying for tax-free
treatment under Section 355 of the Code, will terminate and the other provisions
hereof and of each Ancillary Agreement will remain in full force and effect,
including, without limitation Section 14.9.
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ARTICLE XIV
MISCELLANEOUS
14.1 COUNTERPARTS; ENTIRE AGREEMENT; CORPORATE POWER.
(a) This Agreement and each Ancillary Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other party.
(b) This Agreement, and the Ancillary Agreements and the
Exhibits, Schedules and Appendices hereto and thereto contain the entire
agreement between the parties with respect to the subject matter hereof,
supersede all previous agreements, negotiations, discussions, writings,
understandings, commitments and conversations with respect to such subject
matter and there are no agreements or understandings between the parties other
than those set forth or referred to herein or therein.
(c) Parent represents on behalf of itself and each other
member of the Parent Group, the Company represents on behalf of itself and each
other member of the Company Group:
(i) each such Person has the requisite corporate or
other power and authority and has taken all corporate or other action necessary
in order to execute, deliver and perform each of this Agreement and each other
Ancillary Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby; and
(ii) this Agreement and each Ancillary Agreement to
which it is a party has been duly executed and delivered by it and constitutes a
valid and binding agreement of it enforceable in accordance with the terms
thereof.
(d) Each party hereto acknowledges that it and each other
party hereto is executing certain of the Ancillary Agreements by facsimile,
stamp or mechanical signature. Each party hereto expressly adopts and confirms
each such facsimile, stamp or mechanical signature made in its respective name
as if it were a manual signature, agrees that it will not assert that any such
signature is not adequate to bind such party to the same extent as if it were
signed manually and agrees that at the reasonable request of any other party
hereto at any time it will as promptly as reasonably practicable cause each such
Ancillary Agreement to be manually executed (any such execution to be as of the
date of the initial date thereof).
14.2 GOVERNING LAW. Except as set forth in Section 11.10, this
Agreement and, unless expressly provided therein, each Ancillary Agreement,
shall be governed by and construed and interpreted in accordance with the laws
of the State of Florida.
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14.3 ASSIGNABILITY. Except as set forth in any Ancillary Agreement,
this Agreement and each Ancillary Agreement shall be binding upon and inure to
the benefit of the parties hereto and thereto, respectively, and their
respective successors and assigns; PROVIDED, HOWEVER, that no party hereto or
thereto may assign its respective rights or delegate its respective obligations
under this Agreement or any Ancillary Agreement without the express prior
written consent of the other parties hereto or thereto.
14.4 THIRD PARTY BENEFICIARIES. Except for the indemnification rights
under this Agreement of any Parent Indemnitee or Company Indemnitee in their
respective capacities as such, (a) the provisions of this Agreement and each
Ancillary Agreement are solely for the benefit of the parties and are not
intended to confer upon any Person except the parties any rights or remedies
hereunder, and (b) there are no third party beneficiaries of this Agreement or
any Ancillary Agreement and neither this Agreement nor any Ancillary Agreement
shall provide any third person with any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without reference to
this Agreement or any Ancillary Agreement.
14.5 NOTICES. All notices or other communications under this Agreement
or any Ancillary Agreement shall be in writing and shall be deemed to be duly
given when (a) delivered in person or (b) deposited in the United States mail or
private express mail, postage prepaid, addressed to the principal executive
office of the other party to the attention of such party's chief executive
officer with a copy to such party's general counsel. Any party may, by notice to
the other party, change the address to which such notices are to be given.
14.6 SEVERABILITY. If any provision of this Agreement or any Ancillary
Agreement or the application thereof to any Person or circumstance is determined
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof or thereof, or the application of such provision to
Persons or circumstances or in jurisdictions other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the
economic or legal substance of the transactions contemplated hereby or thereby,
as the case may be, is not affected in any manner adverse to any party. Upon
such determination, the parties shall negotiate in good faith in an effort to
agree upon such a suitable and equitable provision to effect the original intent
of the parties.
14.7 FORCE MAJEURE. No party shall be deemed in default of this
Agreement or any Ancillary Agreement to the extent that any delay or failure in
the performance of its obligations under this Agreement or any Ancillary
Agreement results from any cause beyond its reasonable control and without its
fault or negligence, such as acts of God, acts of civil or military authority,
embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes,
floods, unusually severe weather conditions, labor problems or unavailability of
parts, or, in the case of computer systems, any failure in electrical or air
conditioning equipment. In the event of any such excused delay, the time for
performance shall be extended for a period equal to the time lost by reason of
the delay.
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14.8 PUBLICITY. Prior to the Distribution, each of the Company and
Parent shall consult with each other prior to issuing any press releases or
otherwise making public statements with respect to the IPO, the Distribution or
any of the other transactions contemplated hereby and prior to making any
filings with any Governmental Authority with respect thereto.
14.9 EXPENSES. Except as expressly set forth in this Agreement
(including Section 3.1(g) and Section 5.4 hereof) or in any Ancillary Agreement,
whether or not the IPO or the Distribution is consummated, all third party fees,
costs and expenses paid or incurred in connection with the Distribution will be
paid by Parent. Parent and the Company shall share all of the fees, costs and
expenses in connection with the Letter Ruling as if such amounts were Shared
Contingent Liabilities subject to Section 7.2 hereof.
14.10 HEADINGS. The article, section and paragraph headings contained
in this Agreement and in the Ancillary Agreements are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or any Ancillary Agreement.
14.11 SURVIVAL. Except as expressly set forth in any Ancillary
Agreement, the covenants, representations and warranties contained in this
Agreement and each Ancillary Agreement, and liability for the breach of any
obligations contained herein, shall survive each of the Separation, the IPO and
the Distribution.
14.12 WAIVERS OF DEFAULT. Waiver by any party of any default by the
other party of any provision of this Agreement or any Ancillary Agreement shall
not be deemed a waiver by the waiving party of any subsequent or other default,
nor shall it prejudice the rights of the other party.
14.13 SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement or any Ancillary Agreement, the party or parties who are or are to be
thereby aggrieved shall have the right to specific performance and injunctive or
other equitable relief of its rights under this Agreement or such Ancillary
Agreement, in addition to any and all other rights and remedies at law or in
equity, and all such rights and remedies shall be cumulative. The parties agree
that the remedies at law for any breach or threatened breach, including monetary
damages, are inadequate compensation for any loss and that any defense in any
action for specific performance that a remedy at law would be adequate is
waived. Any requirements for the securing or posting of any bond with such
remedy are waived.
14.14 AMENDMENTS.
(a) No provisions of this Agreement or any Ancillary Agreement
shall be deemed waived, amended, supplemented or modified by any party, unless
such waiver, amendment, supplement or modification is in writing and signed by
the authorized representative of the party against whom it is sought to enforce
such waiver, amendment, supplement or modification.
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(b) Without limiting the foregoing, the parties anticipate
that, prior to the Offerings Closing Date, some or all of the Schedules to this
Agreement may be amended or supplemented and, in such event, such amended or
supplemented Schedules shall be attached hereto in lieu of the original
Schedules.
14.15 INTERPRETATION. Words in the singular shall be held to include
the plural and vice versa and words of one gender shall be held to include the
other genders as the context requires. The terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement (or the applicable Ancillary Agreement) as
a whole (including all of the Schedules, Exhibits and Appendices hereto and
thereto) and not to any particular provision of this Agreement (or such
Ancillary Agreement). Article, Section, Exhibit, Schedule and Appendix
references are to the Articles, Sections, Exhibits, Schedules and Appendices to
this Agreement (or the applicable Ancillary Agreement) unless otherwise
specified. The word "including" and words of similar import when used in this
Agreement (or the applicable Ancillary Agreement) shall mean "including, without
limitation," unless the context otherwise requires or unless otherwise
specified. The word "or" shall not be exclusive.
IN WITNESS WHEREOF, the parties have caused this Separation and
Distribution Agreement to be executed by their duly authorized representatives.
REPUBLIC INDUSTRIES, INC.
By: /s/ James O. Cole
------------------------------------
Name: James O. Cole
-------------------------------
Title: Senior Vice President
------------------------------
REPUBLIC SERVICES, INC.
By: /s/ Harris W. Hudson
------------------------------------
Name: Harris W. Hudson
-------------------------------
Title: Vice Chairman
------------------------------
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EXHIBIT 10.2
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT (the "Agreement"), dated as of June
30, 1998, between Republic Industries, Inc., a Delaware corporation ("Parent"),
and Republic Services, Inc., a Delaware corporation and, as of the date hereof,
a wholly owned subsidiary of Parent ("Company").
WHEREAS, Parent and Company have entered into a Separation and
Distribution Agreement (the "Distribution Agreement") which contemplates (i) the
separation of Company, which comprises Parent's solid waste services businesses
and operations (the "Company Business"), from Parent's other businesses and
operations (the "Separation"), (ii) the consummation of an initial public
offering (the "IPO") of the Company's Class A common stock, and (iii) following
the IPO, the distribution by Parent of all shares of common stock of Company
owned by Parent to Parent's stockholders at the time of such distribution (the
"Distribution"); and
WHEREAS, the Distribution Agreement contemplates the execution and
delivery of this Agreement, the purpose of which is to set forth certain matters
regarding the treatment of employee benefits as a result of, and in connection
with, the Separation.
NOW, THEREFORE, in consideration of the mutual agreement, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, terms shall have the meaning set forth in
the Distribution Agreement, unless otherwise expressly provided herein. In
addition, the following terms shall have the following meanings:
"Company Employee" means (a) any individual who, on or
immediately prior to the Distribution Date, is employed by Parent or any Parent
Subsidiary or is on a leave of absence approved by Parent or any Parent
Subsidiary and who, immediately after the Distribution Date, is employed by
Company or any Company Subsidiary or who is continuing on a leave of absence
approved by Company or any Company Subsidiary, and (b) any individual whose
employment is transferred from Parent or any Parent Subsidiary to Company or any
Company Subsidiary within three hundred and sixty five days after the
Distribution Date.
<PAGE> 2
"Company Subsidiary" means any corporation, partnership or other entity
directly or indirectly controlled by Company.
"Distribution Date" means the date upon which the Distribution is
consummated in accordance with the Distribution Agreement.
"Former Company Employee" means any individual who was an employee of
the Company or was engaged in Company Business with Parent but terminated such
employment prior to the Distribution Date.
"Parent Subsidiary" means any corporation, partnership or other entity
directly or indirectly controlled by Parent, other than Company and Company
Subsidiaries.
"Transfer Date" means, (i) with respect to any Company Employee
described in clause (a) of the definition of Company Employee, the Distribution
Date, and (ii) with respect to any Company Employee described in clause (b) of
the definition of Company Employee, the effective date on which such Company
Employee's employment is transferred from Parent or any Parent Subsidiary to
Company or any Company Subsidiary.
ARTICLE II
CERTAIN BENEFIT PLAN MATTERS
2.1 CERTAIN COMPANY PLANS; ASSUMPTIONS OF OBLIGATIONS BY COMPANY.
(a) Except as otherwise provided herein, Company hereby agrees
to establish as of the Distribution Date employee benefit plans (the "Company
Plans") having substantially the same terms and provisions as the employee
benefit plans of Parent listed on SCHEDULE 2.1 hereto (the "Parent Plans").
Except as otherwise provided herein, the Company agrees to assume and to pay,
perform, fulfill and discharge, in accordance with their respective terms, all
liabilities relating to each Company Employee and certain Former Company
Employees arising under such Parent Plans. The Company acknowledges and agrees
that Parent is making no representations or warranties hereunder or otherwise
that the costs to Company of providing benefits under the Company Plans
(including without limitation costs of premiums and other charges to third party
service providers) will be the same as the corresponding costs heretofore
incurred by Parent. Nothing in this Agreement shall be construed to prevent the
Company from altering or discontinuing any Company Plans established by it
pursuant to this Section 2.
(b) Until the Distribution Date, such Company Employees and
certain Former Company Employees are referenced in Section 2.1(a) above will
continue to participate in the Parent Plans, and the Company shall bear the
allocable share of the costs of benefits thereunder.
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<PAGE> 3
2.2 CERTAIN PAYMENTS BY PARENT. Parent hereby agrees to pay all
insurance premiums or similar plan payments attributable to each participant who
will become a Company Employee for the period ending on such participant's
Transfer Date (or the end of the month thereafter if insurance premiums or third
party administration deposits are paid on a monthly basis) under each Parent
Plan listed on Schedule 2.2 hereto.
2.3 CERTAIN MEDICAL CLAIMS. Parent hereby agrees to retain all medical
costs, including insurance premiums or the payment and reimbursement of claims,
of each Company Employee and his or her covered dependents for claims which
relate to conditions incurred on or prior to the Company Employee's Transfer
Date with respect to expenses for medical services rendered to such persons
during the period ending on such Transfer Date.
2.4 EMPLOYEES ON CERTAIN LEAVE. If any individual who becomes a Company
Employee is on a leave of absence approved by Parent or any Parent Subsidiary on
his or her Transfer Date, and continues on a leave approved by Company or any
Company Subsidiary after the Transfer Date, then such leave shall continue under
Company's leave policies; provided that the maximum aggregate amount and
duration of such benefits as well as the duration of the leave shall not exceed
such limits under the applicable Parent policy.
2.5 SAVINGS PLAN(S). The Company shall participate as a separate
employer in the 401(k) plan currently maintained by the Parent. All liabilities
associated with plans acquired via previous and current acquisition activity by
either Parent and/or the Company related to the Company Business will become the
liability of the Company as of the Distribution Date. Each Company Employee who
is participating in one of the Parent Savings Plans immediately prior to his or
her Transfer Date shall continue to participate in such Parent Savings Plan as
of such Transfer Date. Each Company Employee who makes salary reduction
contributions to a Parent Savings Plan during the calendar quarter in which his
or her Transfer Date occurs, with respect to compensation paid on or before such
Transfer Date, and who continues to be employed by Company or a Company
Subsidiary at the end of such calendar year, will have matching contributions
made to the Parent Savings Plans, by Parent and Company pro rata, with respect
to those contributions, as of the end of such calendar quarter.
2.7 INCENTIVE PLAN. Company shall assume certain employee stock
incentive obligations, pursuant to its 1998 Stock Incentive Plan (the "Stock
Incentive Plan") to be adopted prior to the Offerings Closing Date, a copy of
which is attached hereto as SCHEDULE 2.7.
(a) Following the Distribution, the Company intends to issue
substitute options under the Stock Incentive Plan (collectively "Substitute
Options") in substitution for grants of options to purchase Parent Common Stock
granted under Parent's stock option plans as of the Distribution Date
(collectively, "Parent Stock Options") which are held by Company Employees on
the Distribution Date. With certain exceptions, Parent Stock Options held by
individuals employed by Parent as of the Distribution Date and Parent Stock
Options held by individuals who will not continue their employment after the
Distribution Date with any of Parent, the Company or any of
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<PAGE> 4
their subsidiaries, including individuals who have retired prior to such date,
will remain outstanding as Parent Stock Options, with an appropriate
antidilution adjustment to reflect the Distribution.
(b) The Substitute Options will provide for the purchase of a
number of shares of the Class A Common Stock of the Company (the "Class A Common
Stock") equal to the number of shares of Parent Common Stock subject to such
Parent Stock Options as of the Distribution Date, multiplied by the Ratio (as
defined below), rounded down to the nearest whole share. The per share exercise
price of the Substitute Options will equal the per share exercise price of such
Parent Stock Options as of the Distribution Date divided by the Ratio. Solely
for its convenience, the Company will pay the holders of the Substitute Options
cash in lieu of any fractional share. The other terms and conditions of such
Substitute Options will be substantially the same as those of the surrendered
Parent Stock Options subject to the provisions of the Stock Incentive Plan. The
"Ratio" means the amount obtained by dividing (i) the average of the daily high
and low per share prices of the common stock of Parent as listed on the New York
Stock Exchange (the "NYSE") during each of the 30 trading days immediately
preceding the ex-dividend date for the Distribution by (ii) the average of the
daily high and low per share prices of the Class A Common Stock as listed on the
NYSE during each of the 30 trading days immediately preceding the ex-dividend
date for the Distribution.
(c) Parent agrees to indemnify, defend and hold harmless the
Company Indemnitees from and against any Liabilities relating to, arising out of
or resulting from options granted under any of the Parent's stock option plans.
ARTICLE III
MISCELLANEOUS
3.1 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the parties, it being
understood and agreed that no provisions contained herein, and no act of the
parties, shall be deemed to create any relationship between the parties other
than the relationship set forth herein.
3.2 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
parties hereto and their respective subsidiaries and affiliates and shall not be
deemed to confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without reference to
this Agreement.
3.3 GOVERNING LAW. To the extent not preempted by applicable federal
law, this Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of Florida, irrespective of the choice or
conflict of law rules or provisions of the State of Florida, as to all matters,
including matters of validity, construction, effect, performance and remedies.
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3.4 INCORPORATION OF DISTRIBUTION AGREEMENT PROVISIONS. The following
provisions of the Distribution Agreement are hereby incorporated herein by
reference and, unless otherwise expressly specified herein, such provisions
shall apply as if set forth herein: Article VI (relating to Indemnification),
Article X (relating to exchange of information, confidentiality) and Section
14.5 (relating to notices).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and year first above written.
REPUBLIC INDUSTRIES, INC.
By: /s/ James O. Cole
------------------------------------
Name: James O. Cole
----------------------------------
Title: Senior Vice President
----------------------------------
REPUBLIC SERVICES, INC.
By: /s/ Harris W. Hudson
------------------------------------
Name: Harris W. Hudson
----------------------------------
Title: Vice Chairman
----------------------------------
5
<PAGE> 1
EXHIBIT 10.3
SERVICES AGREEMENT
This SERVICES AGREEMENT (the "Agreement") is made as of June 30, 1998
by and between Republic Industries, Inc., a Delaware corporation ("Parent") and
Republic Services, Inc., a Delaware corporation ("Company").
WHEREAS, the Board of Directors of Parent has determined that it is in
the best interests of Parent and its stockholders to separate the Company, which
comprises the Parent's solid waste services businesses and operations, from
Parent (the "Separation");
WHEREAS, in order to effectuate the Separation, Parent and Company have
entered into a Separation and Distribution Agreement, dated as of the date
hereof (the "Separation and Distribution Agreement"), which provides, among
other things, subject to the terms and conditions thereof, for the Separation,
the initial public offering of the common stock of the Company and the
distribution of all shares of common stock of the Company held by Parent to the
stockholders of Parent; and
WHEREAS, in order to ensure an orderly transition under the Separation
and Distribution Agreement it will be necessary for Parent to provide to Company
certain services described herein at various levels throughout the term of this
Agreement.
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants contained herein, it is agreed by and between the parties as follows:
ARTICLE I
FEES AND TERM
1.1 PRICE/PAYMENT. As consideration for the services to be provided to
Company by Parent under the terms of this Agreement, Company shall initially pay
to Parent a fee (the "Services Fee") of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000.00) per month. The Services Fee shall be payable by Company
to Parent in arrears 15 days after the close of each month (prorated for any
partial month) during the term of this Agreement. Any services provided by
Parent to Company beyond the services covered by the Services Fee shall be
billed to Company on a cost basis, or on such other basis as the parties may
agree from time to time. The Services Fee shall be reviewed and reduced from
time to time in accordance with Section 2.3.
1.2 TERM. The term of this Agreement (the "Term") shall commence on the
date hereof and shall expire one year after the closing of the initial public
offering of the Company.
<PAGE> 2
ARTICLE II
SERVICES
2.1 SERVICES. Parent agrees to provide the following services (subject
to such modification or adjustment as may be mutually agreed upon by the
parties) to Company during the Term:
(a) CORPORATE COMMUNICATIONS DEPARTMENT: The corporate
communications department of Parent shall develop and
implement strategic internal and external communication
programs for Company, including investor assistance and
communications;
(b) CORPORATE DEVELOPMENT DEPARTMENT. The corporate development
department of Parent shall assist Company to develop,
negotiate and close on acquisition and disposition
opportunities.
(c) CORPORATE FINANCE DEPARTMENT: The corporate finance department
of Parent shall provide corporate accounting, financial
planning and financial reporting systems, processing of
Company accounts payable, processing of Company payroll, cash
management and treasury functions, and internal audit
supervision.
(d) HUMAN RESOURCES DEPARTMENT: The human resources department of
Parent shall provide and administer for certain employees, as
agreed upon by the parties, all benefit plans and a 401(k)
plan consistent with the current plans maintained by Parent,
provide salary administration, maintain affirmative
action/EEOC programs and compliance, assist in the recruiting
and selection of employees, and administer employee relations
programs.
(e) LEGAL DEPARTMENT: The legal department of Parent shall provide
all legal services requested by Company, including but not
limited to: advice and counsel on legal matters, governmental
affairs, employee termination issues, Fair Labor Standards Act
matters and Service Contract Act matters; preparation, review
and negotiation of acquisition agreements and other material
contracts; direction and coordination of labor relations and
worker's compensation cases and claims; performing corporate
secretary functions; preparation and filing of all
information, reports and registration statements with the
Securities and Exchange Commission and any exchange on which
the Company's common stock may be listed; and assisting in any
applicable licensing and intellectual property matters.
(f) PURCHASING DEPARTMENT: The purchasing department of Parent
shall provide central purchasing programs for Parent and
Company and shall provide Company assistance in negotiating
contracts with vendors.
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<PAGE> 3
(g) RISK MANAGEMENT DEPARTMENT: The risk management department of
Parent shall direct and coordinate all risk management
activities of the Company, including insurance and surety and
general risk management services such as insurance procurement
and claims administration.
(h) TAX DEPARTMENT: The tax department of Parent shall provide tax
compliance, reporting and planning services for federal, state
and local tax matters.
2.2 DETAILS OF PERFORMANCE. Reasonable details of Parent's performance
of services hereunder may be specified in one or more memoranda signed by the
parties and such memoranda shall be deemed incorporated in this Agreement by
reference as if recited herein in their entirety.
2.3 PHASE OUT OF SERVICES; REDUCTION OF SERVICES FEE. The parties
hereby acknowledge that Company will promptly take all steps to internalize the
services to be provided herein by acquiring its own staff or outsourcing to
third parties. The parties agree to periodically review the level of services
being utilized by the Company, and from time to time shall reduce the Service
Fee proportionately to account for reductions in the level of services being
provided hereunder.
ARTICLE III
MISCELLANEOUS
3.1 CONFIDENTIALITY. Parent shall not use or disclose to any other
person at any time, any confidential or proprietary information or trade secrets
of Company, including, without limitation, its customer lists, programs, pricing
and strategies except to those of its employees and those other persons who need
to know such information to fulfill Parent's obligations hereunder. Parent shall
provide to Company semi-annually upon Company's written request, a list of all
employees of Parent whose duties have required access to such information, and
any other employees who to the actual knowledge of Parent's officers have had
access to such information during the preceding six (6) month period, in each
case, designating whether such employees are in the employ of Parent as of the
date such list is provided. Parent agrees that all drawings, specifications,
data, memoranda, calculations, notes and other materials, including, without
limitation, any materials containing confidential or proprietary information or
trade secrets of Company, furnished by Company to Parent in connection with this
Agreement and any copies thereof are and shall remain the sole and exclusive
property of Company and shall be delivered to Company upon its request.
3.2 NO AGENCY. Parent shall perform its services under this Agreement
as an independent contractor. Each party acknowledges and agrees that it is not
granted any express or implied authority to assume or create any obligation or
responsibility on behalf of the other party, or to bind the other party with
regard to third parties in any manner.
3.3 NOTICES. Any notices required or permitted to be provided pursuant
to this Agreement shall be provided in writing and be deemed received upon
delivery by hand or five days after mailing
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<PAGE> 4
by certified mail, return receipt requested, addressed to the recipient party at
its address set forth above.
3.4 FORCE MAJEURE. In the event that either party is prevented from
performing, or is unable to perform, any of its obligations under this Agreement
due to any act of God, fire, casualty, flood, war, strike, lock out, failure of
public utilities, injunction or any act, exercise, assertion or requirement of
governmental authority, epidemic, destruction of production facilities,
insurrection, inability to procure materials, labor, equipment, transportation
or energy sufficient to meet manufacturing needs, or any other cause beyond the
reasonable control of the party invoking this provision, and if such party shall
have used its best efforts to avoid such occurrence and minimize its duration
and has given prompt written notice to the other party, then the affected
party's performance for the period of delay or inability to perform due to such
occurrence shall be suspended. Should Parent fail to perform hereunder and shall
have provided proper notice to Company that it is unable to perform on account
of one or more reasons set forth in this section, Company may obtain replacement
services from a third party for the duration of such delay or inability to
perform, or for such longer period as Company shall be reasonably required to
commit to in order to obtain such replacement services and the Services Fee
shall be reduced accordingly.
ARTICLE IV
GENERAL PROVISIONS
4.1 ENTIRE AGREEMENT. Except as contemplated in Section 2.2, this
Agreement embodies the entire agreement and understanding of the parties hereto
with respect to the subject matter hereof, and supersedes all prior agreements
and understandings relative to said subject matter.
4.2 BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of, Parent, Company and their respective successors and
assigns.
4.3 ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder shall be assignable by either party without the prior written consent
of the other party hereto, which consent shall not be unreasonably withheld.
4.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Florida applicable to contracts to be
performed entirely in that State.
4.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
4.6 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first above written.
REPUBLIC INDUSTRIES, INC.
By: /s/ James O. Cole
------------------------------------
Name: James O. Cole
----------------------------------
Title: Senior Vice President
---------------------------------
REPUBLIC SERVICES, INC.
By: /s/ Harris W. Hudson
------------------------------------
Name: Harris W. Hudson
----------------------------------
Title: Vice Chairman
---------------------------------
5
<PAGE> 1
EXHIBIT 10.4
TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
THIS TAX INDEMNIFICATION AND ALLOCATION AGREEMENT ("Agreement") is
entered into as of June 30, 1998 by and between REPUBLIC INDUSTRIES, INC., a
Delaware corporation ("Distributing Co.") and REPUBLIC SERVICES, INC., a
Delaware corporation ("Controlled Co.") (Distributing Co. and Controlled Co. are
sometimes collectively referred to herein as the "Companies"). Capitalized terms
used in this Agreement are defined in Section 1 below. Unless otherwise
indicated, all "Section" references in this Agreement are to sections of this
Agreement.
PRELIMINARY STATEMENTS
A. As of the date hereof, Distributing Co. is the common parent of an
affiliated group of corporations, including Controlled Co., which has elected to
file consolidated Federal income tax returns.
B. Incident to an initial public offering ("IPO") of Class A Common
Stock of Controlled Co. in connection with the separation and distribution of
Controlled Co. from Distributing Co. pursuant to one overall integrated plan,
the Companies have entered into a Separation and Distribution Agreement (the
"Distribution Agreement").
C. As a result of the IPO, Controlled Co. and its subsidiaries (as
constituted immediately after the consummation of the IPO) will cease to be
members of the affiliated group of which Distributing Co. is the common parent
(the "Offerings Closing Date").
D. The Distribution Agreement also sets forth certain transactions
whereby certain assets held by the Distributing Group will be transferred in
connection with the IPO and separation to Republic Resources and, prior to the
Offerings Closing Date, all of the capital stock of Republic Resources held by
Controlled Co. will be distributed to Distributing Co. in a transaction intended
to qualify as a tax-free distribution by Controlled Co. to Distributing Co.
under Section 355 of the Internal Revenue Code of 1986, as amended.
E. The Distribution Agreement also sets forth corporate transactions
pursuant to which Distributing Co. may sell capital stock of Controlled Co. and
will distribute, subject to the satisfaction of certain terms and conditions,
all of the capital stock of Controlled Co. held by Distributing Co. to
Distributing Co.'s shareholders in a transaction intended to qualify as a
tax-free distribution to Distributing Co. and its shareholders under Section 355
of the Internal Revenue Code of 1986, as amended.
<PAGE> 2
F. The Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the transactions contemplated by the Distribution Agreement,
and to provide for and agree upon other matters relating to Taxes.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the mutual covenants
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. DEFINITION OF TERMS. For purposes of this Agreement
(including the recitals hereof), the following terms have the following
meanings:
"Accounting Cutoff Date" means, with respect to Controlled
Co., any date as of the end of which there is a closing of the
financial accounting records for such entity.
"Accounting Firm" shall have the meaning provided in Section
15.
"Adjustment Request" means any formal or informal claim or
request filed with any Tax Authority, or with any administrative agency
or court, for the adjustment, refund, or credit of Taxes, including (a)
any amended Tax return claiming adjustment to the Taxes as reported on
the Tax Return or, if applicable, as previously adjusted, or (b) any
claim for refund or credit of Taxes previously paid.
"Affiliate" means any entity that directly or indirectly is
"controlled" by the person or entity in question. "Control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through
ownership of voting securities, by contract or otherwise. Except as
otherwise provided herein, the term Affiliate shall refer to Affiliates
of a person as determined immediately after the Distribution. The term
"Affiliate" includes a Subsidiary of an entity.
"Agreement" shall mean this Tax Indemnification and Allocation
Agreement.
"Allocated Federal Tax Liability" shall have the meaning
provided in Section 5.1(b)(i).
"Carryback" means any net operating loss, net capital loss,
excess tax credit, or other similar Tax item which may or must be
carried from one Tax Period to an earlier Tax Period under the Code or
other applicable Tax Law.
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<PAGE> 3
"Code" means the U.S. Internal Revenue Code of 1986, as
amended, or any successor law.
"Companies" means Distributing Co. and Controlled Co.,
collectively, and "Company" means any one of Distributing Co. and
Controlled Co.
"Consolidated or Combined Income Tax" means any Income Tax
computed by reference to the assets or activities of members of more
than one Group.
"Consolidated or Combined State Income Tax" means any State
Income Tax computed by reference to the assets or activities of members
of more than one Group.
"Consolidated Tax Liability" means, with respect to any
Distributing Co. Federal Consolidated Return, the tax liability of the
group as that term is used in Treasury Regulation Section
1.1552-1(a)(1) (including applicable interest, additions to the tax,
additional amounts, and penalties as provided in the Code), adjusted as
follows:
(i) such tax liability be treated as including any alternative
minimum tax liability under Code Section 55; and
(ii) in the case of the Tax Period which includes the
Offerings Closing Date, the Consolidated Tax Liability shall be
computed as if the Offerings Closing Date were the last day of the Tax
Period.
"Controlled Adjustment" means any proposed adjustment by a Tax
Authority or claim for refund asserted in a Tax Contest to the extent
Controlled Co. would be exclusively liable for any resulting Tax under
this Agreement and exclusively entitled to receive any resulting Tax
Benefit under this Agreement.
"Controlled Group" means Controlled Co. and its Subsidiaries
and wholly- owned limited liability companies as determined immediately
after the Offerings Closing Date.
"Controlled Group Disqualifying Event" means any event
involving the direct or indirect acquisition of shares of the capital
stock of any member of the Controlled Group after the Distribution
which has the effect of disqualifying the Distribution or any part
thereof from tax-free treatment under Code section 355, whether or not
such event is the result of direct actions of, or within the control
of, the Controlled Co. or its Subsidiaries, or which otherwise is
inconsistent with representations relating to Controlled Co. and the
ownership of its capital stock, as set forth in the Ruling Request.
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<PAGE> 4
"Controlled Group Prior Federal Tax Liability" shall have the
meaning provided in Section 2.2(b)(ii).
"Controlled Group Prior State Tax Liability" shall have the
meaning provided in Section 2.3(b)(ii)(B).
"Controlled Group Recomputed Federal Tax Liability" shall have
the meaning provided in Section 2.2(b)(i).
"Controlled Group Recomputed State Tax Liability" shall have
the meaning provided in Section 2.3(b)(ii)(A).
"Cumulative Federal Tax Payment" shall have the meaning
provided in Section 5.1(b)(ii).
"Distributing Adjustment" means any proposed adjustment by a
Tax Authority or claim for refund asserted in a Tax Contest to the
extent Distributing Co. would be exclusively liable for any resulting
Tax under this Agreement and exclusively entitled to receive any
resulting Tax Benefit under this Agreement.
"Distributing Co. Federal Consolidated Return" means any
United States Federal Tax Return for the affiliated group (as that term
is defined in Code Section 1504) that includes Distributing Co. as the
common parent and any member of the Controlled Group.
"Distributing Group" means Distributing Co. and its
Subsidiaries and wholly- owned limited liability companies, excluding
any entity that is a member of the Controlled Group.
"Distribution" means the distribution to Distributing Co.
shareholders on the Distribution Date of all of the outstanding capital
stock of Controlled Co. owned by Distributing Co.
"Distribution Agreement" means the Separation and Distribution
Agreement dated as of the date of this Agreement between the
Distributing Co. and the Controlled Co.
"Distribution Date" means the Distribution Date as that term
is defined in the Distribution Agreement.
"Distribution Tax" means the Taxes described in Section
2.5(a)(ii).
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<PAGE> 5
"Federal Allocation Method" shall have the meaning provided in
Section 2.2(a).
"Federal Income Tax" means any Tax imposed by Subtitle A or F
of the Code.
"Federal Tax Adjustment" shall have the meaning provided in
Section 2.2(b).
"Foreign Income Tax" means any Tax imposed by any foreign
country or any possession of the United States, or by any political
subdivision of any foreign country or United States possession, which
is an income tax as defined in Treasury Regulation Section 1.901-2.
"Group" means the Distributing Co. Group or the Controlled Co.
Group, as the context requires.
"Income Tax" means any Federal Income Tax, State Income Tax,
or Foreign Income Tax.
"Internal Restructuring" means the distribution of all of the
shares of capital stock of Republic Resources held by Controlled Co.
and/or its Subsidiaries to Distributing Co., all distributions,
transfers and exchanges of said capital stock within the Controlled
Group in connection with and prior to the distribution of said capital
stock by Controlled Co. to Distributing Co., and all transfers and
exchanges of assets by members of the Distributing Group or members of
the Controlled Group to Republic Resources or entities owned by
Republic Resources in connection with the distribution, transfer and
exchange of shares of capital stock of Republic Resources within the
Controlled Group and the distribution of such stock to the Distributing
Co.
"Joint Adjustment" means any proposed adjustment resulting
from a Tax Contest that is not a (i) Controlled Adjustment, (ii) a
Distributing Adjustment, or (iii) any other type of adjustment that
give rise to an indemnification payment by one Company to the other
Company pursuant to this Agreement.
"Payment Date" means (i) with respect to any Distributing Co.
Federal Consolidated Return, the due date for any required installment
of estimated taxes determined under Code Section 6655, the due date
(determined without regard to extensions) for filing the return
determined under Code Section 6072, and the date the return is filed,
and (ii) with respect to any Tax Return for any Consolidated or
Combined State Income Tax, the corresponding dates determined under the
applicable Tax Law.
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<PAGE> 6
"Post-IPO Period" means any Tax Period beginning after the
Offerings Closing Date, and, in the case of any Straddle Period, the
portion of such Straddle Period beginning the day after the Offerings
Closing Date.
"Pre-IPO Period" means any Tax Period ending on or before the
Offerings Closing Date, and, in the case of any Straddle Period, the
portion of such Straddle Period ending on the Offerings Closing Date.
"Prime Rate" means the base rate on corporate loans charged by
Citibank, N.A., New York, New York from time to time, compounded daily
on the basis of a year of 365 or 366 (as applicable) days and actual
days elapsed.
"Prohibited Action" shall have the meaning provided in Section
11.
"Republic Resources" means Republic Resources Company, Inc., a
Delaware corporation.
"Responsible Company" means, with respect to any Tax Return,
the Company having responsibility for preparing and filing such Tax
Return under this Agreement.
"Ruling Request" means the letter to be filed by Distributing
Co. with the Internal Revenue Service requesting a ruling from the
Internal Revenue Service regarding certain tax consequences of the
Distribution and Transactions (including all attachments, exhibits, and
other materials submitted with such ruling request letter) and any
amendment or supplement to such ruling request letter.
"Separate Company Tax" means any Tax computed by reference to
the assets and activities of a member or members of a single Group.
"Straddle Period" means any Tax Period that begins on or
before and ends after the Offerings Closing Date.
"State Income Tax" means any Tax imposed by any State of the
United States or by any political subdivision of any such State which
is imposed on or measured by net income, including state and local
franchise or similar Taxes measured by net income.
"Subsidiary" shall have the meaning set forth in Treasury
Regulations section 1.1502-1(c).
"Tax" or "Taxes" means any income, gross income, gross
receipts, profits, capital stock, franchise, withholding, payroll,
social security, workers compensation,
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unemployment, disability, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer,
import, export, value added, alternative minimum, estimated or other
similar tax (including any fee, assessment, or other charge in the
nature of or in lieu of any tax) imposed by any governmental entity or
political subdivision thereof, and any interest, penalties, additions
to tax, or additional amounts in respect of the foregoing.
"Tax Authority" means, with respect to any Tax, the
governmental entity or political subdivision thereof that imposes such
Tax, and the agency (if any) charged with the collection of such Tax
for such entity or subdivision.
"Tax Benefit" means any refund, credit, or other reduction in
otherwise required Tax payments (including any reduction in estimated
tax payments).
"Tax Contest" means an audit, review, examination, or any
other administrative or judicial proceeding with the purpose or effect
of redetermining Taxes of any of the Companies or their Affiliates
(including any administrative or judicial review of any claim for
refund) for any Tax Period ending on or before the Offerings Closing
Date or any Straddle Period.
"Tax Contest Committee" shall have the meaning provided in
Section 9.2(b).
"Tax Item" means, with respect to any Income Tax, any item of
income, gain, loss, deduction, and credit.
"Tax Law" means the law of any governmental entity or
political subdivision thereof relating to any Tax.
"Tax Period" means, with respect to any Tax, the period for
which the Tax is reported as provided under the Code or other
applicable Tax Law.
"Tax Records" means Tax Returns, Tax Return workpapers,
documentation relating to any Tax Contests, and any other books of
account or records required to be maintained under the Code or other
applicable Tax Laws or under any record retention agreement with any
Tax Authority.
"Tax Return" means any report of Taxes due, any claims for
refund of Taxes paid, any information return with respect to Taxes, or
any other similar report, statement, declaration, or document required
to be filed under the Code or other Tax Law, including any attachments,
exhibits, or other materials submitted with any of the foregoing, and
including any amendments or supplements to any of the foregoing.
"Transactions" means the transactions relating to the Internal
Restructuring.
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<PAGE> 8
"Treasury Regulations" means the regulations promulgated from
time to time under the Code as in effect for the relevant Tax Period.
Section 2. ALLOCATION OF TAX LIABILITIES. The provisions of this
Section 2 are intended to determine each Company's liability for Taxes with
respect to Pre-IPO Periods. The provisions of Section 2.5(a)(ii) and (b) are
intended to determine each Company's liability for Distribution Taxes, if any,
even though such Taxes arise in a Post-IPO Period. Once the liability has been
determined under this Section 2, Section 5 determines the time when payment of
the liability is to be made, and whether the payment is to be made to the Tax
Authority directly or to the other Company.
2.1 GENERAL RULE
(a) DISTRIBUTING CO. LIABILITY. Distributing Co. shall be liable
for Taxes not specifically allocated to the Controlled Co. under this Section 2.
Distributing Co. shall indemnify and hold harmless the Controlled Group from and
against any liability for Taxes for which Distributing Co. is liable under this
Section 2.1(a).
(b) CONTROLLED CO. LIABILITY. Controlled Co. shall be liable for,
and shall indemnify and hold harmless the Distributing Group from and against
any liability for, Taxes which are allocated to Controlled Co. under this
Agreement.
2.2 ALLOCATION OF UNITED STATES FEDERAL INCOME TAX. Except as provided
in Section 2.5:
(a) ALLOCATION OF TAX RELATING TO FEDERAL CONSOLIDATED RETURNS.
With respect to any Distributing Co. Federal Consolidated Tax Return filed after
the Offerings Closing Date, the Consolidated Tax Liability shall be allocated
between the Groups in accordance with the method prescribed in Treasury
Regulation Section 1.1552-1(a)(1) (as in effect on the date hereof) determined
by aggregating the amounts allocable to the members of each respective Group
into a single amount for each Group (the "Federal Allocation Method"). For
purposes of such allocation, the excess, if any, of (i) Consolidated Tax
Liability over (ii) Consolidated Tax Liability determined without regard to any
alternative minimum tax liability under Code Section 55, shall be allocated
among the Groups in accordance with their respective amounts of alternative
minimum taxable income, and any corresponding alternative minimum tax credit
shall be allocated in accordance with the allocation of such alternative minimum
tax liability. Any amount so allocated to the Controlled Group shall be a
liability of Controlled Co. to Distributing Co. under this Section 2. Amounts
described in Code Section 1561 (relating to limitations on certain multiple
benefits) shall be divided equally among the Distributing Group and Controlled
Group to the extent permitted by the Code.
(b) ALLOCATION OF FEDERAL CONSOLIDATED RETURN TAX ADJUSTMENTS. If
there is any adjustment to the reported Tax liability with respect to any
Distributing Co. Federal Consolidated Return, or to such Tax liability as
previously adjusted, Controlled Co. shall be liable to Distributing Co. for the
excess (if any) of--
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(i) the share of the Consolidated Tax Liability of
the Controlled Group computed in accordance with paragraph (a) based on the Tax
Items of members of the Controlled Group as so adjusted (the "Controlled Group
Recomputed Federal Tax Liability"); minus
(ii) the share of the Consolidated Tax Liability of
the Controlled Group computed in accordance with paragraph (a) based on the Tax
Items of such members as reported (or, if applicable, as previously adjusted)
(the "Controlled Group Prior Federal Tax Liability").
If the Controlled Group Prior Federal Tax Liability exceeds the Controlled Group
Recomputed Federal Tax Liability, Distributing Co. shall be liable to Controlled
Co. for such excess. For purposes of the preceding sentence, if the Controlled
Group has a net operating loss after taking into account the adjustments
allocable to such group, the Controlled Group Recomputed Federal Tax Liability
shall be less than zero to the extent such net operating loss produces a Tax
Benefit for the applicable taxable year, and the amount that Distributing Co.
shall be liable to Controlled Co. pursuant to the preceding sentence shall be
equal to the sum of the Controlled Group Prior Federal Tax Liability and the
amount of such Tax Benefit.
2.3 ALLOCATION OF STATE INCOME TAXES. Except as provided in Section
2.5, State Income Taxes shall be allocated as follows:
(a) SEPARATE COMPANY TAXES. In the case of any State Income Tax
which is a Separate Company Tax, Controlled Co. shall be liable for such Tax
imposed on any members of the Controlled Group.
(b) CONSOLIDATED OR COMBINED STATE INCOME TAXES. In the case of any
Consolidated or Combined State Income Tax, the liability of Controlled Co. with
respect to such Tax for any Tax Period shall be computed as follows:
(i) ALLOCATION OF TAX REPORTED ON TAX RETURNS. In the
case of any Consolidated or Combined State Income Tax reported on any Tax Return
to be filed after the Offerings Closing Date, Controlled Co. shall be liable to
Distributing Co. for the State Income Tax liability computed as if all members
of the Controlled Group included in the computation of such Tax had filed a
consolidated or combined Tax Return for such Controlled Group members based on
the income, apportionment factors, and other items of such members.
(ii) ALLOCATION OF COMBINED OR CONSOLIDATED STATE
INCOME TAX ADJUSTMENTS. If there is any adjustment to the amount of Consolidated
or Combined State Income Tax reported on any Tax Return (or as previously
adjusted), the liability of the Controlled Group shall be recomputed as provided
in this subparagraph. Controlled Co. shall be liable to Distributing Co. for the
excess (if any) of-
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(A) the State Income Tax liability computed in
accordance with paragraph (b)(i) based on the income, apportionment factors, and
other items of such members as so adjusted (the "Controlled Group Recomputed
State Tax Liability"); minus
(B) the State Income Tax liability computed in
accordance with paragraph (b)(i) based on the income, apportionment factors, and
other items of such members as reported (or, if applicable, as previously
adjusted) (the "Controlled Group Prior State Tax Liability").
If the Controlled Group Prior State Tax Liability exceeds the Controlled Co.
Group Recomputed State Tax Liability, Distributing Co. shall be liable to
Controlled Co. for such excess. For purposes of the preceding sentence, if the
Controlled Group has a net operating loss after taking into account the
adjustments allocable to such group, the Controlled Group Recomputed State Tax
Liability shall be less than zero to the extent such net operating loss produces
a Tax Benefit in consolidation for the applicable taxable year, and the amount
that Distributing Co. shall be liable to Controlled Co. pursuant to the
preceding sentence shall be equal to the sum of the Controlled Group Prior State
Tax Liability and the amount of such Tax Benefit.
2.4 ALLOCATION OF OTHER TAXES. Except as provided in Section 2.5, all
Taxes other than those specifically allocated pursuant to Section 2.3 shall be
allocated based on the legal entity on which the legal incidence of the Tax is
imposed. As between the parties to this Agreement, Controlled Co. shall be
liable for all Taxes imposed on any member of the Controlled Group. The
Companies believe that there is no Tax not specifically allocated pursuant to
Section 2.3 which is legally imposed on more than one legal entity (e.g., joint
and several liability); however, if there is any such Tax, it shall be allocated
in accordance with past practices as reasonably determined by the affected
Companies, or in the absence of such practices, in accordance with any
allocation method agreed upon by the affected Companies.
2.5 TRANSACTION AND OTHER TAXES
(a) DISTRIBUTING CO. LIABILITY. Except as otherwise provided in
this Section 2.5, Distributing Co. shall be liable for, and shall indemnify and
hold harmless the Controlled Group from and against any liability for, all Taxes
resulting from the Distribution and the Transactions, including:
(i) Any sales and use, gross receipts, or other
similar transfer Taxes imposed on the transfers occurring pursuant to the
Transactions and the Distribution;
(ii) any Federal Income Tax or State Income Tax
resulting from any income or gain recognized by Distributing Co. as a result of
the Distribution or the distribution to Distributing Co. of all of the shares of
capital stock of Republic Resources held by Controlled Co. failing to qualify
for tax-free treatment pursuant to Section 355 of the Code and related
provisions;
(iii) any Tax resulting from the Internal
Restructuring.
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(b) INDEMNITY FOR CERTAIN ACTS. Controlled Co. shall be liable for,
and shall indemnify and hold harmless the Distributing Group from and against
any liability for, any Distribution Tax (described in subparagraph (ii) above)
to the extent arising as a result after the Distribution Date of Controlled
Co.'s engaging in any Prohibited Action, the occurrence of a Controlled Group
Disqualifying Event, or a breach by Controlled Co. of its representations,
warranties and covenants set forth in Section 11.
Section 3. PRORATION OF TAXES FOR STRADDLE PERIODS
3.1 GENERAL METHOD OF PRORATION. In the case of any Straddle Period,
Tax Items shall be apportioned between Pre-IPO Periods and Post-IPO Periods in
accordance with the principles of Treasury Regulation Section 1.1502-76(b) as
reasonably interpreted and applied by the Companies.
3.2 TRANSACTION TREATED AS EXTRAORDINARY ITEM. In determining the
apportionment of Tax Items between Pre-IPO Periods and Post-IPO Periods, any Tax
Items relating to the Transactions shall be treated as extraordinary items
described in Treasury Regulation Section 1.1502-76(b)(2)(ii)(C) and shall be
allocated to Pre-IPO Periods.
Section 4. PREPARATION AND FILING OF TAX RETURNS
4.1 GENERAL. Except as otherwise provided in this Section 4, Tax
Returns shall be prepared and filed when due (including extensions) by the
person obligated to file such Tax Returns under the Code or applicable Tax Law.
The Companies shall provide, and shall cause their Affiliates to provide,
assistance and cooperate with one another in accordance with Section 7 with
respect to the preparation and filing of Tax Returns, including providing
information required to be provided in Section 7.
4.2 DISTRIBUTING CO.'S RESPONSIBILITY. Distributing Co. has the
exclusive obligation and right to prepare and file, or to cause to be prepared
and filed:
(a) Distributing Co. Federal Consolidated Returns for any Periods
ending on, before or after the Offerings Closing Date.
(b) Consolidated or Combined State Income Tax Returns for Tax
Periods ending on or before the Offerings Closing Date or for any Straddle
Period.
(c) Tax Returns for State Income Taxes (including Tax Returns with
respect to State Income Taxes that are Separate Company Taxes) for members of
the Distributing Group.
4.3 CONTROLLED CO. RESPONSIBILITY. Controlled Co. shall prepare and
file, or shall cause to be prepared and filed, all Tax Returns required to be
filed by or with respect to the Controlled Co.
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or members of the Controlled Group other than those Tax Returns which
Distributing Co. is required to prepare and file under Section 4.2.
4.4 TAX ACCOUNTING PRACTICES
(a) GENERAL RULE. Except as otherwise provided in this Section 4.4,
any Tax Return for any Pre-IPO Period or any Straddle Period, and any Tax Return
for any Post-IPO Period to the extent items reported on such Tax Return might
reasonably affect items reported on any Tax Return for any Pre-IPO Period or any
Straddle Period, shall be prepared in accordance with past Tax accounting
practices used with respect to the Tax Returns in question (unless such past
practices are no longer permissible under the Code or other applicable Tax Law),
and to the extent any items are not covered by past practices (or in the event
such past practices are no longer permissible under the Code or other applicable
Tax Law), in accordance with reasonable Tax accounting practices selected by the
Responsible Company.
(b) REPORTING OF TRANSACTION TAX ITEMS. The tax treatment reported
on any Tax Return of Tax Items relating to the Transactions shall be consistent
with the treatment of such item in the IRS Ruling Letter (as such term is
defined in the Distribution Agreement) (unless such treatment is not permissible
under the Code). To the extent there is a Tax Item relating to the Transactions
which is not covered by the IRS Ruling Letter, the Companies shall agree on the
tax treatment of any such Tax Item reported on any Tax Return. For this purpose,
the tax treatment of such Tax Items on a Tax Return shall be determined by the
Responsible Company with respect to such Tax Return and shall be agreed to by
the other Company unless either (i) there is no reasonable basis as defined
under Section 6662 of the Code for such tax treatment, or (ii) such tax
treatment would have a material impact on the other Company or the Ruling
Request. Such Tax Return shall be submitted for review pursuant to Section
4.6(a), and any dispute regarding such proper tax treatment shall be referred
for resolution pursuant to Section 15, sufficiently in advance of the filing
date of such Tax Return (including extensions) to permit timely filing of the
return.
4.5 CONSOLIDATED OR COMBINED RETURNS. The Companies will elect and
join, and will cause their respective Affiliates to elect and join, in filing
consolidated, unitary, combined, or other similar joint Tax Returns, to the
extent each entity is eligible to join in such Tax Returns, if the Companies
reasonably determine that the filing of such Tax Returns is consistent with past
reporting practices, or in the absence of applicable past practices, will result
in the minimization of the net present value of the aggregate Tax to the
entities eligible to join in such Tax Returns.
4.6 RIGHT TO REVIEW TAX RETURNS
(a) GENERAL. The Responsible Company with respect to any Tax Return
shall make such Tax Return and related workpapers available for review by the
other Companies, if requested, to the extent (i) such Tax Return relates to
Taxes for which the requesting party may be liable, (ii) such Tax Return relates
to Taxes for which the requesting party may be liable in whole or in part or for
any additional Taxes owing as a result of adjustments to the amount of Taxes
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reported on such Tax Return, (iii) such Tax Return relates to Taxes for which
the requesting party may have a claim for Tax Benefits under this Agreement, or
(iv) the requesting party reasonably determines that it must inspect such Tax
Return to confirm compliance with the terms of this Agreement. The Responsible
Company shall use its reasonable best efforts to make such Tax Return available
for review as required under this paragraph sufficiently in advance of the due
date for filing such Tax Returns to provide the requesting party with a
meaningful opportunity to analyze and comment on such Tax Returns and have such
Tax Returns modified before filing, taking into account the person responsible
for payment of the tax (if any) reported on such Tax Return and the materiality
of the amount of Tax liability with respect to such Tax Return. The Companies
shall attempt in good faith to resolve any issues arising out of the review of
such Tax Returns. Issues that cannot be resolved by the Companies shall be
resolved in the manner set forth in Section 15.
(b) EXECUTION OF RETURNS PREPARED BY OTHER PARTY. In the case of
any Tax Return which is required to be prepared and filed by one Company under
this Agreement and which is required by law to be signed by another Company (or
by its authorized representative), the Company which is legally required to sign
such Tax Return shall not be required to sign such Tax Return under this
Agreement if there is no reasonable basis for the tax treatment of any material
items reported on the Tax Return.
4.7 CLAIMS FOR REFUND, CARRYBACKS, AND SELF-AUDIT ADJUSTMENTS
("ADJUSTMENT REQUESTS")
(a) CONSENT REQUIRED FOR ADJUSTMENT REQUESTS RELATED TO
CONSOLIDATED OR COMBINED INCOME TAXES. Except as provided in paragraph (b)
below, each of the Companies hereby agrees that, unless each of the other
Companies consents in writing, which consent shall not be unreasonably withheld,
(i) no Adjustment Request with respect to any Consolidated or Combined Income
Tax for a Pre- IPO Period shall be filed, and (ii) any available elections to
waive the right to claim in any Pre-IPO Period with respect to any Consolidated
or Combined Income Tax any Carryback arising in a Post-IPO Period shall be made,
and no affirmative election shall be made to claim any such Carryback. Any
Adjustment Request which the Companies consent to make under this Section 4.7
shall be prepared and filed by the Responsible Company under Section 4.2 for the
Tax Return to be adjusted. The Company requesting the Adjustment Request shall
provide to the Responsible Company all information required for the preparation
and filing of such Adjustment Request in such form and detail as reasonably
requested by the Responsible Company. Notwithstanding anything to the contrary
in this paragraph (a), the consent of the Controlled Co. shall not be necessary
for any Carryback by Distributing Co. or any member of the Distributing Group
provided such Carryback constitutes a Distributing Adjustment in the year (or
years) such Carryback is absorbed.
(b) EXCEPTION FOR ADJUSTMENT REQUESTS RELATED TO AUDIT ADJUSTMENTS.
Controlled Co. shall be entitled, without the consent of Distributing Co., to
require Distributing Co. to file an Adjustment Request to take into account any
net operating loss, net capital loss, deduction, credit, or other adjustment
attributable to such Controlled Co. or any member of its Group corresponding
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to any adjustment resulting from any audit by the Internal Revenue Service or
other Tax Authority with respect to Consolidated or Combined Income Taxes for
any Pre-IPO Tax Period. For example, if the Internal Revenue Service requires
Controlled Co. to capitalize an item deducted for the taxable year 1996,
Controlled Co. shall be entitled, without the consent of Distributing Co., to
require Distributing Co. to file an Adjustment Request for the taxable year 1997
(and later years) to take into account any depreciation or amortization
deductions in such years directly related to the item capitalized in 1996.
(c) OTHER ADJUSTMENT REQUESTS PERMITTED. Nothing in this Section
4.7 shall prevent any Company or its Affiliates from filing any Adjustment
Request with respect to Income Taxes which are not Consolidated or Combined
Income Taxes or with respect to any Taxes other than Income Taxes. Any refund or
credit obtained as a result of any such Adjustment Request (or otherwise) shall
be for the account of the person liable for the Tax under this Agreement.
(d) PAYMENT OF REFUNDS. Any refunds or other Tax Benefits received
by any Company (or any of its Affiliates) as a result of any Adjustment Request
which are for the account of another Company (or member of such other Company's
Group) shall be paid by the Company receiving (or whose Affiliate received) such
refund or Tax Benefit to such other Company in accordance with Section 6.
Section 5. TAX PAYMENTS AND INTERCOMPANY BILLINGS
5.1 PAYMENT OF TAXES WITH RESPECT TO DISTRIBUTING CO. FEDERAL
CONSOLIDATION RETURNS FILED AFTER THE OFFERINGS CLOSING DATE. In the case of any
Distributing Co. Federal Consolidated Return the due date for which (including
extensions) is after the Offerings Closing Date:
(a) COMPUTATION AND PAYMENT OF TAX DUE. At least three business
days prior to any Payment Date, Distributing Co. shall compute the amount of Tax
required to be paid to the Internal Revenue Service (taking into account the
requirements of Section 4.4 relating to consistent accounting practices) with
respect to such Tax Return on such Payment Date and shall pay such amount to the
Internal Revenue Service on or before such Payment Date.
(b) COMPUTATION AND PAYMENT OF CONTROLLED CO. LIABILITY WITH
RESPECT TO TAX DUE. Within 90 days following any Payment Date, Controlled Co.
will pay to Distributing Co. the excess (if any) of --
(i) the Consolidated Tax Liability determined as of
such Payment Date with respect to the applicable Tax Period allocable to the
members of the Controlled Group as determined by the Distributing Co. in a
manner consistent with the Section 2.2(a) (relating to allocation of the
Consolidated Tax Liability in accordance with the Federal Allocation Method)
(the "Allocated Federal Tax Liability"), over
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(ii) the cumulative net payment with respect to such
Tax Return prior to such Payment Date by the members of the Controlled Group
(the "Cumulative Federal Tax Payment").
If the Controlled Group Cumulative Federal Tax Payment is greater than the
Controlled Group Allocated Federal Tax Liability as of any Payment Date, then
Distributing Co. shall pay such excess to Controlled Co. within 90 days of
Distributing Co.'s receipt of the corresponding Tax Benefit (i.e., through
either a reduction in Distributing Co.'s otherwise required Tax payment or a
credit or refund of prior tax payments).
(c) DEEMED CUMULATIVE FEDERAL TAX PAYMENTS; AMOUNT DUE FOR PRIOR
PERIODS. For purposes of Section 5.1(b)(ii) with respect to the Distributing Co.
Federal Consolidated Tax Return for the taxable year ending on the dates set
forth below, the Controlled Co. Group's Cumulative Federal Tax Payment through
the date of this Agreement is equal to the amounts set forth below:
Taxable Year Ending Controlled Group's Cumulative
December 31 Federal Tax Payment
----------- -------------------
1997 See Schedule 5.1(c)
1998 See Schedule 5.1(c)
Subject to adjustments as set forth in Sections 2.2(b) and 2.3(b)(ii),
no amounts are currently due and owing by the Controlled Co. to the Distributing
Co. with respect to any Consolidated or Combined Income Tax or Consolidated or
Combined State Income Tax for periods prior to the year ended on December 31,
1997.
(d) INTEREST ON INTERGROUP TAX ALLOCATION PAYMENTS. In the case of
any payments to Distributing Co. required under paragraph (b) of this subsection
5.1, Controlled Co. shall also pay to Distributing Co. an amount of interest
computed at the Prime Rate on the amount of the payment required based on the
number of days from the applicable Payment Date to the date of payment. In the
case of any payments by Distributing Co. required under paragraph (b) of this
subsection 5.1, Distributing Co. shall also pay to Controlled Co. an amount of
interest computed at the Prime Rate on the amount of the payment required based
on the number of days from the date of receipt of the Tax Benefit to the date of
payment of such amount to Controlled Co.
5.2 PAYMENT OF FEDERAL INCOME TAX RELATED TO ADJUSTMENTS
(a) ADJUSTMENTS RESULTING IN UNDERPAYMENTS. Distributing Co. shall
pay to the Internal Revenue Service when due any additional Federal Income Tax
required to be paid as a result of adjustment to the Tax liability with respect
to any Distributing Co. Federal Consolidated Return. The Distributing Co. shall
compute the amount attributable to the Controlled Group in accordance
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with Section 2.2(b) and Controlled Co. shall pay to Distributing Co. any amount
due Distributing Co. under Section 2.2(b) within ninety (90) days from the later
of (i) the date the additional Tax was paid by Distributing Co. or (ii) the date
of receipt by Controlled Co. of a written notice and demand from Distributing
Co. for payment of the amount due, accompanied by evidence of payment and a
statement detailing the Taxes paid and describing in reasonable detail the
particulars relating thereto. Any payments required under this Section 5.2(a)
shall include interest computed at the Prime Rate based on the number of days
from the date the additional Tax was paid by Distributing Co. to the date of the
payment under this Section 5.2(a).
(b) ADJUSTMENTS RESULTING IN OVERPAYMENTS. Within ninety (90) days
of receipt by Distributing Co. of any Tax Benefit resulting from any adjustment
to the Consolidated Tax Liability with respect to any Distributing Co. Federal
Consolidated Return, Distributing Co. shall pay to Controlled Co., or Controlled
Co. shall pay to Distributing Co. (as the case may be), their respective amounts
due from or to Distributing Co. as determined by the Responsible Company in
accordance with Section 2.2(b). Any payments required under this Section 5.2(b)
shall include interest computed at the Prime Rate based on the number of days
from the date the Tax Benefit was received by Distributing Co. to the date of
payment to Controlled Co. under this Section 5.2(b).
5.3 PAYMENT OF STATE INCOME TAX WITH RESPECT TO RETURNS FILED AFTER THE
OFFERINGS CLOSING DATE
(a) COMPUTATION AND PAYMENT OF TAX DUE. At least three business
days prior to any Payment Date for any Tax Return with respect to any State
Income Tax, the Responsible Company shall compute the amount of Tax required to
be paid to the applicable Tax Authority (taking into account the requirements of
Section 4.4 relating to consistent accounting practices) with respect to such
Tax Return on such Payment Date and -
(i) If such Tax Return is with respect to a
Consolidated or Combined State Income Tax, the Responsible Company shall, if
Distributing Co. is not the Responsible Company with respect to such Tax Return,
notify Distributing Co. in writing of the amount of Tax required to be paid on
such Payment Date. Distributing Co. will pay such amount to such Tax Authority
on or before such Payment Date.
(ii) If such Tax Return is with respect to a Separate
Company Tax, the Responsible Company shall, if it is not the Company liable for
the Tax reported on such Tax Return, notify the Company liable for such Tax in
writing of the amount of Tax required to be paid on such Payment Date. The
Company liable for such Tax will pay such amount to such Tax Authority on or
before such Payment Date.
(b) COMPUTATION AND PAYMENT OF CONTROLLED CO. LIABILITY WITH
RESPECT TO TAX DUE. Within ninety (90) days following the due date (including
extensions) for filing any Tax Return for any Consolidated or Combined State
Income Tax (excluding any Tax Return with respect to payment of estimated Taxes
or Taxes due with a request for extension of time to file), (i) Controlled
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Co. shall pay to Distributing Co. the tax liability allocable to the Controlled
Group as determined by the Responsible Company under the provisions of Section
2.3(b)(i), plus interest computed at the Prime Rate on the amount of the payment
based on the number of days from the due date (including extensions) to the date
of payment by Controlled Co. to Distributing Co., and (ii) the Responsible
Company shall notify Distributing Co. (if Distributing Co. is not the
Responsible Company with respect to such Tax Return).
5.4 PAYMENT OF STATE INCOME TAXES RELATED TO ADJUSTMENTS
(a) ADJUSTMENTS RESULTING IN UNDERPAYMENTS. Distributing Co. shall
pay to the applicable Tax Authority when due any additional State Income Tax
required to be paid as a result of any adjustment to the tax liability with
respect to any Tax Return for any Consolidated or Combined State Income Tax for
any Pre-IPO Period. Controlled Co. shall pay to Distributing Co. its respective
share of any such additional Tax payment determined by the Responsible Company
in accordance with Section 2.3(b)(ii) within ninety (90) days from the later of
(i) the date the additional Tax was paid by Distributing Co. or (ii) the date of
receipt by Controlled Co. of a written notice and demand from Distributing Co.
for payment of the amount due, accompanied by evidence of payment and a
statement detailing the Taxes paid and describing in reasonable detail the
particulars relating thereto. Controlled Co. shall also pay to Distributing Co.
interest on its respective share of such Tax computed at the Prime Rate based on
the number of days from the date the additional Tax was paid by Distributing Co.
to the date of its payment to Distributing Co. under this Section 5.4(a).
(b) ADJUSTMENTS RESULTING IN OVERPAYMENTS. Within ninety (90) days
of receipt by Distributing Co. of any Tax Benefit resulting from any adjustment
to the tax liability with respect to any Tax Return for any Consolidated or
Combined State Income Tax for any Pre-IPO Period, Distributing Co. shall pay to
Controlled Co. its respective share of any such Tax Benefit determined by the
Responsible Company in accordance with Section 2.3(b)(ii). Distributing Co.
shall also pay to Controlled Co. interest on its respective share of such Tax
Benefit computed at the Prime Rate based on the number of days from the date the
Tax Benefit was received by Distributing Co. to the date of payment to
Controlled Co. under this Section 5.4(b).
5.5 PAYMENT OF SEPARATE COMPANY TAXES. Each Company shall pay, or shall
cause to be paid, to the applicable Tax Authority when due all Separate Company
Taxes owed by such Company or a member of such Company's Group.
5.6 INDEMNIFICATION PAYMENTS. If any Company (the "payor") is required
to pay to a Tax Authority a Tax that is properly allocated to another Company
(the "responsible party") under this Agreement, the responsible party shall
reimburse the payor within ninety (90) days of delivery by the payor to the
responsible party of an invoice for the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in reasonable
detail the particulars relating thereto. The reimbursement shall include
interest on the Tax payment computed at the
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Prime Rate based on the number of days from the date of the payment to the Tax
Authority to the date of reimbursement under this Section 5.6.
Section 6. TAX BENEFITS. If a member of one Group receives any Tax
Benefit with respect to any Taxes for which a member of another Group is liable
hereunder, the Company receiving such Tax Benefit shall make a payment to the
Company who is liable for such Taxes hereunder within ninety (90) days following
receipt of the Tax Benefit in an amount equal to the Tax Benefit (including any
Tax Benefit realized as a result of the payment), plus interest on such amount
computed at the Prime Rate based on the number of days from the date of receipt
of the Tax Benefit to the date of payment of such amount under this Section 6.
Section 7. ASSISTANCE AND COOPERATION
7.1 GENERAL. After the Offerings Closing Date, each of the Companies
shall cooperate (and cause their respective Affiliates to cooperate) with each
other and with each other's agents, including accounting firms and legal
counsel, in connection with Tax matters relating to the Companies and their
Affiliates including (i) preparation and filing of Tax Returns, (ii) determining
the liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) examinations of Tax Returns,
and (iv) any administrative or judicial proceeding in respect of Taxes assessed
or proposed to be assessed. Such cooperation shall include making all
information and documents in their possession relating to the other Company and
their Affiliates available to such other Company as provided in Section 8. Each
of the Companies shall also make available to each other, as reasonably
requested and available, personnel (including officers, directors, employees and
agents of the Companies or their respective Affiliates) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with any administrative or
judicial proceedings relating to Taxes. Any information or documents provided
under this Section 7 shall be kept confidential by the Company receiving the
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with any administrative or
judicial proceedings relating to Taxes.
7.2 INCOME TAX RETURN INFORMATION. Each Company will provide to the
other Company information and documents relating to their respective Groups
required by the other Company to prepare Tax Returns. The Responsible Company
shall determine a reasonable compliance schedule for such purpose in accordance
with Distributing Co.'s past practices. Any additional information or documents
the Responsible Company requires to prepare such Tax Returns will be provided in
accordance with past practices, if any, or as the Responsible Company reasonably
requests and in sufficient time for the Responsible Company to file such Tax
Returns on a timely basis.
Section 8. TAX RECORDS
8.1 RETENTION OF TAX RECORDS. Except as provided in Section 8.2, each
Company shall preserve and keep all Tax Records exclusively relating to the
assets and activities of its respective
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Group for Pre-IPO Tax Periods, and Distributing Co. shall preserve and keep all
other Tax Records relating to Taxes of the Groups for Pre-IPO Tax Periods, for
so long as the contents thereof may become material in the administration of any
matter under the Code or other applicable Tax Law, but in any event until the
later of (i) the expiration of any applicable statutes of limitation, and (ii)
seven years after the Offerings Closing Date. If, prior to the expiration of the
applicable statute of limitation and such seven-year period, a Company
reasonably determines that any Tax Records which it is required to preserve and
keep under this Section 8 are no longer material in the administration of any
matter under the Code or other applicable Tax Law, such Company may dispose of
such records upon 90 days prior notice to the other Company. Such notice shall
include a list of the records to be disposed of describing in reasonable detail
each file, book, or other records being disposed. The notified Company shall
have the opportunity, at its cost and expense, to copy or remove, within such
90-day period, all or any part of such Tax Records.
8.2 STATE INCOME TAX RETURNS. Tax Returns with respect to State Income
Taxes and workpapers prepared in connection with preparing such Tax Returns
shall be preserved and kept, in accordance with the terms of Section 8.1, by the
Company having liability for the Tax.
8.3 ACCESS TO TAX RECORDS. The Companies and their respective
Affiliates shall make available to each other for inspection and copying during
normal business hours upon reasonable notice all Tax Records in their possession
to the extent reasonably required by the other Company in connection with the
preparation of Tax Returns, audits, litigation, or the resolution of items under
this Agreement.
Section 9. TAX CONTESTS
9.1 NOTICE. Each of the Companies shall provide prompt notice to the
other Company of any pending or threatened Tax audit, assessment or proceeding
or other Tax Contest of which it becomes aware related to Taxes for Tax Periods
for which it is indemnified by the other Company hereunder. Such notice shall
contain factual information (to the extent known) describing any asserted Tax
liability in reasonable detail and shall be accompanied by copies of any notice
and other documents received from any Tax Authority in respect of any such
matters. If an indemnified party has knowledge of an asserted Tax liability with
respect to a matter for which it is to be indemnified hereunder and such party
fails to give the indemnifying party prompt notice of such asserted Tax
liability, then (i) if the indemnifying party is precluded from contesting the
asserted Tax liability in any forum as a result of the failure to give prompt
notice, the indemnifying party shall have no obligation to indemnify the
indemnified party for any Taxes arising out of such asserted Tax liability, and
(ii) if the indemnifying party is not precluded from contesting the asserted Tax
liability in any forum, but such failure to give prompt notice results in a
monetary detriment to the indemnifying party, then any amount which the
indemnifying party is otherwise required to pay the indemnified party pursuant
to this Agreement shall be reduced by the amount of such detriment.
9.2 CONTROL OF TAX CONTESTS
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(a) SEPARATE COMPANY TAXES. In the case of any Tax Contest with
respect to any Separate Company Tax, the Company having liability for the Tax
shall have exclusive control over the Tax Contest, including exclusive authority
with respect to any settlement of such Tax liability.
(b) CONSOLIDATED OR COMBINED INCOME TAXES. In the case of any Tax
Contest with respect to any Consolidated or Combined Income Tax, (i)
Distributing Co. shall control the defense or prosecution of the portion of the
Tax Contest directly and exclusively related to any Distributing Adjustment,
including settlement of any such Distributing Adjustment and (ii) Controlled Co.
shall control the defense or prosecution of the portion of the Tax Contest
directly and exclusively related to any Controlled Adjustment, including
settlement of any such Controlled Adjustment, and (iii) the Tax Contest
Committee shall control the defense or prosecution of Joint Adjustments,
including settlement of any such Joint Adjustment, and any and all
administrative matters not directly and exclusively related to any Distributing
Adjustment or Controlled Adjustment. The Tax Contest Committee shall be
comprised of two persons, one person selected by Distributing Co. (as designated
in writing to Controlled Co.) and one person selected by Controlled Co. (as
designated in writing to Distributing Co.). Each person serving on the Tax
Contest Committee shall continue to serve unless and until he or she is replaced
by the party designating such person. Any and all matters to be decided by the
Tax Contest Committee shall require the approval of both persons serving on the
committee. In the event the Tax Contest Committee shall be deadlocked on any
matter, the provisions of Section 15 of this Agreement shall apply. A Company
shall not agree to any Tax liability for which another Company may be liable
under this Agreement, or compromise any claim for any Tax Benefit which another
Company may be entitled under this Agreement, without such other Company's
written consent (which consent may be given or withheld at the sole discretion
of the Company from which the consent would be required). The Distributing Co.,
in the case of any examination or audit of a Distributing Co. Federal
Consolidation Return, and the Responsible Company in the case of any examination
or audit of a Consolidated or Combined State Income Tax Return, shall be the
only parties representing the members of the Group before any Federal or State
Tax Authority in connection with the examination or audit. Notwithstanding the
representation by the Distributing Co. or Responsible Company before such Tax
Authority, the Distributing Co. or Responsible Company shall (a) provide the
Controlled Co. with all information reasonably requested relating to any
Controlled Adjustment or Joint Adjustment; (b) submit to such Tax Authority any
facts, legal arguments or other matters deemed advisable by Controlled Co. and
provided by it to Distributing Co. or the Responsible Company; (c) not have the
authority to settle or otherwise compromise a Controlled Adjustment; and (d) not
have the authority to settle or otherwise compromise a Joint Adjustment other
than through the Tax Contest Committee procedures set forth in this Section
9.2(b).
Section 10. EFFECTIVE DATE. This Agreement shall be effective on the
Offerings Closing Date.
Section 11. NO INCONSISTENT ACTIONS. Each of the Companies covenants
and agrees that it will not take any action, and it will cause its Affiliates to
refrain from taking any action, which is inconsistent with the Tax treatment of
the Distribution as contemplated in the Ruling Request (any
20
<PAGE> 21
such action is referred to in this Section 11 as a "Prohibited Action"), unless
such Prohibited Action is required by law, or the person acting has obtained the
prior written consent of each of the other parties (which consent shall not be
unreasonably withheld). With respect to any Prohibited Action proposed by a
Company (the "Requesting Party"), the other party (the "Requested Party") shall
grant its consent to such Prohibited Action if the Requesting Party obtains a
ruling with respect to the Prohibited Action from the Internal Revenue Service
or other applicable Tax Authority that is reasonably satisfactory to the
Requested Party (except that the Requesting Party shall not submit any such
ruling request if a Requested Party determines in good faith that filing such
request might have a materially adverse effect upon such Requested Party).
Without limiting the foregoing:
(a) NO INCONSISTENT PLAN OR INTENT. Controlled Co. and Distributing
Co. each represents and warrants that neither it nor any of its Affiliates has
any plan or intent to take any action which is inconsistent with any factual
statements or representations in the Ruling Request. Regardless of any change in
circumstances, Controlled Co. and Distributing Co. each covenant and agree that
it will not take, and it will cause its Affiliates to refrain from taking, any
such inconsistent action on or before the last day of the calendar year ending
after the second anniversary of the Distribution Date other than as permitted in
this Section 11.
(b) AMENDED OR SUPPLEMENTAL RULINGS . Each of the Companies
covenants and agrees that it will not file, and it will cause its Affiliates to
refrain from filing, any amendment or supplement to the Ruling Request
subsequent to the Distribution Date without the consent of the other Company,
which consent shall not be unreasonably withheld.
Section 12. SURVIVAL OF OBLIGATIONS . The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional and
absolute and shall remain in effect without limitation as to time.
Section 13. EMPLOYEE MATTERS . To the extent applicable, each of the
Companies agrees to utilize, or cause its Affiliates to utilize, the alternative
procedure set forth in Revenue Procedure 96-60, 1996-2 C.B. 399, with respect to
wage reporting.
Section 14. TREATMENT OF PAYMENTS; TAX GROSS UP
14.1 TREATMENT OF TAX INDEMNITY AND TAX BENEFIT PAYMENTS. In the
absence of any change in tax treatment under the Code or other applicable Tax
Law,
(a) any Tax indemnity payments made by a Company under Section 5
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring immediately
before the Offerings Closing Date, but only to the extent the payment does not
relate to a Tax allocated to the payor in accordance with Treasury Regulation
Section 1.1502-33(d) (or under corresponding principles of other applicable Tax
Laws), and
21
<PAGE> 22
(b) any Tax Benefit payments made by a Company under Section 6,
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring immediately
before the Offerings Closing Date, but only to the extent the payment does not
relate to a Tax allocated to the payor in accordance with Treasury Regulation
Section 1.1502-33(d) (or under corresponding principles of other applicable Tax
Laws).
14.2 TAX GROSS UP. If notwithstanding the manner in which Tax indemnity
payments and Tax Benefit payments were reported, there is an adjustment to the
Tax liability of a Company as a result of its receipt of a payment pursuant to
this Agreement, such payment shall be appropriately adjusted so that the amount
of such payment, reduced by the amount of all Income Taxes payable with respect
to the receipt thereof (but taking into account all correlative Tax Benefits
resulting from the payment of such Income Taxes), shall equal the amount of the
payment which the Company receiving such payment would otherwise be entitled to
receive pursuant to this Agreement.
14.3 INTEREST UNDER THIS AGREEMENT. Anything herein to the contrary
notwithstanding, to the extent one Company ("indemnitor") makes a payment of
interest to another Company ("indemnitee") under this Agreement with respect to
the period from the date that the indemnitee made a payment of Tax to a Tax
Authority to the date that the indemnitor reimbursed the indemnitee for such Tax
payment, or with respect to the period from the date that the indemnitor
received a Tax Benefit to the date indemnitor paid the Tax Benefit to the
indemnitee, the interest payment shall be treated as interest expense to the
indemnitor (deductible to the extent provided by law) and as interest income by
the indemnitee (includible in income to the extent provided by law). The amount
of the payment shall not be adjusted under Section 14.2 to take into account any
associated Tax Benefit to the indemnitor or increase in Tax to the indemnitee.
Section 15. DISAGREEMENTS. If after good faith negotiations the parties
cannot agree on the application of this Agreement to any matter, then the matter
will be referred to a nationally recognized accounting firm acceptable to each
of the parties (the "Accounting Firm"). The Accounting Firm shall furnish
written notice to the parties of its resolution of any such disagreement as soon
as practical, but in any event no later than 45 days after its acceptance of the
matter for resolution. Any such resolution by the Accounting Firm will be
conclusive and binding on all parties to this Agreement. In accordance with
Section 17, each party shall pay its own fees and expenses (including the fees
and expenses of its representatives) incurred in connection with the referral of
the matter to the Accounting Firm. All fees and expenses of the Accounting Firm
in connection with such referral shall be shared equally by the parties affected
by the matter.
Section 16. LATE PAYMENTS . Any amount owed by one party to another
party under this Agreement which is not paid when due shall bear interest at the
Prime Rate plus two percent, compounded semiannually, from the due date of the
payment to the date paid. To the extent interest required to be paid under this
Section 16 duplicates interest required to be paid under any other provision of
this Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 16 or the interest rate provided under such other
provision.
22
<PAGE> 23
Section 17. EXPENSES. Except as provided in Section 15, each party and
its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement.
Section 18. GENERAL PROVISIONS
18.1 ADDRESSES AND NOTICES. Any notice, demand, request or report
required or permitted to be given or made to any party under this Agreement
shall be in writing and shall be deemed given or made when delivered in party or
when sent by first class mail or by other commercially reasonable means of
written communication (including delivery by an internationally recognized
courier service or by facsimile transmission) to the party at the party's
principal business address. A party may change the address for receiving notices
under this Agreement by providing written notice of the change of address to the
other parties.
18.2 BINDING EFFECT . This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and assigns.
18.3 WAIVER. No failure by any party to insist upon the strict
performance of any obligation under this Agreement or to exercise any right or
remedy under this Agreement shall constitute waiver of any such obligation,
right, or remedy or any other obligation, rights, or remedies under this
Agreement.
18.4 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
18.5 FURTHER ACTION. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement,
including the execution and delivery to the other parties and their Affiliates
and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
Contests (or portions thereof) under the control of such other parties in
accordance with Section 9.
23
<PAGE> 24
18.6 INTEGRATION. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter of this Agreement and supersedes
all prior agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and the Distribution Agreement or any other
agreements relating to the transactions contemplated by the Distribution
Agreement, the provisions of this Agreement shall control.
18.7 CONSTRUCTION. The language in all parts of this Agreement shall in
all cases be construed according to its fair meaning and shall not be strictly
construed for or against any party.
18.8 NO DOUBLE RECOVERY; SUBROGATION. No provision of this Agreement
shall be construed to provide an indemnity or other recovery for any costs,
damages, or other amounts for which the damaged party has been fully compensated
under any other provision of this Agreement or under any other agreement or
action at law or equity. Unless expressly required in this Agreement, a party
shall not be required to exhaust all remedies available under other agreements
or at law or equity before recovering under the remedies provided in this
Agreement. Subject to any limitations provided in this Agreement (for example,
the limitation on filing claims for refund in Section 4.7), the indemnifying
party shall be subrogated to all rights of the indemnified party for recovery
from any third party.
18.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
18.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida applicable to contracts
executed in and to be performed in that State.
24
<PAGE> 25
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers as of the date first written above.
REPUBLIC INDUSTRIES, INC.
By: /s/ James O. Cole
------------------------------------
Name: James O. Cole
------------------------------
Title: Senior Vice President
-----------------------------
REPUBLIC SERVICES, INC.
By: /s/ Harris W. Hudson
------------------------------------
Name: Harris W. Hudson
------------------------------
Title: Vice Chairman
-----------------------------
25
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